Bill Text: CA SB1407 | 2021-2022 | Regular Session | Amended

California Senate Bill 1407 (Prior Session Legislation)

NOTE: There are more recent revisions of this legislation. Read Latest Draft

Bill Title: California Employee Ownership Act.

Spectrum: Slight Partisan Bill (Democrat 5-2)

Status: (Passed) 2022-09-29 - Chaptered by Secretary of State. Chapter 733, Statutes of 2022. [SB1407 Detail]

Download: California-2021-SB1407-Amended.html

Amended IN Senate March 16, 2022

CALIFORNIA LEGISLATURE— 2021–2022 REGULAR SESSION

Senate Bill

No. 1407

Introduced by Senator Becker
(Coauthors: Senators Borgeas, Ochoa Bogh, and Portantino)
(Coauthor: Assembly Member Ting)

February 18, 2022

An act to ~~amend Section 2607 of the Revenue and Taxation Code, relating to taxation.~~ add Article 6.6 (commencing with Section 12100.30) to Chapter 1.6 of Part 2 of Division 3 of Title 2 of the Government Code, relating to economic development.

LEGISLATIVE COUNSEL'S DIGEST

SB 1407, as amended, Becker. ~~Property taxation.~~ California Employee Ownership Program.

Existing law establishes the Office of Small Business Advocate (CalOSBA) within the Governor’s Office of Business and Economic Development, also known as GO-Biz, to advocate for causes of small business and to provide small businesses with the information they need to survive in the marketplace.
This bill would, upon appropriation by the Legislature, establish the California Employee Ownership Program within the Office of Small Business Advocate, administered by an Employee Ownership Program Manager, to assist small businesses in transitioning to employee ownership. The bill would establish, upon appropriation by the Legislature, an Employee Ownership Outreach and Technical Assistance Grant Program, administered by the manager, for the purpose of funding education and outreach programs that increase awareness and technical assistance for employee ownership transitions, as defined. The bill would also establish, upon appropriation by the Legislature, an Employee Ownership Feasibility Assessment Grant Program, administered by the manager, to assist in the development of financial assessments to determine viable employee-ownership transition scenarios.
Existing property tax law authorizes the entire tax on real property to be paid when the first installment is due and payable, as provided, and authorizes the 2nd installment to be paid separately only if the first installment has been paid.
~~This bill would make a nonsubstantive change to this provision.~~

Vote: MAJORITY Appropriation: NO Fiscal Committee: NOYES Local Program: NO

The people of the State of California do enact as follows:

SECTION 1.

Article 6.6 (commencing with Section 12100.30) is added to Chapter 1.6 of Part 2 of Division 3 of Title 2 of the Government Code, immediately following Section 12100, to read:

