California Lawmaker Making the State More Hostile to Business

California has a new low: Sen. Maria Elena Durazo, a Democrat state lawmaker, wants to nullify Limited Liability Companies (LLC) and similar corporations, and force business owners and landlords to disclose their identities. Her bill, SB 1201, “would require a real estate investment trust to file with the Secretary of State a statement containing the name and complete business or residence address of any beneficial owner.”

“She also wants the public to know who actually owns the company. Her bill would require these companies to list anyone who owns at least 25% of the company’s assets on its registration with the state. It would apply to all LLCs and similar corporations regardless of the size,” the Associated Press reported.

As opponents of SB 1201 say, “The bill appears to be a veiled attempt to provide contact information for owners already legally reporting and doing business in the state without any rational reason given as to how this information is valuable to the public.”

Durazo claims LLCs and corporations are “all to shield their identities from the public, government officials and even law enforcement agencies” – as if anyone in her office is prevented from making a phone call to the California Secretary of State and request information on any corporation or LLC.

The SOS says: “The California Secretary of State is a convenient and secure way to file your business entity documents in California. You can file online for corporations, LLCs, LPs, UCC, trademarks, and more. You can also check the status of your filing, order certified copies, and pay fees online.”

“In many cases, local and state officials must spend significant time and resources to track down the owners before they can charge or sue the business for violating state laws, if they can find them at all.”

Durazo was a senior official with the Los Angeles County Federation of Labor, AFL-CIO, the second largest labor council in the country, and served on the National AFL-CIO Executive Council, prior to running for the California State Senate. Now-Senator Maria Elena Durazo once led the Los Angeles County Federation of Labor , a group of self-proclaimed socialist and Communist California labor officials. Durazo’s labor union and Democrat Party operatives created a program to target Latinos and immigrants (illegal and legal) to permanently drive California politics far to the left, Democrat political consultant Richie Ross wrote in CalBuzz in 2010. Ross openly boasted of targeting the Latino community’s fear of anti-illegal immigration measures, to drive the community even further into the arms of the Democratic Party, I explained in my book co-authored with attorney James Lacy, “California’s War Against Donald Trump; Who Wins? Who Loses?”

Since becoming a Senator, Durazo has authored bills to:

• unionize renters and tenants
• provide  Medi-Cal to illegal immigrants
• increase the legal liability on garment manufacturers in California, as well as eliminate the piece-rate method of payment for garment workers
• allow the criminal arrest records of convicted criminals sealed from potential employers, schools, charitable organizations and the public
• force employers to repeatedly offer newly available positions to qualified employees, no matter how many times they have turned offers down, failed to respond, or explicitly declined offers following the mandatory COVID lockdowns
• increase the size and scope of the state’s paid family leave programs.

Durazo supported the forced-unionization of farm workers.

She blamed the affordable housing crisis on wages in the state not being high enough to afford skyrocketing rents, claiming that half of the people living on the streets “have jobs, but don’t make enough money.” She said they “live in cars or on someone’s sofa.”

All of this is to show the lengths some lawmakers go to target businesses – small, medium and large – in a state which already has most of the highest taxes in the country, and some of the most business-crushing regulations.

The AP reports “currently, only law enforcement and government officials — not the public — have access to the information.”

So, bad actors can be found by law enforcement and government officials if they are violating the law.

I’m just cynical enough to suspect the trial lawyers sponsoring SB 1201, to create a shortcut to suing business owners, since law enforcement and public officials already have the ability to locate the names of the LLC owners.

Business groups and landlords groups say that LLCs already are required to share lots of information with the government. They said that they will be required to disclose ownership to a branch of the U.S. Treasury Department by 2025.

The AP continued:

They also point to costs. Last year, the Secretary of State estimated the new disclosure requirement would cost $9 million to implement and an additional $3.4 million annually in subsequent years to employ 28 support workers.

“It really doesn’t make any sense to us.” said Debra Carlton, an executive of California Apartment Association. “Why add these costs onto the state,” she asked, “when we’re already having financial challenges?”

A coalition of real estate industry groups including the California Apartment Association opposes Durango’s bill saying in recent bill analysis:

There is no rational reason to mandate disclosure of a “beneficial owner(s).” Corporations and limited liability companies already file with the federal government and with Secretary of State an extensive amount of information. Those filings provide everything that the general public needs to know about the entity in order to send notices or file lawsuits against them. The bill appears to be a veiled attempt to provide contact information for owners already legally reporting and doing business in the state without any rational reason given as to how this information is valuable to the public.

Bill sponsors “Rise Economy and Public Advocates” write:

…some owners abuse LLCs to shield not only their assets, but also their identities. Compounding the issue, many LLCs are owned in the name of another LLC, creating additional layers of anonymity. None of this is necessary to achieve the legal and financial protection afforded by forming an LLC…

Without owner transparency, policymakers, enforcement agencies, and the public lack critical information. The lack of accessible ownership information allows continued patterns of abuse among those who deliberately shield their activities from public scrutiny behind a wall of LLCs, frustrates attempts to ensure accountability, and makes it challenging to make informed policy decisions that are responsive to the changing needs of Californians. SB 1201 would make it easier to enforce existing laws to protect the people who live and work in our communities across the state, increase government efficiency, and ultimately save taxpayer dollars.

Public Advocates Inc. “is a nonprofit law firm and advocacy organization that challenges the systemic causes of poverty and racial discrimination by strengthening community voices in public policy and achieving tangible legal victories advancing education, housing, transportation equity, and climate justice.”

They “demand the state end the state’s highly discriminatory system for funding school facilities. The status quo is an unequal system in which students in low-wealth districts receive an education inferior to that of their peers in higher-wealth districts.”