April 16, 2009
From Kevin J Pedrotti, Legislative Advocate for the Golden State Builders Exchanges
Legislation
Fresh off Spring break, the legislature stepped up hearings on various bills introduced this year. Below is a recap of the key bills pertaining to the construction industry that was acted upon this week:
AB 396 (Fuentes) - Modifies, recasts and consolidates various provisions governing the timely payment of progress payments, retention proceeds, and final payments under a contract for a public or private work of improvement. This bill is a multi-prong approach that will reduce retention on public works payment to no more than 5%, unless a surety bond is requested and the subcontractor is unable to provide a bond. Provides that if a claimant has not provided a 20-day public work preliminary bond notice, the claimant may enforce a claim by giving written notice to the surety and bond principle prior to the completion of the project or recordation of a notice of completion. Reduces the time period an original contractor is required to make proportional payments to subcontractors on a private work of improvement after the original contractor receives payment from 10 to 7 days. Passed the Assembly Business and Professions Committee.
AB 484 (Eng) - Permits the Franchise Tax Board (FTB) to suspend state occupational and professional licenses because of unpaid tax liabilities. The sponsor states that the intent of the bill is not to take away an individual's livelihood, but to encourage him or her to file and pay their taxes. The bill was strongly opposed by numerous construction interests, including GSBE, stating that a contractor must maintain their license throughout all phases of a job in order to be paid. Under the provisions of AB 484, the qualifier for the construction company could have their license suspended due to a FTB tax problem which could place the entire company and existing projects in jeopardy. The bill was defeated in the Assembly Business and Professions Committee.
AB 1074 (Conway) – Sponsored by the CSLB, provides that it is a crime if a person willfully and intentionally uses, with the intent to defraud, any number that does not correspond to the number on a currently valid contractor's license held by that person. GSBE supported this bill.
The bill was passed by the Assembly Business and Professions Committee.
SB 392 (Florez) - Authorizes the issuance of a contractor's license to a limited liability company (LLC); mirrors the provisions regulating contractor's licenses issued to a corporation and applies them to contractor's licenses issued to LLCs; requires an LLC to carry $1,000,000 in liability insurance or $500,000 in a trust or escrow account. Most states allow an LLC to hold a contractor's license, and the current law is an impediment to established nationwide business doing business in California. An LLC form of business has needed flexibility for distribution of profits and losses separate from control and ownership which benefits commerce with no foreseeable detriment. The bill passed the Senate Business and Professions Committee.
SB 629 (Liu) – Limits retention amounts to 5% on private works. GSBE supported the bill. The bill was passed by the Senate Judiciary Committee.
SB 802 (Leno) - Provides that retention proceeds withheld from any payment by a "public entity" from the original contractor, by the original contractor from any subcontractor, and by a subcontractor from any subcontractor shall not exceed 5% of the payment. The current state policy relative to payment procedures on public works diminishes the likelihood of California small businesses from being able to fully participate in public works development. GSBE supported this measure. The bill was passed by the Senate Governmental Organization Committee.
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