MINUTES OF THE meeting

of the

ASSEMBLY Committee on Judiciary

 

Seventy-Second Session

May 5, 2003

 

 

The Committee on Judiciarywas called to order at 8:10 a.m., on Monday, May 5, 2003.  Chairman Bernie Anderson presided in Room 3138 of the Legislative Building, Carson City, Nevada, and, via simultaneous videoconference, in Room 4401 of the Grant Sawyer State Office Building, Las Vegas, Nevada.  Exhibit A is the Agenda.  Exhibit B is the Guest List.  All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.

 

Note:  These minutes are compiled in the modified verbatim style.  Bracketed material indicates language used to clarify and further describe testimony.  Actions of the Committee are presented in the traditional legislative style.

 

 

COMMITTEE MEMBERS PRESENT:

 

Mr. Bernie Anderson, Chairman

Mr. John Oceguera, Vice Chairman

Mrs. Sharron Angle

Mr. David Brown

Ms. Barbara Buckley

Mr. John C. Carpenter

Mr. Jerry D. Claborn

Mr. Marcus Conklin

Mr. Jason Geddes

Mr. Don Gustavson

Mr. William Horne

Mr. Garn Mabey

Mr. Harry Mortenson

Mr. Rod Sherer

 

 

COMMITTEE MEMBERS ABSENT:

 

Ms. Genie Ohrenschall (excused)

 

GUEST LEGISLATORS PRESENT:

 

Senator Dina Titus, District No. 7, Clark County

Assemblyman Chad Christensen, District No. 13, Clark County

Assemblyman Lynn Hettrick, District No. 39, Douglas County and portions of Carson City and Washoe County

 

 

STAFF MEMBERS PRESENT:

 

Allison Combs, Committee Policy Analyst

Risa B. Lang, Committee Counsel

Carrie Lee, Recording Committee Secretary

 

 

OTHERS PRESENT:

 

Derek Rowley, President, Nevada Resident Agents Association

James J. Jackson, representing the Direct Sales Association

John Webb, representing Direct Selling Association and Independent Contractor Distributors

Bryan Harrison, representing Alticor Inc. and Quixtar

Anne Crews, Vice President, Government Relations, Mary Kay, Inc.

Josephine Mills, Director, Government Relations, Avon Products

Matthew Sharp, Nevada Trial Lawyers Association

Edward Cotton, Administrator, Division of Child and Family Services, Nevada Department of Human Resources

May Shelton, representing Washoe County Social Services

Jodi Tyson, Director, Nevada Coalition Against Sexual Violence

Terri Miller, Training Coordinator, Nevada Coalition Against Sexual Violence; and President, Stop Educator Sexual Abuse, Misconduct, and Exploitation (SESAME)

Robin Reedy, Deputy, Debt Management, Office of the State Treasurer

John P. Fowler, Chair, Executive Committee, Business Law Section, State Bar of Nevada

Scott Anderson, Deputy for Commercial Recordings, Office of the Secretary of State

Chairman Anderson:

Good morning. The Assembly Committee on Judiciary will please come to order.  [The Chair acknowledged Judges Ward and Bunch who were listening via the Internet.  He also reminded the Committee members and those present in the audience of the Standing Rules and appropriate meeting etiquette.  Roll called.]  There is a quorum present. 

 

[The Chair opened the hearing on S.B. 298.] 

 

Senate Bill 298 (1st Reprint):  Makes various changes to provisions pertaining to business. (BDR 7-987)

 

Assemblyman Chad Christensen, District No. 13, Clark County:

[Introduced himself.]  This bill is identical to the Assembly bill I sponsored in this body.  This bill will keep Nevada competitive and will also help us raise a significant sum [of money] through the filing fee provisions that are included to the degree of $46 to $50 million over the biennium.

 

Derek Rowley, President, Nevada Resident Agents Association:

Senate Bill 298 contains amendments that were discussed when this bill was previously heard as an Assembly bill.  There was input from Clark County, the Office of the Secretary of State, and the Nevada Department of Taxation; they all had recommendations that were included in the amendment in the first reprint.  This bill represents a reorganization of the filing fee structure for commercial recordings in the Office of the Secretary of State.  We estimate this bill to raise increased revenue of $46 to $50 million, depending upon the growth rate that the Office of the Secretary of State experiences.  This bill reduces the up-front filing fees, making Nevada more attractive and more competitive with those states that we compete with for new filings.  The increases proposed by this bill will happen with mandatory filing fees such as annual renewal, which occurs on a tiered structure based upon the amount of capital in a corporation.  The other types of mandatory filings that a corporation is subject to in order to keep its status in Nevada are late filing penalties, expedite fees, name reservation, and certificates of good standing.  These fees will have various degrees of increase. 

 

I would like to direct most of my remarks to the portion of the bill that creates the limited-liability limited partnership (LLLP) because I’m aware that is an area where there are lots of questions.  Previously we had some testimony with the Assembly version of this bill from attorneys about the creation of the LLLP, but we have some updated information that was not provided to you previously. 

 

[Derek Rowley continued.]  As you recall, the LLLP is a limited partnership that registers for a limited-liability status and, by virtue of that registration, the general partner receives the same type of personal indemnification liability protection that currently exists for corporate officers and directors or for the manager of a limited-liability company.  That removes the bias that’s related to liability that can arise simply as the result of the choice of entity, and there is a great deal of precedent for this type of entity.

 

The National Conference of Commissioners on Uniform State Laws (NCCUSL) met in August of 2001, and they adopted a Uniform Limited Partnership Act (ULPA), the primary component of which is the addition of the LLLP status.  The ULPA was adopted and recommended for implementation in all states.  The NCCUSL is comprised of more than 300 lawyers, judges, and law professors that are appointed by all the states as well as Washington D.C., Puerto Rico, and the United States Virgin Islands.  When NCCUSL adopted the LLLP as part of the ULPA, it was presented to the American Bar Association’s House of Delegates in February 2002 and was approved for enactment in all states.

 

In previous testimony we discussed that, according to information we had pulled from Commerce Clearinghouse, which is a reliable legal publisher, there were already 6 states that had adopted these statutes.  Since then we’ve discovered that there are 15 states that have adopted a version of LLLP statute, and there is pending legislation in Hawaii.  As a result of those changes and the number of states that have adopted the LLLP statutes, we need to recognize that if Nevada does not adopt a version of a LLLP statute, one of the potential risks is that, for partnership filings, Nevada may become a jurisdiction that people will choose to avoid because it doesn’t provide the benefits that are available in many other states. 

 

We recognize that there is a concern among some parties about the prospect of adding additional liability protection to general partners.  There are limitations on the liability protection that a general partner can receive under the statute.  For example, a partnership agreement can contain provisions that establish individual liability among the partners, if they choose to do so.  Any liability that is incurred prior to the registration of the LLLP, or at any time when the partnership isn’t registered as a LLLP, will incur liability.  Under the provisions of the bill, any time a partner acts as the “alter-ego” of the partnership, it can also create personal indemnification, such as when “adherence to the fiction of a separate entity would sanction fraud or promote a manifest injustice.”  The indemnification issue is not foolproof; someone cannot use these entities to promote sanctioned fraud or to be involved in a circumstance that would represent a legal manifest injustice.

 

[Derek Rowley continued.]  One question that we have addressed as we’ve discussed this new entity is whether the LLLP creates too much liability protection.  The LLLP doesn’t create any new liability protection in any degree that doesn’t already exist for corporations and limited liability companies; it only uses the same liability protection applied under those standards that currently exist under corporate law.  The liability protection provided by the LLLP only applies to the individual’s liability for partnership acts or debts and doesn’t remove any of the partnership liability for its own acts.

 

Is that a good public policy?  The need for personal liability protection in business is the very reason that limited-liability corporations exist in the first place; virtually every free-market society has some version of limited-liability entity, and it’s been long recognized that there is a proper and legitimate purpose for providing this type of personal indemnification from business risks.  I found an interesting quote that I’d like to share with you from an author by the name of Peter Huber in a book called Liability:  the Legal Revolution and Its Consequences.”  He said,

 

Who would be building and fixing, developing and doing, treating, immunizing and curing while the lawyers were busy assessing the fines and keeping the jail?  The answer, with growing frequency, is, no one at all.  When it comes to liability problems, the bold innovators are the most fleet-footed of potential defendants.  More often than not they adjusted to the threat of liability by doing less; not innovating is a remarkably easy thing to do. 

 

That quote illustrates the need for some degree of liability protection in business so that investment in new business and technology can keep our economy going.  Without those protections, people sometimes will pull out of those types of investment activities, which is not healthy for our economy.

 

Another question that we have been asked is wouldn’t the creation of LLLPs in Nevada encourage the use of “Enron-type” vehicles that could create problems for the state?  First, under the bill’s provision the “adherence to the fiction of a separate entity would sanction fraud or promote a manifest injustice,” a court could determine that the LLLP is the alter ego of a general partner and remove the liability protection available to them.  In many of the recently publicized corporate fraud and ethics cases where fraud has become an issue, the use of a LLLP as an entity would not protect the managers from personal liability.

 

Second, according to the NCCUSL in their February 2002 press release when they adopted the Uniform Limited Partnership Act, they recognized that the use of partnerships has significantly changed with time.  They said, “The use of limited partnerships has shifted with time from businesses to family limited partnerships used in estate planning.”  Most of the entities that would use the LLLP designation are estate planning vehicles that are used by families; the corporations and the LLCs (limited liability companies), the primary business entities used today, already enjoy this type of liability protection.  We would only be adding this liability protection for the people who are primarily using limited partnerships in today’s environment.

 

[Derek Rowley continued.]  Third, the LLLP status is not automatic; it’s something that has to be elected.  Investors participating in partnerships where they have those concerns can require that the LLLP not be elected.

 

The fourth reason we feel that the “Enron-type” issues can be avoided is that sophisticated planners, who use limited partnerships for planning purposes and have the resources of law firms to assist them in structuring these arrangements, have for many years formed a separate corporation as a general partner.  The result is that the corporate general partner absorbs all of the liability, so the firms that use an “Enron-type” structure typically have a corporate general partner with its indemnification, because they’ve paid the additional legal fees and formation costs to achieve that.  The type of client that we are interested in assisting would be those using these partnerships for family limited partnership purposes and typically lacks these resources in establishing their entities.

 

I am willing to take any questions.  We appreciate your support on this bill and would encourage you to pass it.  We feel it is a good measure that supports the state and will protect Nevada’s position as a place where people will come to incorporate and form business entities.

 

Chairman Anderson:

Are you planning on taking us through the bill, not section by section, but to remind us what it’s all about?

 

Derek Rowley:

The first several sections of the bill deal with some of the minor fee changes that are provided under Nevada statute.  We are reducing the initial filing fee, currently at $175 for a minimum filing fee, by $100 so the minimum filing fee would be $75.  The initial list of officers and directors, currently at $165, would be reduced to $125.  That would reduce the total original corporation cost down to $200 in state filing fees.  The annual list of officers and directors, currently $85 a year for every corporation, is restructured so that there is a minimum annual renewal of $125 for corporations with up to $75,000 worth of total aggregate capital. 

 

[Derek Rowley continued.]  For corporations that have higher aggregate capital, the renewal fee is tiered on the basis of the amount of capital they have up to a cap of just over $11,000.  That takes you to a corporation that has an aggregate capital of about $20.5 million; these are typically large, publicly traded companies.  However, in every instance, these are corporations that have already demonstrated an ability to pay that type of fee because when originally formed they incorporated on a tiered structure and paid increased fees for the right to have the additional capital.

 

In terms of the other fee changes:

 

·        $50 filing penalty is proposed to be increased to $75

 

·        $200 reinstatement fee is proposed to be increased to $300

 

·        $150 amendments and changes in general fee is proposed to be increased to $175

 

·        $60 dissolution fee is proposed to be increased to $75

 

·        $30 fee to change a resident agent is proposed to be increased to $60

 

·        $20 certification fee is proposed to be increased to $30

 

·        $20 name reservation fee would be raised to $25

 

·        $40 certificates of good standing would raise to $50

 

·        $1 copy fees per page would be raised to $2 a page

 

·        $250 resident agent registration fee for the right to be published on the Office of the Secretary of State Web site would be increased to $500

 

·        $100 24-hour expedite fee would be increased to $125

 

There are also some moderate increases in the nonprofit fees:  $10 and $15 for incorporation and the annual list.  The nonprofit fees are significantly less than the profit corporation fees.

