The Family Business Association continues to review and analyze the 2,124 bills that have been proposed this year by state lawmakers, along with dozens of bills from 2023 that are still under consideration. A number of these bills would have significant impacts on family businesses, and FBA – the only organization that lobbies lawmakers and regulators exclusively on issues affecting the state’s thousands of family-owned businesses – has taken positions on several of them so far this year.
California Assembly in session
Given that many of the bills pending in the Legislature punish businesses rather than help them succeed, FBA will eventually oppose many of them. That’s especially true since lawmakers frequently engage in a practice called gut and amend, in which a bill is stripped of its original language and replaced by text that radically changes the intent of the bill.
“Unfortunately, too many bills continue to be introduced that would make it harder for family businesses to prosper and be passed down to the next generation,” said FBA consultant Robert Rivinius. “California’s 1.4 million family businesses employ some 7 million people and because they are firmly rooted in their communities they strongly support their employees and the communities they serve. State government needs to make it easier, not harder, for these companies to remain in business.”
FBA is now supporting two more 2024 measures:
SB 1243, by Sen. Bill Dodd, D-Napa, which would make compliance with campaign contribution laws more manageable, and
SCA 4 by FBA’s 2023 Legislator of the Year, Sen. Kelly Seyarto, R-Murrieta, which would restore the tax treatment of passing single-family residences to immediate family members without requiring the tax base.
These are in addition to two measures FBA had already weighed-in on: AB 2011 by Asm. Rebecca Bauer-Kahan, D-Orinda, which would make the state’s small employer family leave mediation program permanent, and AB 2371 by Asm. Juan Carillo, D-Palmdale, which FBA is cosponsoring along with FBA member AMAROK. The bill would create uniformity in local permitting requirements for specified security alarm technology.
FBA is now opposing eight additional 2024 bills:
AB 2248 by Asm. Ash Kalra, D-San Jose, which would invite more litigation under the onerous Private Attorneys General Act.
AB 2499 by Asm. Pilar Schiavo, D-Chatsworth, which would lower the threshold for jury duty and crime victim leave from 25 employees to just one.
ACA 3 by Asm. Alex Lee, D-Milpitas, which would impose a wealth tax and eliminate the voter-approved Gann Limit.
ACA 11 by Asm. Phil Ting, D-San Francisco, which would abolish the State Board of Equalization, removing the only tax agency made up of elected officials directly accountable to taxpayers.
And four measures by Sen. Lola Smallwood-Cuevas, D-Los Angeles – SB 1089, which would require grocery stores and pharmacies to provide at least 90-day notice to employees before a closure; SB 1446, which would require grocery stores and pharmacies to employ one employee per two self-checkout stations, whose sole job would be to monitor the self-checkout stations; SB 1434, which is a vast reworking of California’s unemployment insurance system and would massively increase unemployment insurance taxes on all employers in California by providing, among other changes, a 55% increase in maximum UI benefits for all workers; and SB 1345, which aims to restrict the use of criminal background checks by employers.
FBA previously had expressed opposition to SB 1116 by Sen. Anthony Portantino, D-La Canada-Flintridge, which would effectively require employers to subsidize striking workers even if those workers or the strikes had nothing to do with the employer.
The Association also continues to support two bills introduced in 2023 – SB 393 by Sen. Steve Glazer, D-Orinda, which would require CEQA plaintiffs to disclose contributors of $1,000 or more to fund the legal action, and SB 585 by Sen. Roger Niello, R-Fair Oaks, which would give small businesses time to correct construction-related accessibility issues before claims could be filed under the Unruh Civil Rights Act.
FBA continues to oppose SB 399 by Sen. Aisha Wahab, D-Hayward, which would effectively prohibit any discussion of political matters in the workplace.
Our guest contributor says that many family-owned businesses may leave California or sell out to larger corporations if Assembly Constitutional Amendment 1 becomes law.
California is notorious for being one of the worst places in the nation to do business. For years, businesses have dealt with the high cost of living, onerous and expensive regulations, complex employment laws and, of course, high taxes.
