BILL ANALYSIS �
AB 1712
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB 1712 (Gomez)
As Amended June 16, 2014
Majority vote
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|ASSEMBLY: |73-0 |(May 8, 2014) |SENATE: |33-0 |(August 22, |
| | | | | |2014) |
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Original Committee Reference: JUD.
SUMMARY : Clarifies authority for a parent nonprofit
organization to file a claim for unclaimed property with the
State Controller (Controller) for property owned by a local
chapter or affiliate no longer in existence. Specifically, this
bill provides such authority to a nonprofit civic, charitable,
or educational organization that granted a charter, sponsorship,
or approval for the existence of an organization that had legal
right to the property prior to its escheat but that has
dissolved or is no longer in existence, if the charter,
sponsorship, approval, organization bylaws, or other governing
documents provide that unclaimed or surplus property shall be
conveyed to the granting organization upon dissolution or
cessation to exist as a distinct legal entity.
The Senate amendments clarify that a parent nonprofit
organization may file a claim for unclaimed property of an
affiliate it sponsored or chartered if, among other things, the
relevant governing documents provide that the unclaimed property
shall be conveyed to the parent upon the dissolution of the
affiliate.
FISCAL EFFECT : According to the Senate Appropriations
Committee:
1)Unknown annual loss of General Fund revenues potentially in
the range of $65,000 to $130,000 assuming 5% to 10% of
unclaimed properties belonging to nonprofit entities no longer
in existence are claimed and paid each year. The fiscal
impact would be dependent on the number and value of
additional valid claims paid out as a result of the expanded
eligibility to nonprofit parent organizations.
2)Minor ongoing administrative costs of less than $20,000
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(General Fund) to the State Controller's Office (SCO)
associated with processing additional claims.
COMMENTS : This bill seeks to authorize a parent nonprofit
organization to file a claim with the State Controller for
unclaimed property that, prior to escheat, was owned by an
organization that was chartered or sponsored by the parent
(typically a local chapter or affiliate) but that has dissolved
or simply no longer exists. According to the author:
This bill will resolve the problem of unclaimed
property that cannot be claimed under current law.
The property that an (subsidiary or chaptered)
organization leaves behind after it has been dissolved
remains stagnant with no chance of being
redistributed... Without expanding the definition of
an "owner", the state controller's office will
continue to hold onto unclaimed property which does
not benefit the State of California. This bill
includes parent organizations in the definition to
allow them to reclaim that property and place it back
into circulation for which it was originally intended.
It will also increase the parent organization's
resources which will allow them to place more funds
into the local community.
The Unclaimed Property Law (UPL), enacted in 1958, establishes
procedures for the escheat of unclaimed personal property.
Property escheated to the state means the state has custody of
the property in perpetuity, until the owner claims the property.
The UPL has dual objectives: 1) to protect unknown owners by
locating them and restoring their property to them; and 2) to
give the state, rather than the holders of unclaimed property,
the benefit of its retention, since experience shows that most
abandoned property will never be claimed. The state, through
the Controller, acts as the protector of the rights of the true
owner. The UPL establishes procedures to be followed when
property goes unclaimed, generally for a period of three years,
and escheats to the state. A person "who claims an interest in"
escheated property may file a claim to recover the property from
the state. The Controller maintains a Web site
(http://www.sco.ca.gov) where members of the public may search a
database to discover if the state is holding any of their
property, and may submit claims to recover the funds or
property.
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According to data provided by the Controller, his office
receives approximately $600 million annually as escheated
property. Existing law requires that all but $50,000 of these
funds are transferred to the General Fund on a monthly basis.
The Controller reports maintaining current accounts of
approximately $6.4 billion for monies that have been remitted to
the Controller and transferred to the General Fund. As of
Fiscal Year (FY) 2011-12, there were approximately 21.5 million
owner accounts (individuals and organizations) in the
Controller's database, and in that year a total of $240 million
in cash was disbursed with an average payment of $837. (State
Controller, Unclaimed Property Division, Information Worksheet
FY 2011-12.) It is not known precisely how many owner accounts
currently in the Controller's database belong to nonprofit
organizations, but a cursory search of some common examples
suggests the number could be in the thousands. (For example,
the term "AYSO", short for American Youth Soccer Organization,
yields over 100 records and "Girl Scouts" yields over 200
records.)
Existing law states that "for purposes of filing a claim
pursuant to this section, 'owner' means the person who had legal
right to the property prior to its escheat, his or her heirs or
estate representative, his or her guardian or conservator, or a
public administrator [acting pursuant to the Probate Code.]"
Existing law further provides that "Only an owner, as defined in
this subdivision, may file a claim with the Controller." A
challenging problem is often created, the author contends, when
a chapter of the parent nonprofit, listed as the owner in the
Controller's records, has dissolved or ceased to exist and
therefore cannot step forward to make the claim itself, dooming
the property to sit with the Controller perpetually unclaimed
and virtually unclaimable.
Accordingly, this bill seeks to expand the above definition of
"owner" so that the parent nonprofit organizations are expressly
permitted to file a claim with the Controller for unclaimed
property that, according to the author, "remains stagnant with
no chance of being redistributed" and that "cannot be claimed
under current law." According to the author, this bill is
intended to facilitate the return of unclaimed property within
the charitable sector where it can once again benefit the
community through use by the parent nonprofit organization.
Specifically, this bill seeks to expand the definition of
"owner" to include a parent nonprofit organization on the basis
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of four elements, if true. First, the parent must be a
nonprofit civic, charitable, or educational organization.
Second, the parent must have "granted a charter, sponsorship, or
approval for the existence" of the affiliate or chapter. Third,
the local affiliate or chapter organization that owned the
property must have dissolved or cease to exist, but also have
had a legal right to the property prior to its escheat.
Finally, the parent organization may file a claim for ownership
if "the charter, sponsorship, approval, organization bylaws, or
other governing documents provide that unclaimed or surplus
property shall be conveyed to (it)" upon the dissolution of the
affiliate.
Recent amendments to the bill clarify that a claim of ownership
of unclaimed property by a parent nonprofit organization is
based on having legal right to the property prior to its
escheat, as established by provisions of the charter or other
governing documents conveying unclaimed or surplus property back
to the parent organization when the affiliate dissolves or
ceases to exist. The amendments ensure that the bill is
consistent with the standard of ownership that applies to every
other person who may file a claim, and is consistent with the
Assembly Judiciary Committee's approval last year of AB 1275
(Chau), Chapter 128, Statutes of. 2013. That legislation
codified the Controller's practice, since the inception of the
UPL in 1959, that only an entity that has legal right to the
property prior to escheat is an owner who may file for recovery
of the property.
There are a wide variety of relationships that exist between
parent groups and their chapters and affiliates. The
disposition of surplus property after dissolution of a local
chapter or sponsored organization likely depends on the kind of
relationship that was initially established with the parent, and
may be already governed by existing law. For example, in cases
where a local chapter or affiliate is a registered nonprofit
corporation seeking to "wind down" operations and dissolve
pursuant to the Nonprofit Corporation Law, then existing law
requires the corporation's assets on dissolution to be disposed
of in conformity with its articles and bylaws, as specified.
(See, e.g., Corporation Code Section 6716, pertaining to
nonprofit public benefit corporations.) It should be noted this
bill would only apply to unclaimed property identified after a
group has dissolved or ceases to exist, and does not seek to
change any rules prescribing rightful distribution of property
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in the process leading up to formal dissolution.
Analysis Prepared by : Anthony Lew / JUD. / (916) 319-2334
FN: 0004943