 

Another change this bill makes is there an entity by the name of corporation “soles.”  When a corporation sole files in the state of Nevada they file their articles of incorporation there is no requirement that they file any additional annual list at any time.  We are adding an annual list requirement of corporation soles at the nonprofit fee rate that will generate additional revenue. 

 

[Derek Rowley continued.]  There is also proposed a change in the annual business license fee.  Currently there is a requirement that entities conducting business in the state of Nevada file a one-time application fee of $25 for a Nevada business license.  The proposal in S.B. 298 is to make that application fee $50 and to collect that business license fee annually.  There is no jurisdiction that I’m aware of that issues a one-time, never-ending business license.  The bulk of the entities our industry represents are companies that pay the one-time filing fee and then have no additional business license fees.  We feel it’s not a large fee, but it is something that has a perceived benefit to those who have the state business license.  It’s a business license rather than a tax; people will not hesitate to pay that.  We recognize that there is concern by some parties as to the application of that $50 fee; we’re sensitive to that and you’ll hear testimony with regard to that today.

 

We have also tried to put some teeth in the bill with regard to the business license registration fees.  We have provided for late penalties and provisions that may be applied by the Department of Taxation to increase the enforceability and collections of the business license tax (fee).  We’ve added a procedure for issuing a cease-and-desist order to accompany a person who is engaged in business in Nevada but has not complied with the state business license requirement.  The bill also has the provision for corrections, technical changes, and the charging order limitation.

 

As you may remember from previous testimony on the Assembly version of this bill, charging order limitation issue had some points of confusion.  The intent was that the charging order laws in Nevada would provide that the charging order protection as the sole remedy of the creditor’s claim.  There was some confusion in the legal community as to whether or not the existing Nevada statute actually provided the charging order as a sole creditor’s claim or not.  The language before you is consistent with language that is used in the states of Alaska, Arizona, Oklahoma, and Wyoming, which are considered to be the best state laws in the area of charging order protection.

 

The charging order issue is interesting because the charging order protection provides that a creditor can only receive a distribution from a partnership or LLC in satisfaction of a creditor’s claim.  Also, the charging order exists to protect other members of an LLC from involuntarily sharing governance responsibilities with someone they did not choose or from having to accept a creditor or another member as a co-manager.  The charging order protects the autonomy of the original members and their ability to manage their own enterprises. 

 

Generally in a single-member entity there are no non-debtor members to protect.  A recent court ruling in Colorado stated that a charging order serves no purpose in a single-member LLC because there are no other parties’ interests to protect.  Where there are various members, it protects the rights of the other members to manage their own affairs.  Also, the charging order does not apply when the judgment creditor has a judgment against the partnership or LLC itself; it only applies when the judgment is against the individual and only to the LLC asset.  In such cases where the creditor has a judgment against the partnership or LLC itself, all of the assets of the LLC or partnership would be available for attachment.

 

Chairman Anderson:

Generally speaking, when we have bills that come from the NCCUSL we usually have Uniform Commissioners who bring them, rather than individuals who are actively involved in or would like to be actively involved in this area.  A member of the Senate and a member of the Assembly are commissioners; why did they chose not to bring this forward?

 

Derek Rowley:

I can’t answer that question; I don’t know why that didn’t happen.

 

Chairman Anderson:

Ms. Ohrenschall and Senator Care are our current two commissioners.  In order to be a member of the NCCUSL you have to be an attorney, and the choice is always made in conjunction with the American Bar Association.  Usually it takes several years before every state adopts the full measure of a law and then each state works it a bit to make the law fit its particular codes.  Any clue?

 

Assemblyman Christensen:

Ms. Ohrenschall was a co-sponsor on the bill, but she did not make a presentation as a member of the NCCUSL.

 

Assemblyman Horne:

Whenever I hear that a bill doesn’t do anything that we can’t already do, I think, why bring the bill?  I had a question on the original Assembly bill regarding the $100 fee for a resident agent who chooses not to be a resident agent any longer; I still have a problem with that.  Even when a client chooses to allow their corporation to lapse and doesn’t communicate with the resident agent, this person could be stuck with having to pay this fee out of no fault, actions, or conduct of their own.  They could start adopting the practice of collecting this $100 from every client and keep it in case something like this happens?

 

Derek Rowley:

Are you referring to the resident agent resignation provision?  Currently, a resident agent has to pay $30 per entity to resign as a resident agent.  We’re proposing to change that provision so that a resident agent can actually file a list with the Office of the Secretary of State that includes as many entities as he or she needs to resign from, pay $100 fee to do so, plus an additional dollar for every entity that’s on that list. 

 

Assemblyman Horne:

On your elimination of the charging order, I don’t understand that but that seems like it will make it more difficult to collect.

 

Derek Rowley:

The bill does not eliminate the charging order; it makes the charging order a judgment creditor’s sole remedy.  Currently the way the statute reads, there is some question as to whether or not it provides for a foreclosure of a limited partnership interest or a limited liability company membership interest if that breaches the theory of having the charging order as a sole remedy of a creditor.  The purpose of the charging order is to protect the other parties in a company.  There are several parties involved, they agree under certain terms and conditions to manage and run the affairs of the company, and if one of the members has an outside lawsuit against him, if the ownership interest in that entity were an attachable asset that could be taken from them entirely, then the other partners run the risk of having a third party they do not know, had no agreements with, and could be hostile to the intents of the business, as part of the management team.  The whole theory behind a charging order, which is represented in all states, is to protect those individuals who are in the entity.

 

It does make it harder to collect against that individual in a sense; the charging order makes the sole remedy a cash distribution.  If the business generated sufficient income to pay a dividend or a cash distribution to the individual members, the charging order would require that that distribution be paid to the creditor instead of to the individual.

 

Assemblyman Mortenson:

I get upset with the attitude of being tough on the existing businesses in the state and giving breaks to the ones coming in; essentially we subsidize people coming into the state.  You raised the fee for existing people and you lowered the fee for new registering corporations.  Then you made only the lowest fee higher, $125 for continuing re-registration, but only $75 for the original registration.  That’s regressive for small businesses; I would like to see your lists stay consistent.  It goes from $375, $275, $175, and then $75 would be good, in my opinion, for re-registration if you have to amend this bill. 

 

Derek Rowley:

We clearly understand that any time you make changes in the filing fees on entities and individuals in Nevada there are going to be impacts; the value of that can certainly be discussed.  Having taken a long look at the fee structure in the state of Nevada, our industry understands the market forces behind the fee structures and the revenues that are generated.  This is our proposal to you, a legislature that is looking for additional revenue.  It’s our position that if it is the Legislature’s desire to increase revenue through commercial recording fees.  This is the way to do it.  If you choose not to do that, that’s fine with us; but if you choose to raise revenues using commercial recordings, this is what we put together in support.

 

Assemblywoman Buckley:

We heard concerns regarding increasing fees in direct marketing.  Could you explain to us your rationale in increasing those fees so high?

 

Derek Rowley:

Which fee specifically are you referring to?

 

Assemblywoman Buckley:

Direct marketers, people who have small businesses in their home like Avon, Mary Kay, and Amway.  We’ve received a hundred e-mails in the past 24-hours, and I’m wondering what your rationale is for that.  And where is that provision in the bill?

 

Derek Rowley:

Because I haven’t heard any testimony with regard to that yet, I’m going to guess that those concerns have to do with the $50 per year business license requirement.  I see members in the audience nodding.  It wasn’t intended to go after the direct marketing industry.  We represent clients incorporating from out of state who pay that one-time $25 business license registration and then have no additional fees since there are no employees under the head tags; they have no additional annual fee to the Department of Taxation.  There is no jurisdiction that I’m aware of that provides a one-time never-ending business license.  For the people we represent, we feel the perceived value of receiving an annual state business license is one that they would pay $50 a year for, and is a way to raise additional revenue.  If there are concerns, one way that might be addressed would be to credit that business license fee against what’s paid under the head tags; we would have no objection to that.  It’s our intent to demonstrate how there can be additional annual revenue generated through the annual business license registration. 

 

Assemblywoman Buckley:

Would the business pay more under this bill?

 

Derek Rowley:

If the business were functioning as a corporation and had the minimum capital, which would be typical of most small businesses in Nevada, their annual list of officers and directors fee would be increased from $85 to $125 a year, along with every other corporate entity. 

 

Assemblywoman Buckley:

Do you have any documents or information to explain limited-liability limited partnerships?  This is a very complex legal topic.

 

Derek Rowley:

I have a document (Exhibit C) and a copy of the Uniform Limited Partnership Act that was adopted by the NCCUSL that includes the LLLP provision.  The precedent for this proposal comes from that conference, and the subsequent approval by the American Bar Association of the Uniform Limited Partnership Act containing the LLLP provisions; it is complicated.

 

Assemblyman Brown:

You mentioned a cease-and-desist order; is that only for failure to file the annual business license?

 

Derek Rowley:

Yes, that’s correct, that’s the intention of that language.  There has been testimony, if not before this Committee, in other committees, about some of the challenges the Department of Taxation has had in collecting the business license revenues.  There were projections made when the $25 one-time fee was enacted; one such problem was that if somebody was functioning without having filed a business license, their hands were tied.  If it is the Legislature’s decision to raise some revenue from the annual business license mechanism then there needs to be a collection and enforcement procedure.  That’s what the cease-and-desist order would do.

 

The concern that we had related to clients our industry typically represents is that they are remote, it’s not necessarily always something that’s in their forefront whether to pay the Nevada annual business license fee.  As their resident agent, if we’re handling mail or providing any other services for them, the cease-and-desist would be served upon us.  We would then notify the client that the state’s notified us that we can’t handle any further business for them.  That’s an effective mechanism to ensure that those business licenses are paid and collected by the state.

 

Assemblyman Brown:

So in the instance where somebody may not file their annual list of officers, that cease and desist wouldn’t necessarily be triggered?  There’s a penalty for late filing, correct?

 

Derek Rowley:

Correct.  For the list of officers and directors, the late penalty fee is increased by $25 under this bill; the cease-and-desist does not apply to that.

 

Assemblyman Mortenson:

When you have a business license, you semi-annually file a report on the gross that you have made during that period.

 

Derek Rowley:

I think you’re referring to a locally issued business license; those vary depending on the county that’s issuing them.  The way the law is currently written, this state business license doesn’t have any of those reporting requirements.

 

Assemblyman Mortenson:

You’re right, but again, the small business, even if you have zero gross every six months, you still pay $25 every six months, so that’s another $50 a small mothball business must endure.  It’s very regressive to keep hitting the small businesses with these taxes.

 

Assemblyman Brown:

Right now the initial incorporation filing fee is a tiered structure, is that correct?  [Mr. Rowley responded in the affirmative.]  That’s not necessarily regressive; the smaller the corporation, the lower the filing fee, correct?  [Mr. Rowley concurred.]  Then the annual renewal is not tiered, correct?  [Mr. Rowley agreed.]  But this would tier that?  [Mr. Rowley agreed.]  According to the size of operation.

 

Derek Rowley:

According to the dollar value of the stock that’s provided.

 

Chairman Anderson:

Anybody else speaking in support of S.B. 298?  So that everybody understands, I have quite a few people who have signed in but only six people who’ve indicated a desire to speak, so I’m going to call from the list.

 

James J. Jackson, representing the Direct Sales Association:

Our concern is very limited and is found in Sections 81 through 83.  We drafted a very short amendment (Exhibit D), which would continue to allow small proprietors such as direct sales folks from Mary Kay, Avon, and the like, to maintain their current status.  Alternatively, we would suggest that the repealed section indicated on page 59 under Nevada Revised Statutes (NRS) 364A.160 be maintained so that they’re not affected by the changes in the law.  We do not stand in opposition to my understanding of the bill as a whole, but to those sections that would adversely affect the industry that is represented here.