In fact, Chief Executive magazine consistently ranks the Golden State as having the country’s worst business climate, while the Tax Foundation ranks California 48th, ahead of only New York and New Jersey.
But thanks to Proposition 13, property taxes at least remain in the relatively moderate range and are predictable. In addition, local governments must obtain approval from two-thirds of the voters in most cases to raise local sales taxes, parcel taxes and general obligation bonds that are repaid via property tax bills. However, a proposal to make it easier to raise those taxes is quietly gaining momentum in the Legislature. Assembly Constitutional Amendment 1 last week was placed in the suspense file by the Assembly Appropriations Committee but is still very much alive and is scheduled for a hearing on Sept. 1. Should this constitutional amendment become law, it may well be the straw that breaks the back of many California family businesses. The California Taxpayers Association estimates that ACA 1 could increase local taxes by $255 million a year.
ACA 1 would reduce the two-thirds requirement for any “infrastructure” project with an easier-to-obtain 55% threshold. And the way infrastructure is defined, most tax increases would be covered. A fact sheet released by proponents makes it clear that raising taxes is the goal. It points out that just half of the tax proposals requiring a two-thirds vote are enacted, compared to 80% of school bonds, which can be approved with a 55% majority. Additionally, it notes that nearly 80% of tax measures needing a two-thirds vote received more than 55%.
While all businesses are affected by actions taken by lawmakers and regulators in Sacramento and at city hall, family businesses are often impacted especially hard. Most California family businesses are in the small to medium-sized range. Most don’t have the revenues that large corporations have to hire teams of lawyers and accountants to figure out the best way to cope with higher taxes and expensive regulations.
Family businesses should be supported, not burdened further. We are focused on the long term, not the next quarter. We are deeply rooted in our communities. And seven out of 10 family businesses have more than one generation of employee families working for us ⏤ loyalty few major corporations can match.
This isn’t the first time this measure has come before the Legislature, and in past years it failed to gain traction. This year, however, proponents of higher taxes seem to have momentum – even newly installed Assembly Speaker Robert Rivas is a coauthor.
As the Howard Jarvis Taxpayers Association puts it, “ACA 1 is a tax increase, and worse — it’s an engine to raise taxes over and over again in every local election, just by calling any government spending ‘infrastructure,’ even if it’s really for salaries, programs or to free up existing revenue to cover pension liabilities.”
If we lose the protections against higher property tax bills, on top of all the other factors that drive up the cost of doing business, you’re going to see more businesses leaving California or at least moving operations to more business- friendly areas. Family businesses that can’t move will be more likely to sell to larger companies that won’t necessarily have the same commitment to their communities and their employees.
And that would be a blow to communities supporting the measure that would be far greater than any increased tax revenue they might receive. We urge lawmakers to keep that in mind and defeat ACA 1.
Local governments want to make it easier to raise your taxes by reducing the majority needed from voters from two-thirds to just 55%. If passed by the Legislature this month, ACA 1 could appear on the 2024 statewide ballot. In an op-ed in the Sacramento Business Journal, I warn that if this measure becomes law, it could be the final straw for many California family businesses, in addition to all the other taxes, fees, and regulations the state imposes. FBA will always continue fighting to protect California family businesses at the state Capitol and we are urging lawmakers to vote no. You can read it here. (subscription may be required).
A Sacramento County Superior Court judge recently rejected a lawsuit challenging the constitutionality of a law prohibiting local elected officials from voting on matters involving the people and companies who contribute to their campaigns. FBA is the lead plaintiff in the case.
In his ruling, Judge Richard K. Sueyoshi determined the law, which went into effect in January, does not violate either the state or federal constitutions. FBA and the other plaintiffs issued the following statement in response to the ruling:
The Coalition of Business Associations and Elected Officials is disappointed by the ruling against its challenge of SB 1439’s constitutionality.
This law will effectively bar small business owners from participating in the local political process. This is an infringement upon the first amendment right to freedom of speech and to petition the government. This right has historically been protected both federally and by the California Supreme Court.
