BILL ANALYSIS �
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|SENATE RULES COMMITTEE | AB 1260|
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THIRD READING
Bill No: AB 1260
Author: Medina (D), et al.
Amended: 6/18/14 in Senate
Vote: 21
SENATE BUSINESS, PROF. & ECON. DEV. COMM. : 9-0, 6/16/14
AYES: Lieu, Wyland, Berryhill, Block, Corbett, Galgiani,
Hernandez, Hill, Torres
ASSEMBLY FLOOR : 76-0, 1/30/14 - See last page for vote
SUBJECT : California family owned business
SOURCE : Family Business Association
DIGEST : This bill defines a California family owned business.
ANALYSIS :
Existing law:
1. Defines a small business to mean an independently owned and
operated business that is not dominant in the field of
operation, the principal office of which is located in
California, the officers of which are domiciled in
California, and which, together with affiliates, has 100 or
fewer employees, and average annual gross receipts of ten
million dollars or less over the previous three years, or is
a manufacturer as specified."
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2. Defines a microbusiness to mean "a small business which
together with affiliates has average annual gross receipts of
two million, five hundred thousand dollars or less over the
previous three years or is a manufacturer as specified."
3. Defines a disabled veteran's business enterprise to mean "an
enterprise that has been certified as meeting the
qualifications established by Section 999 of the Military
Code."
This bill:
1. Defines a "California family owned business" as a business
that meets all of the following requirements:
A. Is organized as a privately held business by one
individual or two or more related persons, or is a
partnership of business entities owned by related persons;
B. Maintains its principal executive office in
California;
C. Has been in business continuously for more than 10
years;
D. Is owned by a sole proprietorship; or is a business
entity owned by one individual or two or more related
persons domiciled in California who hold a majority of the
equity interests; or is a partnership of business entities
owned by related persons domiciled in this state holding a
majority of the equity interests;
E. The business is controlled by one individual or two or
more related persons who exhibit strategic influence and
control of the business by holding the business as a sole
proprietorship or by holding a majority of the voting
interest; and
F. Demonstrates an intent to continuously operate as a
family owned business in the future through any of the
following means:
(1) Present ownership by two or more related
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persons;
(2) A previous transfer of ownership or equity
interests between two or more related persons; or
(3) Being subject to a written agreement providing
for a future transfer between two or more related
persons provided that the agreement was executed in
good faith.
1. Defines "related person," for the purpose of this bill, to
include a person who is related by a common ancestor,
pursuant to state or federal law up to four generations. Any
person related by greater than four generations is included
if his/her ownership or operational involvement arose from an
exercise of continuity across generations as described in #1F
above. "Related persons" also includes a parent, stepparent,
brother, sister, stepbrother, stepsister, half-brother,
half-sister, adopted person, person born out of wedlock,
stepchild, foster child, uncle, aunt, niece, nephew, first
cousin, and any person denoted by the prefix "grand" or
"great." A spouse, domestic partner, and the spouse or
domestic partner of any person that qualifies as a person
related by a common ancestor, pursuant to state or federal
law up to four generations, is also included within the
definition of "related persons" and shall continue to be
included in the event of the legal relationship being
terminated by death or dissolution.
2. Provides that the definition of "California family owned
business" created by this bill may only be applied to
provisions in which it is explicitly cross-referenced.
3. States legislative intent to enact legislation that would
aid, counsel, assist, and protect the interests of California
family owned businesses in order to preserve free competitive
enterprise and support family owned enterprises.
4. States that a business owned and operated by relatives
creates a unique business structure that can be distinguished
from other business structures, and by creating a definition
for this business structure it provides a framework for the
Legislature to better understand and address the role family
owned businesses play within the California economy.
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5. Makes legislative findings and declarations relative to the
unique and valuable characteristics of California family
owned businesses.