 

Chairman Anderson:

The sections that you’re concerned with?

 

James Jackson:

Sections 81 through 83 are where the direct sales concerns come in.

 

John Webb, representing the Direct Selling Association and Independent Contractor Distributors:

[Introduced himself and provided (Exhibit E).]  We are testifying only on the portion of the bill about the business license tax.  The Direct Selling Association (DSA) represents over 150 direct selling companies.  There are tens of thousands of direct sellers in Nevada; they sell products from some of the nation’s most well-known companies such as Avon, Mary Kay, the Pampered Chef, and Creative Memories.  They sell through personal explanation and demonstration, party plans, or one-on-one.

 

The sales forces for these companies are independent contractors and sole proprietors.  They are the quintessential small business.  Eighty-one percent are women.  Direct selling offers individuals job flexibility and low start-up costs.  Their activities are typically neither extensive nor sophisticated.  The vast majority work part-time and sell to supplement their incomes.  Their financial returns are modest; most make only a few hundred dollars a year.  That may not seem like a lot to some people, but for the family that is struggling to make ends meet, it can be the difference between a vacation or Christmas presents and the like.

 

Who are direct sellers?  They are your constituents.  They are your neighbors, friends, and family.  Senate Bill 298 amends NRS Chapter 364A, which is entitled “Business Tax.”  Section 82 of the bill would increase the business license tax from $25 to $50, and makes it an annual fee.  Section 83 repeals an exemption that is based on natural persons who don’t have employees.  This exemption currently protects direct sellers from having the business license tax.  As the Assembly Committee on Judiciary you are used to dealing with issues of fairness and justice.  I submit that imposing this $50 tax on direct sellers would be unjust, it would be unprecedented, and we know of no other state that requires direct sellers to pay such a tax.

 

Direct sellers typically start their business by buying a start-up kit, in some cases for as little as $10.  They get materials, supplies, and demonstration equipment.  Usually they buy at or below cost.  If you double, triple, or quadruple the cost of starting a direct selling business, you will discourage people from doing it and dissuade people from the activity.  Similarly, if we woke up tomorrow, went to the gas station, and had to pay $4, $6, or $8 a gallon, it would affect our behavior.

 

Currently direct selling companies pay anywhere from $10 to $14 million in sales tax to Nevada.  If you impose this tax on direct sellers, many will quit the activity because it will no longer be worth it to them.  You have to sell a lot of cosmetics or other items to make up the $50 that they’ll have to pay with this tax.  Many will choose to forgo the activity and never begin in the first place.  If the direct sellers go away, so will the sales tax that they pay into the state.  We strongly believe that it is very likely that Nevada will lose far more from sales tax revenue than they will gain on this tax on direct sellers.

 

Recently a wise state legislator reminded me, “Always be aware of unintended consequences.”  I believe this is an unintended consequence of this bill.  We ask that you protect the little guy and gal from this tax increase.  Direct selling is a unique activity; it is recognized as such in federal law.  In Title 26 of the United States Code, Section 3508, the federal statute defines direct sellers as a unique class.  Nevada Revised Statutes 612.144 defines direct sellers as “statutory non-employees.”

 

Obviously, you could do a number of things that Mr. Jackson recommended.  You could leave the current exemption in place or you could craft an exemption for direct sellers based on NRS 612.144.  All we are asking you to do today is to protect these small business entrepreneurs from this unjust tax. 

 

Assemblyman Mortenson:

You said that no other state imposes this annual fee, is that correct?

 

John Webb: 

Yes, to my knowledge no other state imposes a tax of this kind on direct sellers statewide.  There are some local jurisdictions that we have to contend with, but even in those cases, typically, there are provisions that exempt direct sellers.  This would be unprecedented.  That’s one of the reasons why we’re so concerned, because of the impact on the individual direct sellers in Nevada, and also as a bad precedent throughout the United States.

 

Assemblyman Mortenson:

If this Committee intends to promote business [then this bill would be] doing a disservice to the tiny business entities.

 

John Webb:

Yes, we believe so.

 

Assemblyman Horne:

Was the business revenue you quoted for direct sales for Nevada or the nation?

 

John Webb:

The figure I mentioned was our estimate that direct selling companies pay anywhere from $10 to $14 million in sales tax into Nevada.  Typically what companies do is they work out with the Nevada Department of Taxation where they collect and remit; it’s easier for the states to do it that way and it’s easier for the individual direct sellers.  We feel that direct sellers are paying their way and paying their sales tax; we are adamant about them doing so and they’re religious in making sure they pay the appropriate sales tax in the state.

 

Assemblyman Horne:

Do you have the numbers for revenue generated for the average direct seller in Nevada?  I’m trying to understand the large opposition to paying $50 a year; that comes to $4 a month.  The e-mails that I’m getting seem to say that would drive people out of business.

 

John Webb:

You have to remember that some of these people are only making a few hundred dollars minimum.  Most are working part-time and make a very modest amount of money.  But for the money they make, they work hard like most of us do.  If you’re making $200 to $300 a year, $50 is a lot of money.  That may be the difference between whether you think it’s worth it or not.  This is also an up-front cost.  The way the bill is written…[Mr. Webb shared the following scenario].  Typically, 1 percent [of the direct sellers] are women who go to a party plan, they like the products, and they want to get involved.  They are told to pay $10 for a start-up kit and they’ll get the makeup and other samples.  You think that’s great and then say, “Oh, by the way, you also have to file this form with the state and pay a $50 tax that’ll be collected annually.”  This exponentially increases the cost at the beginning.  If you stayed with the business, you might see that it was worth it.  But if you’re looking at it from the perspective of somebody’s just starting their business, throwing this $50 tax at them seems like a lot of money.  That’s why we think it’s so detrimental.

 

Bryan Harrison, representing Alticor Inc. and Quixtar:

[Introduced himself and submitted (Exhibit F).]  We’ve been receiving the same e-mails and phone calls from Nevada citizens.  No other state has extended this requirement.  Currently there is no fee on direct sellers.  This is not just an increase in the fee; it is now being extended to direct sellers as well.  If there are no sales, there are no sales taxes being collected.  We as a company collect and remit on all of the product coming into Nevada.

 

The previous speaker who spoke in favor [of the bill] said if you call it a “license” rather than a “tax” people tend not to be opposed.  From our perspective that is not true.  You can call it a license, a fee, an assessment, or a tax, but it is still money out-of-pocket for these individuals.

 

On my last visit here I was able to visit the historic Supreme Court chambers at the state capital where they list some of the notable cases; one was called the “leaving tax.”  At one time in Nevada’s history, they charged a tax for people who wanted to leave, and I would say that this may be the sequel to the leaving tax.  You’re going to be taxing people right out of an opportunity; let’s learn from history and not repeat it.

 

Anne Crews, Vice President, Government Relations, Mary Kay, Inc.:

[Introduced herself and provided (Exhibit G).]  Our independent contractor sales force of women throughout the state typically enters the career as a part-time career to earn additional money to supplement the family income.  Any additional red tape and fee you might put on them would have a chilling effect not only for the individuals who are currently in the sales force, but also anyone who is thinking about entering a direct selling career.  It’s wonderful that people have the opportunity to enter the career at a low cost; they can work as much or as little as they like.  Often they like the career so much they choose to pursue it full-time, as have some of our sales directors who are with me today. 

 

I also wanted to explain that our company has an agreement with the state; we want to make sure that the sales tax on their purchases directly from the company is collected and remitted.  So the Mary Kay representatives purchase the product wholesale from the company, we collect the sales tax at that time on the suggested retail sale cost, and remit it at once to the state.  I agree with what’s been said previously that if you drive direct sellers out of the state you’ll lose a substantial amount of sales tax revenue.

Assemblyman Carpenter:

What kind of commission or markup do your people work on?

 

Bryan Harrison:

We sell the product to the individual and they determine the price.  There is no predetermined price; it would vary from product to product, even on the suggested retail price.  Our company has over 600 items, which are sold through Amway or Quixtar, so it would be hard to give a specific answer.

 

Assemblyman Carpenter:

There’s no suggested retail price, then?

 

Bryan Harrison:

There is a suggested retail price, but as I mentioned there are 600 items, so the profit margin would vary.  With the price being suggested, individuals are free to sell it at any price.  It would be hard to give you a fast and safe answer, which is why Ms. Crews mentioned we collect and remit sales tax on the suggested retail price.

 

Assemblyman Carpenter:

What would be an average?

 

Anne Crews:

With all due respect, they buy the product wholesale from the company and then they have taken possession, if you will, of those items.  The products are theirs to resell to the ultimate consumer.

 

Assemblyman Carpenter:

I understand that; I would just like a ballpark figure of the biggest selling item in Amway.

 

Bryan Harrison:

Nutritional supplements.

 

Assemblyman Carpenter:

What is the suggested retail markup?

 

Bryan Harrison:

Let’s assume it’s 20 percent, sir, and it would vary from item to item.

 

Assemblyman Carpenter:

Can you supply a list of what your suggested retail is?

 

Bryan Harrison:

Yes, sir.

 

Assemblyman Geddes:

When a person wants to buy the product, they buy it from you at wholesale and you submit a tax based on retail.  So you may a great number of people who are only in the business to get the wholesale rate for the products because they like the products.  So you could be paying more to the state in taxes if they just keep it and use it, is that what you’re saying?

 

Bryan Harrison:

Yes, sir.

 

Assemblyman Geddes:

The estimated increase is 20 percent and we’ll be getting a price guide?

 

Bryan Harrison:

I would like to confirm that.

 

Assemblyman Geddes:

So the product costs $40, your suggested retail price is $50, they sell it for $60, but the tax would be paid on the $50.  We wouldn’t be getting the tax for the additional $10, but we assume they make that up for all those products that are sold at wholesale.  Is that how it works?

 

Bryan Harrison:

Yes, the majority would be made at or below the suggested retail.  If it was for more, we would have no way of knowing that ourselves.

 

Assemblyman Geddes:

I’m wondering about the $4.25 a month [license fee] being “out there.”  Even if a person wasn’t selling to anybody, wasn’t making a profit during the year, and was just buying the product at wholesale, I’m getting a great savings.  I’m not sure this is that onerous an issue. 

 

Bryan Harrison:

When the cost of the government burden exceeds the cost of the opportunity itself, it should be cause for pause.  The average cost for entering into Quixtar is $39; there is a low barrier to entry.  That’s one of the attractions in addition to great products and the ability to set your own hours.  The cost that this bill would put on annually exceeds the potential lifetime cost of entering the business.  That is the point we’re trying to make.  If there is a fee I would question the benefit received by these individuals.  State government does provide needed services for health and welfare, but in particular to these individuals, as you turn to your constituents, the people who will lose their business or choose not to be in the business, explain to them the benefit that this small fee is going to return to them.  I understand your concern of trying to cover revenue, but we believe that you’ll get less revenue because there will be less sales.  If it’s simply about economics, the economics don’t work either.

 

Assemblyman Geddes:

I don’t firmly believe that at all; if you have some people fall out of business, the others still in business will pick up and see that opportunity.  If someone’s willing to buy, there will be a seller.  Does the Nevada Department of Taxation audit Amway or Mary Kay annually or do they go out and audit individual salespeople?  How do we track this tax system and ensure that you’re paying what’s there if you’re estimating it all on the retail price?  How do we really know if all the taxes are being paid to the state?

 

Bryan Harrison:

I can speak for our company; we do work directly with the Nevada Office of the State Treasurer.  I’ve been with the company for 2 years and I’m not in the tax department, so I’m not qualified to say whether we’ve ever been audited.  We work with our tax department to collect and remit, but as far as being audited, I’m not sure how to answer.

 

Anne Crews:

On behalf of Mary Kay, I can check with our in-house tax people concerning any recent audit or our most recent work with the state and get back to you.

 

Josephine Mills, Director, Government Relations, Avon Products:

[Introduced herself.]  I want to reiterate a couple of points.  We estimate the direct selling industry itself pays $10 to$14 million per year in sales tax.  Avon handles the tax remittance similar to Alticor and Mary Kay; we collect sales tax from representatives at the time they purchase the product and we remit sales tax to the state on all purchases made based on suggested retail sales.

