Legislature in OT: plenty of issues--from Regs to outsourcing--keep officials busy.

• Author: Allen, Bruce C.
• Position: GovernmentRelations; accounting

There was some good news for California businesses in January. A little-reported section of the California Constitution mandates that proposed laws which have not passed the house of origin by Jan. 31 of the second year of the two-year session die.

Coming up against that rule were several bills that would, if enacted, have caused extreme consternation. Most notable among them was SB 516 (Speier), which would have denied Subchapter S status to any California corporation grossing $20 million or more in revenue.

Sen. Speier amended the bill at the last minute to eliminate the denial of Subchapter S status and to simply impose a tax on Subchapter S Corporations higher than the 1 percent currently imposed, but the bill failed to meet the deadline.

Another bill, SB 766 (Florez), which would have allowed securities class action lawsuits to be filed in California courts rather than in federal courts, was also defeated by the deadline--and by sharp-eyed business lobbyists who worked the issue up until the deadline.

However, many proposals have survived the automatic death sentence and will have to be dealt with later this year. Additionally, the Legislature had until Feb. 20 to introduce new legislation.

Outsourcing

Outsourcing tax preparation to other countries is becoming a very hot issue in California and the nation. A legislative hearing is scheduled for March 9 to discuss outsourcing professional services, including tax preparation, and its impact on the economy.

At issue are security, privacy and informed consent.

Settlements, Agreements Prohibiting Complaint Filings

Of interest to the profession is AB 320 (Correa), which would prohibit any licensee under the Department of Consumer Affairs from including in a civil settlement agreement a "gag" clause provision that prohibits the other party from contacting or filing a complaint with the DCA. The sponsor appears to be the Center for Public Interest Law, which is concerned with what it perceives to be the low number of civil settlements being reported to all licensing agencies.

The center feels that doctors, insurance companies and others with mandatory reporting requirements are ignoring the requirement and have their aggrieved clients sign settlement agreements that prohibit them from pursuing complaints with the regulatory agency.

The requirement that CPAs and their insurers report civil settlements of more than $30,000 to the CBA became effective last year. AB 320 is in the Senate awaiting...