Article 6.6. California Employee Ownership Program
12100.30.
This article shall be known, and may be cited, as the California Employee Ownership Program.
12100.31.
The Legislature finds and declares all of the following:
(a) California’s small businesses continue to contend with the pressures of the aging baby boomer business owners who are at or near retirement and desperately looking for an exit. According to national surveys, 79 percent of business owners want to retire within 10 years, 60 percent in less than 5 years, and 33 percent in less than 3 years. However, only 15 percent of businesses successfully transition to the next generation in the family, and only 20 percent of commercial listings actually sell. Nearly 360,000 California businesses, employing 3.9 million workers, are at risk because their owners are nearing retirement.
(b) Rather than closing for good or selling to large, out-of-state buyers, small business owners can find willing buyers in the people who work alongside them every day. Doing so will anchor essential production and services in communities, protect livelihoods, avert layoffs, and save the state money.
(c) Employees becoming owners would create opportunities for wealth-building and community stability. It would also help California create a more inclusive, equitable, and stable economy, supported by the studies of employee-owned businesses and their success and resiliency during the Great Recession and the COVID-19 pandemic.
(d) It is the intent of the Legislature to establish a dedicated hub within the Office of Small Business Advocate that will help educate stakeholders about employee ownership, assist business owners and employees in navigating available resources, provide funding for technical assistance, and streamline and reduce barriers to the existing business transition process.
12100.32.
For purposes of this article, the following definitions shall apply:
(a) “Broad-based employee ownership vehicle” means any of the following:
(1) An employee-owned corporation, as that term is defined in subdivision (c) of Section 91502.1.
(2) An eligible worker-owned cooperative or an eligible member-owned organization where the voting stock is owned by members, and the governing body is elected by the members on the basis of one vote per member.
(3) A business wherein the majority of stock is owned by an employee stock ownership plan.
(b) “California capital programs” means state programs offering capital assistance to businesses, including, but not limited to, the Small Business Loan Guarantee Program, the State Small Business Credit Initiative, the California Rebuilding Fund, and the California Capital Access Program.
(c) “Eligible worker-owned cooperative” has the same definition as that term is defined in paragraph (2) of subsection (c) of Section 1042 of the Internal Revenue Code, as that provision read on January 1, 2022.
(d) “Employee stock ownership plan” or “ESOP” has the same definition as that term is defined in paragraph (7) of subsection (e) of Section 4975 of the Internal Revenue Code, as that provision read on January 1, 2022.
(e) “Employee ownership transition” means the process by which a business enters a broad-based employee ownership vehicle.
(f) “Feasibility assessment” means a financial assessment of a company’s debt capacity and other factors that will determine viable employee-ownership transition scenarios.
(g) “Manager” means the Employee Ownership Program Manager.
12100.33.
(a) Upon appropriation by the Legislature, the Office of Small Business Advocate shall establish the California Employee Ownership Program, administered by an Employee Ownership Program Manager.
(b) The manager shall administer the Employee Ownership Program, and shall be responsible for the following duties:
(1) Manage the Employee Ownership Outreach and Technical Assistance Grants Program and the Employee Ownership Feasibility Assessment Study Grants Program.
(2) Work with all California state agencies whose regulations and programs affect employee-owned companies, and businesses with the potential to become employee owned, to enhance opportunities and reduce barriers.
(3) Partner with grantee partners, and other relevant private, nonprofit, and public organizations including, but not limited to, professional and trade associations, financial institutions, unions, Small Business Development Centers, economic and workforce development organizations, and nonprofit entities to promote employee ownership benefits and succession models.
(4) Develop and make available materials regarding employee ownership benefits and succession models.
(5) Provide a referral service to help business owners find appropriate legal, financial, and technical employee ownership resources and services.
(6) Work with the California Infrastructure and Economic Development Bank, the California Pollution Control Financing Authority, and related entities to shape and implement guidance on lending to broad-based employee ownership vehicles.
(7) Issue an annual report on program activities including recommendations for improvement.
(8) Report employee ownership transition related concerns and recommendations to the director.
12100.34.
(a) Upon appropriation by the Legislature, the manager shall establish and administer an Employee Ownership Outreach and Technical Assistance Grant Program with the purpose of funding education and outreach programs that increase awareness and technical assistance for employee ownership transitions.
(b) Funding will be allocated to nonprofit organizations with demonstrated experience and expertise in delivering employee ownership services in California and should encompass diverse broad-based employee ownership vehicles.
12100.35.
(a) Upon appropriation by the Legislature, the manager shall establish and administer, or contract with a third party or grant partner to administer, an Employee Ownership Feasibility Assessment Grant Program with the purpose of subsidizing the cost of feasibility assessments for conversion to employee ownership.
(b) Qualifying businesses will receive a grant equal to 50 percent of the cost of a feasibility assessment for conversion to employee ownership up to a maximum of fifty thousand dollars ($50,000).
12100.36.
(a) Nothing in this article shall prevent the California Infrastructure and Economic Development Bank and the California Pollution Control Financing Authority from utilizing eligible funds for assisting with employee ownership transitions, including the provision of commercial loans, subordinated debt, and synthetic equity to broad-based employee ownership vehicles, or for the purchase of, or facilitation of the purchase of, broad-based employee ownership vehicles provided that the transaction results in the broad-based employee ownership vehicles holding a majority interest in the business.
(b) Nothing in this article shall prevent employee-owned companies from participating in California capital programs including the provision of commercial loans, subordinated debt, and synthetic equity to broad-based employee ownership vehicles, or for the purchase of, or facilitation of the purchase of, broad-based employee ownership vehicles provided that the transaction results in the broad-based employee ownership vehicles holding a majority interest in the business.

SECTION 1.Section 2607 of the Revenue and Taxation Code is amended to read:
2607.
The entire tax on real property may be paid at the time the first installment is due and payable or at any time thereafter until the properties on the current roll become tax defaulted. The second installment may be paid separately only if the first installment has been paid. The tax collector shall accept payment of current year taxes even though prior year delinquencies on the real property may exist. The acceptance of that payment shall not affect the validity of any sale in satisfaction of a lien for defaulted taxes.