 

I think it is highly unlikely that any representative would make a sale in excess of a suggested retail price since the suggested retail price is in the brochure.  The brochure is the catalog upon which all these sales are based, so it would be unethical and probably not doable for a representative to approach somebody to charge someone more than the suggested retail price.  I believe that you are being remitted all of the taxes and, most likely, more tax in terms of sales tax than should otherwise be remitted to the state.

 

One of the things that attracts people to the direct selling industry is the ease of entry.  There are very low start-up costs; with Avon it’s $10.  We raised it at one point and found that trying to increase the start-up cost for representatives really hurt the business, so we brought it back down to $10.  This fee covers  literature, start-up kit, samples, tote bag, and product information; it’s provided to the representatives who start their business with Avon as independent contractors much lower than the cost of these items.  If we were to charge the actual cost of these items it would be a tremendous deterrent.  For a representative to have to pay this $10 fee and then a business license fee in the amount of $50, that would definitely be a major obstacle and we’re really concerned.

 

What we are most concerned about is that you understand the dynamics because if this $50 business license fee is passed and it becomes reality, the dynamics of everything changes in the state regarding direct sellers, the sales tax, and the revenue that you currently receive.

 

I want to leave you with the fact that you have to understand the actual picture of the true dynamics and the total scope of what this can do. 

 

James Jackson:

We’ll follow up with the additional information that has been requested by the Committee.

 

Chairman Anderson:

We’ll be looking for it.

 

Matthew Sharp, Nevada Trial Lawyers Association:

[Introduced himself.]  We are opposed to Sections 47 and 48 of the bill dealing with the limited liability for a general partner of a limited-liability limited partnership.  Let me preface my comments by saying my association is not against small businesses; we understand the importance of entrepreneurs.  Small businesses, in my opinion, would not be affected by this bill; they have the means to form entities to provide them with limited-liability in the form of either a corporation or limited liability company.  What we’re dealing with here is a fairly sophisticated type of entity and, as the law currently stands, a general partner of a limited-liability partnership is responsible for the debts and acts of the partnership.  A limited partner who is an investor in the partnership has limited liability and they are not responsible.  We can point, as the proponents of the bill did, to the Enron examples, but the partnerships that absconded money from Enron were limited partnerships.

 

Our association’s position is that with operating a business comes responsibility to the public.  We’re concerned about these entities that are created and do run afoul of the law.  How do we provide the protection to the people who are harmed and get them compensated?  I think this bill, unfortunately, provides more protection for the bad actors and more loopholes for the people that need to be compensated to get their money back.  We understand the reality and the public policy argument of creating new entities to attract business to this state, but I think that this body has always been concerned about the rights of all people affected, and we currently have both corporate laws and limited-liability companies that are favorable to businesses. 

 

Assemblyman Conklin:

I have been concerned about this section of the bill as well.  Could you detail the difference between an LLC and a LLLP in terms of liability?  Maybe it’s appropriate to look at something like a construction defect suit where a company comes into the state of Nevada, forms a LLLP versus an LLC, builds some shoddy work, and leaves town.  What kind of liability difference is there between the two entities?  That’s where I’m confused because I’ve always viewed them as having the same liability.  We don’t seem to have problems with LLCs, although a sole proprietorship would have far more liability than one.

 

Matthew Sharp:

I’m not a business lawyer; I notice Mr. Fowler’s in the room and he probably can answer a lot of these questions if I can’t.  With a limited-liability company, the manager receives limited liability.  As I understand, limited-liability companies originated as a creature of the tax statutes.  A limited-liability limited partnership would allow for that same protection for the general partner.  This is where my concern is; the law traditionally has distinguished between partnerships and corporate entities.  For partnerships run by general partners, the law has recognized the heightened responsibility for those partnerships.  This bill would eliminate that exception.  Currently, a general partner of a LLLP would be responsible for the debt to the partnership; under this bill they would not.  It would create the same protection as a limited-liability company.

 

Assemblyman Conklin:

In an LLC, the people who have formed the LLC, the ownership, ultimately still remain liable for actions of the business, actions left undone, and obligations left unfulfilled by the business.  It’s only the management that’s not responsible, is that correct?

 

Matthew Sharp:

The investors in a limited-liability company would have limited liability; they would have that protection.  The manager of the LLC would also have that protection, the manager being the person who runs the day-to-day activities.  Under a limited partnership, as the law currently exists, the limited partners would be investors; they have limited liability.  The general partner who runs the partnership would not.  Under the proposal of this bill, the general partner would receive significant liability protection, which could be interpreted with the broadness of this language to be far beyond what a manager of a LLC would have.

 

Assemblyman Brown:

You mentioned the heightened responsibility for general partners.  Why would we have a difference in the level of responsibility for a general partner versus any officer of a corporation or manager of an LLC?

 

Matthew Sharp:

There is a distinction, certainly within corporate law, where we have specific protections in place to ensure that the corporate officers are acting in the protection of the corporate entity and in the shareholder’s interests.  I’m not familiar with the LLC law, so I can’t comment on that.  We look at the statutes, and those statutes recognize that the officer has built in place protections for the public and shareholders.  As far as I know, those same protections do not exist for a general partnership in relationship to his responsibility in a limited partnership to the public and other entities that he is dealing with.

 

Assemblyman Brown:

It seems like this would create the same type of responsibility, duties, and liabilities as a corporation for the general partner.  I don’t understand; if we do it for those other entities, why we wouldn’t do it for the partnership?

 

Matthew Sharp:

Your point is well taken and it’s a public policy issue that this body must decide.  I think if you read Section 47, subsection 1(b), I interpret that to be pretty broad liability protection; it says, “A partner of a registered limited-liability limited partnership is not individually responsible for the debt or liability by way of acting as a partner.”  That’s very broad language; virtually anything that partner is doing in the course of his business, he’s acting as a partner.  That limits his own personal accountability; the law has never said that an actor is limited from what he does from his own tortuous conduct.  In other words, if I commit a tort in law, I’m responsible; under this language, I think, it provides more significant protection than a corporate officer has.

 

Assemblyman Brown:

Don’t we have in the following section, the alter ego doctrine? 

 

Matthew Sharp:

Yes, you do have the alter ego, but that only comes into play when the partner is being held responsible for acts other than his own.  The way I read Section 47, subsection 1(d), it’s very broad and would include virtually anything that partner did.  As Section 47, subsection 1(b), reads, he has limited liability unless you can prove fraud in the action of the formal entity with regard to the limited-liability limited partnership for which we have no case law or structure to assist the courts in analyzing.  Those two sections are much broader protection than a corporation would receive.

 

Assemblyman Brown:

Wouldn’t we have analogous law under corporations?

 

Matthew Sharp:

You would have analogous law for two separate types of entities; corporation and partnerships have traditionally been separate types of entities, so I don’t know what precedential authority either would have.  But I think, again referring to Section 47, subsection 1(b), if I’m an officer of a corporation and I commit a tort, I’m responsible for that tort.  Here that partner commits a tort and I’m not sure they are responsible. 

 

Chairman Anderson:

I see many have signed in in opposition to S.B. 298.  I have letters [in opposition] from Maynard and Beverly Christian (Exhibit H) and Rosemarie Conner (Exhibit I).  Is there anybody who feels they need to bring forward a point that has not been made?  I have a memo here with possible amendment language (Exhibit D).  Anything else for the record?

 

Let me close the hearing on S.B. 298, and open the hearing on S.B. 383.

 

Senate Bill 383 (1st Reprint):  Revises provisions governing mandatory reporting of abuse or neglect of children. (BDR 38-194)

 

Edward Cotton, Administrator, Division of Child and Family Services, Nevada Department of Human Resources:

[Introduced himself.]  Senate Bill 383 is the bill that adds to the [list of] people who are required or mandated to report child abuse and neglect, “Any adult person who is employed by an entity that provides organized activities for children.”  Although I will testify in support of the bill, I want to be on record to say the Division very much supported the previous version before it was amended; it was amended to take out “volunteers.”  Previously the bill changed the penalty for not reporting from misdemeanor to gross misdemeanor; that was also amended out.

 

Every day across Nevada thousands of children take part in organized programs that provide recreation, enrichment, and other activities.  Staff members and volunteers working at these agencies have the opportunity to interact with these children in an informal setting, and they often establish rapport with them.  These people may be provided information by the child that he or she is not comfortable sharing with other adults that involved being abused or neglected, or they may notice unexplained marks or burns.  Making this group of people mandated reporters means that we have additional sets of eyes observing children and keeping them safe from child abuse or neglect.  These individuals can be provided a mandated reports manual and can receive training regarding their obligations to report.

 

Our concern about removing volunteers from this is that there are 3 very large groups of volunteers that would not be mandated under this amended version:  Boy Scout leaders, 4-H volunteers, and the Boys and Girls Clubs volunteers. 

 

The second part of the bill that was amended changed the penalty for not reporting from a misdemeanor to a gross misdemeanor; the United States Department of Health and Human Services estimates that more that 50 percent of child abuse in this nation goes unreported.  People who work with children and suspect abuse should be accountable for aiding in our efforts to keep children safe, and that change would have reinforced our commitment to safety.

 

Chairman Anderson:

I know that you would prefer us to go back to the first draft of the bill; we may lose some language if we end up in a conference committee.

 

Edward Cotton:

This definitely is a step in the right direction.

 

May Shelton, Washoe County Social Services:

[Introduced herself.]  We want to go on record in support of S.B. 383.

 

Jodi Tyson, Director, Nevada Coalition Against Sexual Violence:

[Introduced herself.]  I also would just like to go on record in support of the previous bill that was in the Senate Committee on Judiciary.  I’m here to address the mandatory reporting issues, the benefits of increasing the ability of mandatory reporters, and those who are included in that definition. 

 

Child abuse and child sexual abuse is veiled under a very thin cloth of secrecy.  It is reported that abused children will tell three adults what is going on in their lives before an adult will start the process of doing something about it.  This list of mandatory reporters is crucial to the safety of children and investigating sexual and physical abuse.  They are listed as professionals because we, above all else, as professionals who work with children, know the devastation of abuse to a child’s abilities to grow, develop, socialize, and learn at a normal level.  We also feel that there are other certain disciplines that are not included or exempted under certain circumstances, which would include groups like clergy and volunteers, who were removed from the previous bill.

 

We do think that this is one step forward to include a group of professionals who work with children in organized activities, although volunteers of Boy and Girl Scouts, employees, and coordinators should be included.  They teach life skills to students who are in their groups.  When we teach children life and resistance skills, we need to be held accountable when a child discloses abuse instead of being one of the other two adults that a child tells who thinks it is none of their business or not included in their job description.

 

I also want to let you know that, as we try to inform many mandatory reporters, there are free mandatory reporter training programs available and, as an office, we make referrals to those programs.  That’s important to say because as we continue to grow and enhance this list of mandatory reporters, I know that sometimes there is a concern about when someone becomes a mandatory reporter, how will they know what needs to be reported, and who to report it to.  It is something that the Coalition is also concerned about and has been working with members to make sure that those training programs are available for mandatory reporters.

 

Terri Miller, Training Coordinator, Nevada Coalition Against Sexual Violence; and President, Stop Educator Sexual Abuse, Misconduct and Exploitation:

[Introduced herself.]  I’m going to speak to you on behalf of Stop Educator Sexual Abuse, Misconduct and Exploitation (SESAME).  It has been my experience with mandated reporting and the lack thereof within the educational environment that school employees spend a majority of time with our children, and it is incumbent upon them to make mandatory reportings.

 

Chairman Anderson:

Aren’t school employees already mandated [reporters] in this state?

 

Terri Miller:

Yes, they are, sir.

 

Chairman Anderson:

Would you speak to this bill?

Terri Miller:

I am speaking to this bill in regard to increasing the penalties for mandated reporters.  I support the previous bill, as do Mr. Cotton and Ms. Tyson.  It is incumbent upon school employees and mandated reporters within the school environment to make the mandated reports for the protection of children. 