Although Senator Glazer argues that this law will end ‘pay-to-play’ corruption by special interests, the only interests affected by SB 1439 are those of businesses. SB 1439 hypocritically does not apply to labor or union special interests, as they both have been carved out an exemption in the law’s language and therefore will be allowed to donate up to $5,500 without forcing the recusal of a vote from a local elected official.
Also of note is that SB 1439 does not apply to elected officials at the state level. Senator Glazer says he was motivated to author this legislation out of concern that $250 in aggregated contributions from representatives of a company threatens the ability of locally elected leaders to make fair and independent decisions that are in the best interest of their communities. We challenge Senator Glazer and others to lead by example and abide by the campaign contribution limits detailed in SB 1439 to similarly avoid any question or suggestion of ‘pay-to-play’ related to decisions they make which may impact small business or other so-called interest groups. As Senator Glazer said at his press conference today, his advice to local elected officials is simply, ‘Just don’t take the money.’
We remain concerned about the weaponization of this law by NIMBY organizations seeking to block new housing or competing business interests looking to prevent competitor business growth. While we consider future legal options to protect the important constitutional right to freedom of speech, we call upon the FPPC to monitor and report to the public on nefarious abuse of this law.
FBA is the lead plaintiff in a major court case designed to ensure that our members’ free speech rights and ability to support good government in their communities is protected.
The suit seeks to overturn SB 1439, a bill passed with little debate last year that has major implications. Under SB 1439, receiving a $251 campaign contribution would disqualify a local elected official from voting on any issue relating to whomever they received the contribution from - be it an individual or company. This would even apply to newly hired individuals that did not previously work for, or have any affiliation with, the company at the time of their individual contribution.
Making and receiving campaign contributions is an exercise of a constitutional right of free speech.
This law will also have a direct effect on many of our members’ ability to operate and expand their businesses. For example, if a business wants to expand its operations, they often seek zoning changes or conditional use permits that must be approved by the city council or the board of supervisors. Many restaurants operate under conditional use permits. And farmers and ranchers almost always require special use permits for activities such as agricultural processing facilities. These can be controversial even though the zoning permits them, so elected officials often have to make the final decision.
Accordingly, it would be risky for any family business owner to ever contribute to candidates for local office because it’s always possible that six or eight months down the road an issue will come up that would require elected officials to be involved.
It would also have a chilling effect on many family businesses that you wouldn’t think would be affected. Businesses that do engineering, accounting, legal and other work in the development sector may find themselves cut off from future work if they make contributions to local elected officials. Because their contributions, no matter how small, would be considered part of a prime contractor’s aggregated contributions, the contractor might have to bar them from future work simply because they exercised their constitutional rights.
The Family Business Association of California is committed to helping our state’s 1.4 million family-owned businesses survive and prosper. To do this more effectively, a common agreement and understanding of what constitutes a family business is necessary. The Family Business Association is taking on this challenge by sponsoring AB 2611, introduced on February 18 by Assembly Member Tom Daly, D-Anaheim (left).
AB 2611 sets out, for the first time in state statute, a definition of a family-owned business. A statutory definition of a family-owned business is important for California because a family-owned businesses is distinct in many ways — both in terms of successes and challenges. AB 2611 sets out that, to be deemed a family-owned businesses in statute, the business must be privately held; strategic influence is exercised by family members; the business must demonstrate continuity across generations; have its headquarters located in California; and have been in business for no less than 10 years.
A uniform clear definition will provide many benefits including one that can be referenced across codes in California including Tax and Government codes and it provides one definition that can be referenced by local municipalities that want to promote family-owned businesses within their local jurisdictions.
Under AB 2611, the definition of a family-owned business is proposed to be added to the statues covering the Governor’s Office of Business and Economic Development (GO-Biz) program. The successful GO-Biz program offers a range of services to business owners including attraction, retention and expansion services, site selection, permit streamlining, clearing of regulatory hurdles, small business assistance, international trade development, assistance with state government, and much more. Importantly, AB 2611 will let California lead the nation in a positive direction by being the first state to statutorily define a family-owned business so that decision makers are able to better understand the unique challenges of operating community-based businesses when considering future legislative and regulatory actions.