Background
According to the March 2011 Annual Family Business Survey
conducted by Family Enterprise USA, "Family businesses have a
dramatically positive impact on their communities, and together
they are a driving force of the American economy. Family-owned
businesses generate 57% of the [Gross Domestic Product (GDP)] in
the United States, employ 63% of our nation's workforce and are
the societal stabilizers in most communities in the country."
According to a 2012 report, Family Business and Their Impact on
the California Economy, "in terms of their impact on the
economy, family businesses represent a considerable share of
economic activity at both the state and national level. While
the exact measure of their contribution varies significantly
depending upon the definition used?[there are] estimates that
family businesses account for approximately 20 to 35 percent of
all California businesses, contribute 20 to 40 percent of the
state's GDP, and provide between 20 percent and 40 percent of
the state's jobs." The report also found that definitional
problems around the term "family-owned business" provide
measurement challenges when trying to assess the full economic
benefit of these businesses. As the report states, "While much
research has been conducted in the past few decades on family
businesses and their impact on the economy, no commonly accepted
definition has emerged as to what exactly constitutes a family
business."
Comments
According to the author's office, California law already
recognizes small businesses, disabled veteran-owned business
enterprises, micro-enterprises, and disadvantaged business
entities, among others, but does not recognize family owned
businesses, even though they play an important role within the
California economy. According to the author's office, federal
law recognizes family owned businesses and applies the
definition within the tax code.
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FISCAL EFFECT : Appropriation: No Fiscal Com.: No Local:
No
SUPPORT : (Verified 6/17/14)
Family Business Association (source)
Air Conditioning Trade Association
Associated Builders and Contractors - San Diego Chapter
California Asian Pacific Chamber of Commerce
Gorrill Ranch
Holt of California
Lyon's Investments
Mape's Ranch
Nor-Cal Beverage Co. Inc.
Pacific Coast Building Products
Plumbing-Heating-Cooling Contractors Association of California
Western Electrical Contractors Association
OPPOSITION : (Verified 6/17/14)
Department of General Services
ARGUMENTS IN SUPPORT : Supporters write that this is a
necessary bill, establishing a statutory definition of a family
owned business for the first time which is important in that it
more clearly identifies the unique and distinct differences
between family-owned enterprises from other businesses and
allows decision makers to consider the special aspects of
operating these businesses when considering future action.
ARGUMENTS IN OPPOSITION : The Department of General Services
(DGS) believes that "this bill is not necessary at this time,
and we also have concerns about the proposed definition." DGS
writes that "this bill proposes to create a statutory definition
that serves no current legal or programmatic purpose".
According to DGS, defining the term "California family owned
business" is premature given that there are no immediate plans
to conduct research on family owned businesses and that the
proposed definition is "ill-suited for a voluntary survey."
ASSEMBLY FLOOR : 76-0, 1/30/14
AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Bigelow, Bloom,
Bocanegra, Bonilla, Bonta, Bradford, Brown, Buchanan, Ian
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Calderon, Campos, Chau, Ch�vez, Chesbro, Conway, Cooley,
Dababneh, Dahle, Daly, Dickinson, Eggman, Fong, Fox, Frazier,
Beth Gaines, Garcia, Gatto, Gomez, Gonzalez, Gordon, Gorell,
Gray, Grove, Hagman, Hall, Harkey, Roger Hern�ndez, Holden,
Jones, Jones-Sawyer, Levine, Linder, Lowenthal, Maienschein,
Medina, Morrell, Mullin, Muratsuchi, Nazarian, Nestande,
Olsen, Pan, Patterson, Perea, V. Manuel P�rez, Quirk,
Quirk-Silva, Rendon, Ridley-Thomas, Rodriguez, Salas, Skinner,
Stone, Ting, Wagner, Waldron, Weber, Wieckowski, Wilk,
Williams, Yamada, John A. P�rez
NO VOTE RECORDED: Donnelly, Logue, Mansoor, Melendez
MW:k 6/18/14 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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