 

Generally they do a pretty good job when the suspected abuse involves a family member or someone outside the school environment.  When it involves a school employee, too often they don’t report as currently required by law; there are no accountability incentives in our laws that compel licensed employees to make a report.  When a report is not made, children continue to suffer, schools can be held liable for their suffering, and trust within the entire education community is broken.  All suffer because liability results in costly civil actions and increased insurance premiums for our districts.  Currently there are 17 states that have legislation that will result in disciplinary actions ranging from suspension and forfeiture of certification, to revocation of certification for failure to make a mandated report.  I would like you to consider these types of penalties for licensed employees when they fail to make the mandated report. 

 

Chairman Anderson:

Why am I under the impression that if I don’t immediately report a child who has been abused that I see in my classroom that I lose my license?

 

Edward Cotton:  

I don’t believe under Nevada law you would lose your license; I think action could be taken against you.  In the original bill, Section 2 originally said, “Any person who is knowingly or willingly violates the provisions of this is guilty of a” and they added “gross misdemeanor.”  I took that to mean, even at this point, in Nevada law they’re guilty of a misdemeanor, but I notice in the amendment Section 2 doesn’t include that language.

 

May Shelton:

In the reprint they did take out that section because it currently exists in the law that it is a misdemeanor.  The original bill, as introduced, proposed to change it to a gross misdemeanor.  Insofar as social workers go, they’re required to report and if they don’t there are sanctions internally within the agency as well as with the licensing board.

 

Chairman Anderson:

Is that not true for teachers?

May Shelton:

I don’t know for sure, but I would think that all licensing boards have some rules about the conduct of their licensees.

 

Chairman Anderson:

I’m going to have the Committee Policy Analyst check on that.  Anybody else wishing to testify on the bill?  I close the hearing on S.B. 338.  Let’s take a look at Senate Bill 434.

 

Senate Bill 434 (1st Reprint):  Exempts from execution by creditors certain money held in trust forming part of qualified tuition program under certain circumstances. (BDR 2-303)

 

Robin Reedy, Deputy of Debt Management, Office of the State Treasurer:

[Introduced herself.]  Treasurer Brian Krolicki requested this bill to benefit those participants of Nevada’s 529 programs.  Nevada offers both types of 529 plans:  the Nevada Prepaid Tuition Program and the Nevada College Savings Program.  This bill would protect an individual’s assets held in a Nevada 529 plan by providing an exemption from execution by a judgment creditor.

 

We are requesting the education savings be included in the same exemption that is already provided to a long list of exempted items including:

 

·        Social Security and veteran’s benefits

 

·        Retirement benefits

 

·        Public assistance—welfare, industrial insurance, and unemployment benefits

 

·        Proceeds from life insurance policies

 

·        A homestead and a vehicle

 

·        75 percent of take-home pay

 

·        Money not to exceed $500,000 in an IRA (individual retirement account), SEP (simplified employee pension), 401, or other qualified stock bonus, pension or profit-sharing plan

 

Treasurer Krolicki believes that protecting these assets, which are restricted to higher education costs under these wholesome circumstances, would be a benefit to Nevada families.  It would provide those familiar with the peace of mind that their children would be financially able to pursue a higher education.

 

Assemblyman Brown:

On the $500,000 that is set forth as a cap [for an pension plan], is that in the aggregate for the various accounts that are listed or is that per account?

 

Robin Reedy:

I would have to defer to Legal on that question.

 

Risa Lang, Committee Counsel:

You’re talking about Section 1, subsection 11, in the new language?

 

Assemblyman Brown:

That’s correct.

 

Risa Lang:

I think this would be in the aggregate since it lists (a) through (d) and has the conjunction “and (e).”

 

Assemblyman Carpenter:

The language now specifically mentions Section 401 of the Internal Revenue Code, which I thought were 401(k) accounts, and the new language mentions Section 401; will that cover the 401(k) accounts?

 

Robin Reedy:

It is my belief that the NRS code is to remain in conformance with the federal laws that are enacted.

 

Chairman Anderson:

If I’m to understand both Mr. Carpenter’s and Mr. Brown’s questions, we’ve gone from exempting $500,000 in a 401(k) to exempting $500,000 in a retirement arrangement, which could be competing.  It would be quite conceivable to reach the $500,000 without too much trouble.

 

Robin Reedy:

I have been told that since 1998, 2 purchasers holding 4 accounts have closed them due to bankruptcy for a total of $11,395.

 

Chairman Anderson:

Are there questions for this witness?  Anybody else wishing to testify on S.B. 434?  I will close the hearing on S.B. 434.  We’ll hold the bill for a work session. 

 

Let’s open the hearing on S.B. 436.

 

Senate Bill 436 (1st Reprint):  Makes various changes to provisions pertaining to business. (BDR 7-982)

 

John P. Fowler, Chair, Executive Committee, Business Law Section, State Bar of Nevada:

[Introduced himself.]  I’m here to support Senate Bill 436, which was the bill proposed by the Business Law Section this year.  The Business Law Section has been producing a bill every session since 1991.  The revisions we propose are hopefully not controversial but intended to improve and make more competitive the state of Nevada related to business entities and the practice of business law in general.

 

There are no major changes in policy this year but there are a number of tweaks we’d like to make.  The changes that we have proposed over the years have encouraged businesspeople across the country and the world to file their entities in Nevada.  This has increased the amount of fees paid to the Office of the Secretary of State.

 

I’ve prepared a memo (Exhibit J), which describes each section.  You’ll see that some are truly “tweaks” and minor details, while others are more important.  I’d like to point out two proposals.

 

The first item in the memo deals with preparing for the world of electronic filing.  The bulk of this bill is changes of the same kind to a great number of different statutes.  All those changes are designed to make it easier for the Office of the Secretary of State to allow electronic filing when that day comes.  Some of you may be familiar with the system used by the Securities and Exchange Commission, which requires electronic filing of documents for their office.  Those filings are ready for viewing on the Web site often within 24 hours of the time they are presented electronically for filing.  What a wonderful thing it would be for our state to have that system.  It would make it easier for those who do business to find out what filings there are for a particular corporation, LLC, or other entity in Nevada.  This system would allow for payment by credit card for copies and viewing of documents and would be an additional source of revenue because it’s easy and relatively inexpensive.  Hopefully we could encourage viewing-for-pay and it could bring in a considerable amount of fees.  It could also encourage people to file in Nevada because no other state currently has that system.

 

The changes in a number of new definitions and terms are designed to eliminate the requirement necessary for a handwritten signature for almost all filings; they could be done electronically.  That would speed up and make possible electronic filing.

 

[John Fowler continued.]  The terminology is standardized throughout the statutes in Title 7 and there is one exception requested by the Office of the Secretary of State.  Those documents by which one entity allows another entity to use the identical name would still require “live” handwritten signatures and acknowledgments.  That is the exception to the rule, which otherwise would allow electronic signatures.

 

Provisions in this bill allow corporations to operate electronically; they would be, with stockholder permission, allowed to give electronic stockholder meeting notices and waivers of notice.  The provisions would also allow the corporation to keep electronic records, but electronic records have to be something that can be reduced to paper.  Finally, to make sure we don’t impose something on corporations that the smaller businesses would not be able to comply with, the bill doesn’t require corporations to keep records electronically; they can still keep them on paper.

 

The other provision changes the Uniform Commercial Code (UCC) and affects the kind of financing that’s become very popular.  This is item 41 of the memo and deals with UCC Section 9318.  In 1999, the Legislature passed revised Article 9 of the UCC.  The various versions were worked on by the NCCUSL and were proposed to this Legislature who adopted them.  The major change to Article 9 was made in 1999 and put into place.  One change recommended by the Uniform Law Commissioners did not make in into the statutes and that’s UCC Section 9318A, or in our way of designating statutes would be 9318(1).  That section was intended to reverse a ruling made in the United States Court of Appeals, Tenth Circuit, the Octagon case.

 

There is a type of financing that’s become popular, financing with a special purpose vehicle, and that’s not a car; it is a subsidiary entity that is created by a corporation.  The special purpose vehicle is created only for the purpose of holding a set of assets; often they are accounts receivable or it can be an airplane, machines tools—whatever assets the corporation has.  A group of those assets would be put into the special purpose entity, whose only purpose is to hold those assets.  That asset then borrows money from a lender and the special purpose entity pays the parent corporation for the assets.  The assets go to the special purpose entity and secure the loan.  The lenders get a guarantee from the parent corporation.

 

Why is this important?  The lenders know that the assets aren’t owned by the parent corporation; they’re owned by the special purpose entity.  There is a strong hope that if the parent corporation goes bankrupt the special purpose entity and those assets won’t be dragged into the bankruptcy.  That’s important because it allows borrowers a lower interest rate because the lenders feel more secure with the assets separated from the parent, and sometimes it makes possible loans that wouldn’t have happened otherwise.

 

According to the lawyers, the Octagon case threatened the whole structure because it dragged assets back into the bankrupt entity.  Section 9318A as proposed by the Uniform Laws Commissioners would have changed this case.  This didn’t get put into our 1999 statutes where we are asking that it be inserted this time.

 

There are other changes to the bill such as in NRS Chapter 602 relating to fictitious firm names.  There were some changes made to those statutes in 2001 that allowed counties, by ordinance, to require 5-year renewal of fictitious firm name statements; those are the documents that are filed in the Clerk’s office whenever someone or some entity is operating under a name different than their legal name.  Before the 2001 Legislative Session, one never had to renew those and they never expired.  We may recommend some tweaks to those statutes clarifying the legal standard requiring the filing of the fictitious firm name statement in the first place and also requiring that all filings have a mailing address because we’d like for county clerks to send out reminder notices every 5 years.  Another concern is that the failure to file was classed a misdemeanor; failure to file anything else in this business world is never a misdemeanor.  We suggested a $50 fine, but what the fine ought to be is up to this body.  We feel that a misdemeanor for failing to file a fictitious firm name statement is pretty strong.

 

There are other provisions, which I’d be happy to answer questions on; the memo reviews this whole bill.

 

Chairman Anderson:

Somebody has faxed me some questions; it appears to be from the [Washoe] County Clerk’s office (Exhibit K).  They are concerned about the changes in Sections 263 and 265, pages 147, 148, and 149, to remove street address requirements for a natural person and only use a mailing address.  They object because:

 

The County Clerk’s office provides the public with information needed to serve a lawsuit, if necessary.  If a street address is not required by law, how will they get that?  Only an artificial person on file with the Secretary of State will have a resident agent available for accepting service in the case of a lawsuit.  The removal of the notary requirement compromises the credibility of these documents.  The changes will eliminate the protection provided to the public when doing business with any firm that is not a legal entity on file with the Secretary of State of Nevada.  The following statement can be found at the beginning of the printed version of NRS 602.  The purpose of the fictitious name status “is to prevent fraud and to inform the public of the true identity of those with whom the public conducts business.”  We strongly object to the removal of the notary requirement.

 

John Fowler:

We personally believe that the need for an address was mostly related to the clerks’ ability to send reminder notices every five years.  Some businesses wouldn’t have a street address anyway; if you’re operating out of your home or a post office box, there would be no business street address.  I don’t have any problem with including the residence or business address so long as we’re confident that’s where the mailing can go.  We would encourage county clerks to send out reminder notices; it’s in their interest to pick up the additional filing fee anyway. 

 

As far as serving a lawsuit, there are many places where a street address may be obtained.  If that’s a concern, it was our intent to make sure that there was a mailing address to which a reminder notice could be sent.  With respect to the notarial requirement, we were simply seeking to delete the notarial requirement for business filings everywhere so it would be uniform and one wouldn’t have to worry about finding a notary to file a fictitious firm name statement; one doesn’t have to do that to file articles of incorporation.  If that’s a strong concern of the county clerks, their offices are used to insisting on notarial requirements because everything in the recorder’s office has to have a notarial acknowledgement for purposes of real estate.  We don’t believe the notarial requirement really compromises the credibility of the document; if one wishes to propose a fraud, a notary acknowledgement seal is not going to stop you, you’ll just make one up.  You could always leave it in the bill; it’s not a strong issue as far as we’re concerned.

 

Chairman Anderson:

It had been my intention to try to process this bill today but we can hang onto it.

 

Assemblyman Gustavson:

I feel that the filing fee to correct a record as stated in Section 103, page 59, is too high. 

John Fowler:

I see a filing fee of $25.

 

Assemblyman Gustavson:

No, $150.  I’m sorry; I’m looking at the original copy of the bill, not the first reprint.  Then in Section 175, subsection 1(i), I don’t understand, “Owning, without more, real or personal property.”  What does the “without more” mean?

 

John Fowler:

“Without more” means all they do is own it; they don’t actively conduct a business.  It’s to encourage without further bother those who might want to purchase Nevada real property and invest in the state.  Once they start doing something with the property, for instance, administering or developing it, that’s when they would have to file.

 

Assemblywoman Buckley:

On page 4 of your memo with regard to the creditors being added, I think I understand why some corporations might like alternative standards and I am OK with that provision, but adding the corporate creditors, could you elaborate on that?  In the 1999 session, we tried to codify the Polaris case, as I recall, and we didn’t add the word “manifest”?  We added you could argue it to a bench trial instead of a jury; I think that was the substantive change.

 

John Fowler:

That was the alter ego standard?

 

Assemblywoman Buckley:

Yes.  By adding creditors, were creditors also covered by the Polaris case?  Would you discuss this, if it isn’t in this bill, what would the standard be now?

 

John Fowler:

You’re referring to the memo on page 4, item 7?  [Assemblywoman Buckley answered in the affirmative.]  All of this was changed when subsection 7 of NRS 78.138 was added by the 2001 Legislature; they also deleted a statute, I can’t remember which one it was, which was on the same subject matter and put it all in one place.  The statutory wording that they deleted from the existing statute and put here covered creditors.  They forgot to put “creditors” in subsection 7, so it was an interesting possibility whether or not the standard of officer/director liability in damages—this is all just money damages, not injunctions—whether the standard for their liability to stockholders now differed from the standard of liability to creditors.  Before, it was the same standard and it applied to both stockholders and creditors.  This adds “creditors” where it was deleted in 2001.

 

Assemblyman Carpenter:

If the county has passed an ordinance so fictitious names have to be renewed every five years and you send a notice to the people, would that be in the ordinance or could we put it in here?  I think those fictitious names have run for many years and this is the first I’ve heard about renewing them.  Where could we make sure that a notice is sent?

 

John Fowler:

It’s in neither; I haven’t seen the county ordinances on this.  I know that we’ve had discussions with at least one county clerk’s office that wants to send out reminder notices because when they do, they get a filing with a filing fee.  It’s in their interest to do so.  I don’t believe the existing statute requires reminder notices to be sent out and we felt that was for the county clerks to do.  There is nothing in the statute that would forbid sending out reminder notices.

 

Assemblyman Carpenter:

Would it be a good idea to require the counties, if they do pass this, to send out those reminder notices?  They’ll get a fee.

 

Chairman Anderson:

Where do we allow them to charge the fee?  Section 7?

 

John Fowler:

The fee is built into NRS Chapter 602 and I’m uncertain whether it’s in one of the statutes that are in this bill.

 

Chairman Anderson:

That’s not the Office of the Secretary of State’s fee?

 

John Fowler:

No, this is county clerks only.

 

Chairman Anderson:

We wouldn’t want to have another unfunded mandate on the county clerks. 

 

Assemblyman Carpenter:

It wouldn’t be unfunded if they were going to get a new fee.  I think it would be a good idea to notify people because I’m sure that 90 percent of the people aren’t going to know that they’re supposed to renew that name because it’s been going on for years.

Chairman Anderson:

We’ll ask Ms. Lang to look for a possible amendment there.

 

Assemblyman Mortenson:

The practice is already happening in Clark County; I got my notice that I need to renew my fictitious name in three years.

 

Chairman Anderson:

But yours may be a newer fictitious name and they may not have begun to track the older fictitious names.

 

Assemblyman Mortenson:

Yes, very new, and I haven’t gotten any notice on the older one.

 

Chairman Anderson:

It may be a practice that they began at a particular date.  Is it possible that the fictitious name would have died if it hadn’t been used in a certain number of years?

 

John Fowler:

Prior to the 2001 Legislature they just went on forever; once filed it was there on file and very often the partners, usually they were partnerships, would die and the name would still be on the record.

 

Chairman Anderson:

So all those fictitious corporations continue to exist?  Given the level of mining activity in this state there could be enough of them out there that it would be pretty hard not to find one that wasn’t duplicated.

 

John Fowler:

That’s true; there’s nothing in the statute that prevents people from duplicating these names; that’s not in NRS Chapter 602.  The county clerk just takes the filing even though there may be 14 people with the name “Sierra Nevada Restaurant,” for instance; still all the filings are accepted by the county clerks.

 

Chairman Anderson:

Mr. Carpenter, we might have a problem with the county clerks having to comb the records to determine if there’s an entity that still wishes to keep a fictitious name alive.

 

Assemblyman Carpenter:

You’re probably right, but if these people don’t have some notice they’re not going to know because it’s been so long, and most people don’t really read the statutes.  Maybe there could be a simple notice that if you have a fictitious name [you need to re-file and pay a fee].

 

Assemblywoman Buckley:

If we messed up the asset-based securitization last session, maybe we messed up the fictitious name at the same time.  It’s tough, after 50 years, to change the rules without a notice.

 

Chairman Anderson:

Maybe we could have Legal try to come up with some level of notification so the county clerks can go about doing this without having to go back prior to the twentieth century, although I’m sure there are still nineteenth-century companies still in existence.  Questions for Mr. Fowler?  Anybody else wishing to testify on S.B. 436?

 

John Fowler:

I want to indicate that the Office of the Secretary of State and the Business Law Section Executive Committee have worked together, which is why there were some changes made on the Senate side.  As I understand it, they’re in agreement with the bill as the first reprint appears before you.

 

Scott Anderson, Deputy for Commercial Recordings, Office of the Secretary of State:

[Introduced himself.]  As Mr. Fowler stated, we worked very closely together on this and we rectified our concerns on the Senate side.  We have no opposition to this bill.

 

Chairman Anderson:

Would you see a problem if we were to fix the concern about the filings in Sections 263 and 264 about fictitious addresses?

 

Scott Anderson:

I don’t believe that that would affect our office since everything we do in the office is under Title 7.

 

Chairman Anderson:

Anybody else wishing to be heard on S.B. 436?  I’ll close the hearing on S.B. 436. 

 

Good morning, Senator Titus.  Let’s open the hearing on S.B. 124.

 

Senate Bill 124 (1st Reprint):  Requires certain corporations to provide certain information at time of filing list of officers and directors and to pay fee under certain circumstances. (BDR 7-100)

 

Senator Dina Titus, District No. 7, Clark County:

[Introduced herself.]  Senate Bill 124 aims at tightening Nevada’s corporate laws to protect the public from white-collar crime.  American capitalism was stunned last year when some of the world’s major corporations including Enron, Arthur Andersen, WorldCom, Xerox, RiteAid, and even Martha Stewart became embroiled in scandal, fraud, bankruptcy, and insider trading.  Overpaid executives were led away in handcuffs, business leaders took the Fifth Amendment, investors on Wall Street and Main Street were devastated, stocks plunged, pensions were wiped out, and thousands of jobs were lost; the statistics are staggering.

 

To give you a few examples from Enron, 6,100 workers lost their jobs as a result of that bankruptcy.  On the last business day before bankruptcy, however, the Enron executives awarded themselves $55 million in cash bonuses.  As a result of the Enron collapse, an estimated 15,000 employees lost $1.3 billion dollars from their 401(k) accounts.  At one point, employee retirements were worth $2.1 billion; now they are worth $0.  Stock prices that peaked at $90.75 in the year 2000, plunged below 25 cents in 2002.

 

WorldCom has some similar numbers.  On June 28, 2002, WorldCom began to lay off 17,000 workers; the cuts amounted to 20 percent of the company’s workforce in 65 countries.  Employees who owned shares in the company in their retirement plans collectively lost at least $1.1 billion.  Public pension funds faced losses of more than $1 billion as a result of their collapse; their stock plummeted from $63 a share in 1999 to 26 cents a share last year, and their value in June of 1999 that was listed at $115.3 billion was down to $1 billion in June of 2002.  You may have also seen this past weekend a settlement where some of the major companies on Wall Street were forced to pay $1 billion in fines because of their activity.

 

In response to this, Congress passed the Sarbanes-Oxley Act of 2002, which was signed into law on July 30, 2002; by all accounts the legislation made its way through Congress at lightning speed.  The confluence of recent events, including the plunging stock market, new disclosures concerning accounting problems, approaching elections, and the summer Congressional recess put tremendous pressure on Congress to approve, and then on the President to sign, what has been called the most far-reaching reforms of the American business practices since the time of FDR (Franklin Delano Roosevelt).

 

While the financial pain lingers, the more enduring legacy of this scandalous era could be beneficial to American corporate structure.  Executives, auditors, and corporate boards now face greater scrutiny and individual investors are paying greater attention to conflicts of interest that have dominated corporate America.  A number of states have enacted their own statutes to strengthen corporate oversight, aimed at both protecting the public and restoring its faith in the truthfulness of financial reports, the credibility of managers, and the basic honesty of the economic system as a whole.

 

Assemblyman Goldwater brought you such a bill for Nevada, A.B. 163, which you passed, and now I’m bringing you another one that complements in a small way that same process.

 

Senate Bill 124 has two parts to it.  Section 1 requires certain reporting requirements of corporations that hold 25 percent or more of shares of any market in the state, any product that’s sold or distributed in the state, and has had a total of five or more investigations commenced against them in the previous five years.  These same companies, in addition to having to give information to the Office of the Secretary of State, will be forced to pay a fee of $100,000 to the Office of the Attorney General to be used for investigating any possible restraint of trade.

 

The second part of the bill found in Section 2 requires all corporations that file with the Office of the Secretary of State to indicate whether or not they are publicly traded and to list on their form what’s called a central index key, which will also be posted on the Office of the Secretary of State’s Web site.  This is the key that you can use to get SEC (Securities and Exchange Commission) information about a particular publicly traded company; there will also be instructions on the Web site how you use that SEC number and obtain that information.  Those two provisions are repeated in Sections 4 and 5 to amend NRS Chapter 80, as well as NRS Chapter 78.

 

In conclusion, these provisions provide more information to the public about corporations that are doing business in Nevada.  These new reporting requirements aren’t overly burdensome to the companies, and at the same time they help to restore the public’s faith in corporate governance in this country and protect against the wrongful exploitations of both a company’s assets and an individual’s investments.  We worked with the Office of the Secretary of State, the trial lawyers, and Mr. Fowler; there was no opposition to this bill on the Senate side and I bring it before you today.

Assemblyman Brown:

The bill is a new concept to me; I wondered if there were any unintended consequences.  Are there corporations in the state of Nevada that might fall under these provision right now?  Are there smaller corporations?  The bill is aimed at large corporations with tremendous impact.

 

Senator Titus:

The Office of the Secretary of State says they currently don’t track which corporations are publicly traded and which ones aren’t, so that would be a new provision on their form to identify if they are traded publicly; then they would fall under this provision.  Section 1 was added as an amendment to the bill in the Senate Committee on Judiciary; that stemmed from some hearings on the dairy industry.

 

Assemblyman Brown:

So we might not know for some time.

 

Senator Titus:

Exactly, until after the new forms go out, [we won’t know] how many companies are publicly traded.

 

Assemblyman Brown:

I imagine there has to be stock owned with common officers and shareholders

 

Senator Titus:

I would guess so; let me ask Scott Anderson to help with this.

 

Scott Anderson:

What Senator Titus said is true; we will not know how many corporations that are on file in our office are publicly traded until we start this tracking process proposed in Section 2, where they will indicate on their annual list of officers whether or not they are publicly traded and then add that index key number.

 

Assemblyman Horne:

On page 2, lines 26 through 31, I was curious whether or not this could have the effect of disclosing settlement agreements.  Oftentimes settlement agreements between plaintiffs and defendants remain confidential and this may open that up to the public.

 

Senator Titus:

You’re right; secrecy agreements are something I’ve been fighting against for a long time.  In this bill there was never any question or concern that this would open up a settlement; I don’t think that would be a bad thing if it did, but you might want to look at that.  [Assemblyman Horne agreed.]

 

Chairman Anderson:

Would you like our Legal and Research people to look at that?  [Assemblyman Horne answered in the affirmative.]

 

Assemblyman Carpenter:

With the 25 percent, would that have come into play here [in Nevada] or not?  To me that’s a large amount before they become affected by this.

 

Senator Titus:

This amendment came as a result of hearings on the dairy industry and was put forward by Senator Mark Amodei to try to get a restraint of trade when one company dominates the market.  We never discussed it in relation to Enron, but if you wanted to look at making that number smaller to have more oversight, I wouldn’t have any objection to that.

 

Assemblyman Brown:

Is this for foreign or domestic corporations?

 

Senator Titus:

It would be both.

 

Chairman Anderson:

Any further questions for Senator Titus?

 

Scott Anderson:

As Senator Titus stated, we worked closely with her in regard to this bill, with the exceptions of Sections 1 and 4, which were the proposed amendments by Senator Amodei during the Senate hearings.  We’re not entirely clear on the intent of these provisions, but most of our concerns stem from the administration and the enforcement of these sections.  It is unclear whether this statement required of these corporations, falling under the five investigations filed within a five-year period and the 25 percent market share provisions, would be filed in the Office of the Secretary of State or if it would be filed at the same time that an annual list is filed in the Office of the Attorney General, since that is where the fee is paid.  So there is some uncertainty there. 

 

We had a situation where the Office of the Secretary of State was required to collect fees on behalf of the Real Estate Division for the Ombudsman Program and that caused some administrative problems, which ultimately caused that filing to be moved from the Office of the Secretary of State to the Real Estate Division because of those administrative problems.  We have similar concerns related to filing these documents and collecting the fees that we would then have to transmit to the Office of the Attorney General; the bill as it is written now does not give us the authority to make these types of transfers.  Also, we are not budgeted for these types of transfers, depositing $100,000 of fees into the Office of the Secretary of State’s account and then transferring them to the Office of the Attorney General.

 

Also, we have never dealt with an issue like this as far as determining if five investigations have occurred in the past five years.  The Office of the Attorney General may have dealt with these issues and it might be better served that this filing, in conjunction with the annual list or at least at the same time that the annual list is filed at the Office of the Secretary of State, is filed with the Office of the Attorney General. 

 

I believe that concludes my comments; otherwise we have no opposition to this bill. 

 

Chairman Anderson:

Any questions for Scott Anderson on S.B. 124?

 

Scott Anderson:

Senator Amodei, in conversation with our Chief Deputy Renee Parker this past week, indicated that it might be a good idea, if it is this Committee’s desire to pass this bill as written, that it be applied across the board to other entities, not just corporations.  Sections 1 and 2 specifically apply to LLCs, LLPs (limited liability partnerships), and LLLPs.

 

Chairman Anderson:

No questions?  Anybody else wishing to be heard on S.B. 124?  Let me close the hearing on S.B. 124.  Should we move on this bill today?

 

Assemblyman Brown:

I have some concerns on the disclosure issue in Section 1, subsection 3(d); I’d like to be able to look at that a bit more.  The comment about this applying to business entities I would agree with in principle.  I’m concerned about unintended consequences with small industries where there might be just a handful of competitors in the state.  I think our objective is to stop the large-scale, Enron- and WorldCom-type problems and not necessarily kill small industries or allow some abuse between competing companies by filing certain complaints and building a record against somebody.

Assemblywoman Buckley:

I had similar concerns when I first looked at the bill and what alleviated those concerns is it’s just state and federal investigations, not lawsuits; we’re not opening that up.  Even if the state and federal participate in secret settlements, which I think is contrary to public policy that our government should require something to be secret, even with that caveat it’s a summary of the outcome of the investigation—whether any fine was imposed, whether they were required to divest, not the specific terms of that, and it’s limited to 25 percent or more of the market share.  It’s limited to five investigations within five years.  I think it will only get the worst of the worst and those are the folks that we want to get.  I think the bill is a good corporate accountability measure.

 

Assemblyman Brown:

Thank you, Ms. Buckley.  I was concerned that we had private litigation here and that clearly appears not to be the case; that would be significant to me.  I have a greater comfort level.

 

Chairman Anderson:

The Chair will entertain [a motion on S.B. 124].

 

ASSEMBLYMAN GUSTAVSON MOVED TO DO PASS S.B. 124.

 

ASSEMBLYMAN BROWN SECONDED THE MOTION.

 

THE MOTION CARRIED WITH ASSEMBLYMAN CLABORN ABSTAINING.  (Ms. Ohrenschall was not present for the vote.)

 

[The Chair put the bill on the potential consent calendar with Ms. Buckley to be responsible for the bill on the Floor.] 

 

[The Committee took a 10-minute recess.] 

 

Let’s take a look at our Work Session Document (Exhibit L).

 

Senate Bill 105 (2nd Reprint):  Makes various changes to provisions pertaining to crime of placing graffiti on or otherwise defacing property. (BDR 15‑375)

 

Allison Combs, Committee Policy Analyst: 

Senate Bill 105 is a measure that was introduced on behalf of the City of Reno and makes various changes to the provisions regarding crimes of graffiti and otherwise defacing property (Exhibit L, page 6).  Testimony focused on the financial impact of graffiti on public and private businesses and the measure aggregates the value of the property.  An amendment to clarify language allowing the aggregation of the value of the property damaged was discussed; currently the bill says, “If one or more persons commit the offenses pursuant to a scheme or continuing course of conduct.”  Mr. Horne suggested some possible language to clarify this provision to specify that only the crimes of the individual offender could be aggregated, the purpose being to prevent an offender from being held responsible for another person’s graffiti or tagging.

 

Chairman Anderson:

Mr. Horne, I agree with you.  Have we clarified this enough for you?

 

Assemblyman Horne:

Yes, I’m satisfied.

 

Chairman Anderson:

Do you believe that it takes care of this issue, or not?

 

Assemblyman Horne:

Yes.

 

Allison Combs:

[The language would be added] at the top of page 2 of the bill, and the language that’s copied in the Work Session Document is how the bill currently reads.  The proposal is merely the concept of clarifying this to make sure it would not allow one person to be charged for another person’s graffiti.

 

Chairman Anderson:

Ms. Lang, do you think you could create [some language] that would alleviate our concern?

 

Risa Lang:

I think it can be corrected.  I made some language to the effect that

 

If a person commits more than one offense pursuant to a scheme or a continuing course of conduct, the value of all property damaged or destroyed from the commission of those offenses may be aggregated for purposes which determine any penalty. 

 

It would be an aggregation of that person’s damage to the property as opposed to the damage committed by other people.

 

Assemblyman Brown:

Ms. Lang’s wording was fine with me.

 

Assemblywoman Buckley:

I also like the wording.  I wanted to bring up the change on the driver’s license from 6 months to 12, on page 2, line 27.  This isn’t just on the enhanced penalties; it is across the board, correct?

 

Chairman Anderson:

Right.

 

Assemblywoman Buckley:

Isn’t that a bit steep?  Maybe it’s for the aggravated situations but maybe not for one-time [incidents.]

 

Assemblyman Geddes:

I asked the sponsors of the bill that same question and they said the 6 to 12 months is changed to make it concurrent with another part of the statute that had been changed in that aspect, and it was something that was done in bill drafting, not at their request.

 

Risa Lang:

I wouldn’t think that we would increase six months in drafting but I can look to see what the request says.

 

Assemblyman Brown:

I’m looking at the “not to exceed.”  I think the Court has the flexibility from going from nothing to 12 months.  I would hope that they would look at the 12 months in the instances of the “scheme or continuing course of conduct,” whereas Ms. Buckley has stated if it was just one kid who found a can of spray paint somewhere, thought he’d be funny, and got caught once, that wouldn’t warrant the greater level.  I think the judge has discretion.

 

Chairman Anderson:

I think that’s for a person over 18 years of age, isn’t it?  You’re taking away something of value from somebody; it gives us an opportunity to get them for two crimes. 

 

Let’s move on to another bill.

 

Senate Bill 197 (1st Reprint):  Repeals, reenacts, reorganizes and revises certain provisions relating to juvenile justice. (BDR 5-633)

Allison Combs:

Senate Bill 197, introduced by Senator Wiener, is a large bill that repeals, reenacts, reorganizes, and revises certain provisions relating to juvenile justice.  It was presented as a collaborative effort from multiple individuals who work in this area (Exhibit L, page 6).  There is one technical amendment needed to the bill that is proposed from the Legal Division subsequent to the hearing, so I can defer to Ms. Lang on that, but there are no substantive amendments proposed at this time.

 

Chairman Anderson:

Mr. Carpenter was concerned that we might want to take a longer look at this piece of legislation; an interim committee might be best for that.

 

Assemblyman Carpenter:

I read this bill and I don’t see anything drastically different from the way we are currently doing things.  It’s much better to have everything right there.

 

Chairman Anderson:

The Chair will entertain a motion to Amend and Do Pass with the amendment suggested by Legal to address what had been left out.

 

Risa Lang:

It’s really just an internal reference that was inadvertently excluded, so if we could just have the opportunity to correct that, that’s all that it would be.

 

ASSEMBLYMAN CARPENTER MOVED TO AMEND AND DO PASS S.B. 197 TO HAVE THE LEGAL DIVISION INCLUDE THE INADVERTENTLY EXCLUDED INTERNAL REFERENCE.

 

ASSEMBLYWOMAN BUCKLEY SECONDED THE MOTION.

 

THE MOTION CARRIED.  (Ms. Ohrenschall was not present for the vote.)

 

[The Chair assigned the bill to Mr. Carpenter to defend on the Floor.]

 

Senate Bill 199 (2nd Reprint):  Makes various changes to provisions pertaining to firearms. (BDR 15-331)

 

Allison Combs:

The next measure is Senate Bill 199 starting on page 7 of the Work Session Document (Exhibit L).  It’s a measure that makes various changes to provisions relating to firearms.  The testimony was that this measure was to mirror some federal laws.  There were several amendments that were proposed during the hearing on the bill.  The first proposed amendment from the Nevada Sheriffs’ and Chiefs’ Association amends Section 3 on page 4 of the bill.  The intent was to clarify that the measure is not to ban automatic weapons in Nevada; the original intent of the bill was to move the illegal possession of a machine gun and a silencer from the gross misdemeanor classification to the felony classification.

 

During the hearing, testimony indicated that an amendment is requested to ensure that persons are not prohibited under the provisions of the bill from what is currently legal as far as possession or transfer of machine guns and silencers.  The attachment on the yellow paper is from the Nevada Sheriffs’ and Chiefs’ Association as they proposed an amendment relating to the transfer of these types of weapons, clarifying that it would not be illegal as long as the individuals had completed the appropriate application for transfer as approved by federal law.  The testimony that ensued indicated this amendment may be too narrow and it may need to be broader to clarify what is currently legal now as far as these types of weapons that will not be made illegal with the passage of this measure.

 

The second proposed amendment is for Section 1 of the bill; it would delete the prohibition on the sale to a person who is known to be “an unlawful user of, or addicted to, any controlled substance.”  It was proposed by Assemblyman Carpenter and Assemblyman Horne.

 

Finally, the third set of amendments was proposed by Assemblyman Hettrick.  The components of that amendment include amending NRS 202.350 to authorize the manufacture of switchblade knives in this state when application is submitted to the sheriff and the Board of County Commissioners holds a hearing on the issue.  Secondly, it would specify that a manufacturer of switchblade knives in this state is authorized to sell the knives in this state to:

 

·        People in another state, territory, or county

 

·        Someone who is currently authorized by law to possess such a knife, for example law enforcement officers or members of the military

 

·        Distributors

 

Thirdly, there was a proposal to revise the definition of a switchblade knife to clarify that the definition does not include a knife that is held open by a spring or a spring action.  On page 8 of the Work Session Document I set forth the current definition of a switchblade knife for reference purposes.

 

Assemblywoman Buckley:

I remember the testimony and I can understand why paragraph one is being requested, and I like [proposed amendment] number 3, [relating to] the hearing by the County Commission.  On [proposed amendment] number 2, I’m wondering if there are any unintended consequences by redefining switchblade knife.  As I recall, Assemblyman Hettrick wanted to bring this facility [to Nevada] and to allow them to manufacture and sell to law enforcement, the military, and to distributors, which would be allowed by the bill in proposed amendment 1.  There was testimony about whether this knife really was a switchblade, but if we’re going to allow the facility to be built and the sale to be held, are we causing problems by redefining switchblade such that law enforcement, when they’re faced with someone having some sort of illegal knife, won’t be able to get them?

 

Chairman Anderson:

Take [proposed amendments] numbers 1 and 2, but not 3?

 

Assemblywoman Buckley:

One and 3, but not 2.

 

Vice Chairman Oceguera:

As I recall the testimony, the difference was that the spring or spring action used to actuate, or open, the knife was in question, but they were trying to exclude a spring that held the knife open.

 

Chairman Anderson:

I would agree with Mr. Oceguera.

 

Assemblywoman Buckley:

If that were true, then why would we need the rest of the bill?  If we redefine switchblade so it doesn’t cover their knife and just covers the spring that isn’t used to open, to effectuate the opening, but allows it to remain open, then they could build whatever they wanted and sell to whomever they wanted.

 

Chairman Anderson:

Mr. Hettrick was concerned that in the future this company might be able to do whatever they were going to do that might include some sorts of things that were associated with switchblade knives.

 

Assemblyman Carpenter:

On the second page it said that they could issue a permit to manufacture, keep, offer, or expose, and it specifically mentions switchblade knives.  I didn’t think that’s where we are going; I thought we were going to the situation where they could manufacture and offer knives that in reality aren’t a switchblade, but they include a knife that is just held in place by a spring.

 

Chairman Anderson:

I believe that Mr. Hettrick said that the District Attorney of Douglas County had indicated that he needed that language in order to make him feel comfortable with the type of knife that was being presented because it was so close to the question.  In withdrawing the knife from the pocket it engaged the clothes and caused the knife to be open when coming out of the pocket.

 

Assemblyman Carpenter:

I thought if we change the definition then that was going to take care of any problems.

 

Chairman Anderson:

Mr. Carpenter was concerned about the term “switchblade knives” on the second page.

 

Assemblyman Lynn Hettrick, District No. 39, Douglas County and portions of Carson City and Washoe County:

The question brought up by the District Attorney in Douglas County was because the knife in question locked back with a spring, and because of that he questioned whether or not it might be termed a switchblade knife in some fashion.  So he gave the would-be manufacturer a letter saying he was in doubt, based on the way state law defines switchblade knife.  We came in to change the definition.  The knife is a buck knife and all we want to do is clarify that a buck knife is a knife that has the blade held open by a spring, not opened by a spring, but held open by a spring. 

 

The reason for the switchblade language is this manufacturer is a world-class manufacturer of knives; they make knives for many jurisdictions.  In many states switchblade knives are legal.  All we are asking for in the definition, Mr. Carpenter, you are right the way you are reading this, is that it does allow with a permit from the County Commission, by the amendment, for a manufacturer to make a switchblade knife only if it goes to military or law enforcement, which are allowed to have them, or to a distributor who will only market to military or law enforcement in this state. 

 

[Sales] outside this state don’t matter because other states don’t have a law against it.  We want to encourage this manufacturer to come and manufacture these first-class quality knives in the state of Nevada because it’s going to provide some great jobs and it’s economic development; we’re not letting him do anything illegal in Nevada by this amendment.  Currently in state law, you can’t posses a switchblade knife; this amendment won’t change that.  It only says the manufacturer can sell it to somebody where it is legal to distribute it and that’s all he can do; that’s the intent of this bill.  If he were to get an order for 10,000 switchblade knives for the military he could process the order.

 

Assemblywoman Buckley:

Does this person also want to manufacture switchblade knives?

 

Assemblyman Hettrick:

He makes buck knives currently; the buck knife is the one that’s held open [by a spring] and that’s perfectly legal in Nevada.  His problem is with the definition because the District Attorney said he wasn’t comfortable with the definition, so we just need to clarify the definition.

 

Assemblywoman Buckley:

Does he plan on manufacturing switchblade knives?

 

Assemblyman Hettrick:

He does not plan on doing that today.

 

Assemblywoman Buckley:

Does he want to have that open in case he does do that in the future?

 

Assemblyman Hettrick:

He would like to have that open in case he got an order from the military to produce a switchblade knife; we certainly don’t want him to lose the order.

 

Assemblyman Mortenson:

Let’s say we have three types of knives:  a fixed blade; one that [flips open] and is fixed in position; and a high-tech one where you push a button, it opens, and is in position.  Two of those are real good and one is evil, is that right?  Any of the three can kill just as easily [as the others].

 

Assemblyman Hettrick:

I totally agree with you.  For some reason in the Nevada statutes we have a prohibition against a switchblade knife.  I guess there was a situation that arose sometime in the past where somebody decided we should ban switchblade knives and we did.  I agree that a knife is a knife is a knife and you’ll notice that even our current definition says if the blade is longer than 2 inches; if it’s less than 2 inches long it’s not a switchblade even though it opens with a spring—it’s legal and just as deadly.  The issue here is only trying to make it legal for a world-class manufacturer to be able to move a manufacturing facility here and be able to fulfill orders they might get from legal buyers sometime in the future.

 

Assemblyman Mortenson:

I know it’s a very simple bill and I know what you’re saying is very simple to understand.  Maybe what we ought to do is take away the law that forbids switchblade knives.

 

Assemblyman Hettrick:

That would be up to this Committee; that wouldn’t be my choice.  I don’t know that I want to get in that fight.

 

Chairman Anderson:

I think switchblade knives are banned just about everywhere in the United States.

 

Assemblywoman Buckley:

On the revised definition for the knife that isn’t “opened by but is held open by,” can you currently buy knives like that?

 

Chairman Anderson:

Yes, Vice Chairman Oceguera uses one in his work as a fire fighter.

 

Assemblywoman Buckley:

So there’s probably no reason why we can’t clarify that’s not a switchblade; it just gets us back to if everybody knows that, then why did we get such a decision out of the Sheriff?

 

Chairman Anderson:

Douglas County has some different things going for it.

 

Assemblyman Claborn:

I had a concern about the amendment from the National Rifle Association (NRA).  Since we’re not using that I don’t have a problem with the bill at all.

 

Chairman Anderson:

We are not using that amendment.  There was another area that needed an amendment if we are to move with the bill. 

 

Any further questions for Mr. Hettrick?

 

Allison Combs:

If you look at Section 4, subsection 1(b) as far as a person shall not “Manufacture or cause to be manufactured, or import…a machine gun or a silencer,” the proposal from the law enforcement community was to clarify that to say “unless the transferor and transferee have completed the appropriate application for transfer as approved by federal law.”  There was testimony that in various areas of the state there are activities involving machine guns and possession of machine guns is lawful in certain circumstances under federal law.  The desire was to put in an amendment that the possession of machine guns or silencers is illegal unless it’s otherwise legal under federal law.  If you can possess them currently legally under federal law, the idea is to clarify that you can still do that and this bill will not change that.

 

Chairman Anderson:

Does this amendment take care of that?

 

Allison Combs:

No.  This amendment, as I understand it, is too narrow; it would involve a transfer not the possession.

 

Chairman Anderson:

Ms. Lang, do you have some suggested language for it?

 

Risa Lang:

I think that we can add, “Unless authorized by federal law” and it would probably cover their concern.

 

Chairman Anderson:

Even though the NRA maintains that some of those sections are no longer applicable by federal law?

 

Risa Lang:

I think the NRA was concerned with the language in Section 1 of the bill; it wasn’t that they don’t exist anymore but that they haven’t been applied so they thought it should say something different.  I don’t think their concerns will affect this.

 

Chairman Anderson:

It appears we’re looking at [proposed amendment] choices 1 and 3 on page 7 of the Work Session Document.  Mr. Horne and Mr. Carpenter, how about your recommendations on [proposed amendment] number 2?  Your concern involved how was a person to know if someone used drugs?

 

Assemblyman Horne:

My concern was that we were changing the standard of transferring firearms to be different for private owners as opposed to retail dealers.

 

Assemblyman Brown:

If we were to delete subsection 1(c) in Section 1, which discusses the addiction to controlled substances, would we then need to delete subsection 4, “As used in this section, ‘controlled substance’ has the meaning ascribed to it”?

 

Chairman Anderson:

That would be a bill drafter question to clean up the section.

 

Assemblywoman Buckley:

This is a ridiculously phrased provision and how would you know?  If it’s just trying to mirror the federal law so that the gun dealers at gun shows, which I think is what it’s getting at, can use one form; maybe it doesn’t matter.  Maybe their form complies with federal law anyway.  We don’t want to have them do two forms because we’re changing our requirements.

 

Chairman Anderson:

We are going to help this bill by giving it an Amend and Do Pass S.B. 199 with the suggested amendments [on pages 7 and 8 of the Work Session Document (Exhibit L)]:

 

·        The transfer of ownership to clarify the machine gun section.

 

·        Delete the reference Mr. Carpenter and Mr. Horne are concerned about.

 

·        Add in Mr. Hettrick’s switchblade language [on pages 1 and 2 of the purple document].

 

[Chairman Anderson called for the vote.]

 

ASSEMBLYMAN CONKLIN MOVED TO AMEND AND DO PASS S.B. 199 WITH THE FOLLOWING AMENDMENTS:

 

·        THE TRANSFER OF OWNERSHIP TO CLARIFY THE MACHINE GUN SECTION.

·        DELETE THE REFERENCE MR. CARPENTER AND MR. HORNE ARE CONCERNED ABOUT.

·        ADD IN MR. HETTRICK’S SWITCHBLADE LANGUAGE.

 

ASSEMBLYWOMAN ANGLE SECONDED THE MOTION.

 

THE MOTION CARRIED.  (Ms. Ohrenschall was not present for the vote.)

 

[The Chair assigned the bill to Mr. Geddes to defend on the Floor.] 

 

Let’s look at S.B. 203 (Exhibit L, page 9).

 

Senate Bill 203:  Enacts provisions concerning separation and adjudication of certain small claims actions. (BDR 6-612)

 

There are no amendments for S.B. 203.

 

Assemblyman Horne:

I was concerned with the procedure on severing claims and the amounts of counter-claims that would be outside the jurisdiction of small claims court.  Also I had a question as to whether or not both matters would be heard before the same judge; testimony indicated that it could be.  I don’t think that’s true if they’re heard in small claims court and the counter-claim is in excess of $7,500, then the small claims hearing master could not hear the counter-claim because the court wouldn’t have jurisdiction, correct?

 

Chairman Anderson:

This was one of the judges’ bills.  They didn’t perceive this would be a big problem.  The dollar factor would be key.

 

Assemblywoman Buckley:

I missed the hearing for this bill but I read the Senate minutes on the Web site, because it’s a very funky concept.  Generally you have an action; if someone has a counter-claim, particularly a compulsory counter-claim, they are brought within the same action so you can have jurisdiction over it all.  The NJA (Nevada Judges Association) was concerned about an increasing phenomenon where the people want to have their hearing and then they get a “slap” counter claim that might be bogus from someone who’s saying, “Oh, no!  We have some damages as a result of them speaking out and it’s worth $20,000,” thereby defeating them from this alternate means. 

 

I’ve seen that happen because we help many folks on how to do your own small claims action at our office; it is a real issue.  I don’t know how you solve it by bifurcating counter-claims; you’d almost be better off having a motion for summary judgment on the counter-claim based on the amount and jurisdiction and say, “No, your claim is ridiculous, throw it out,” and then have the hearing rather than separating the claims.  I think they are trying to get at a very good thing but the way they’re doing it troubles me a little bit.

Chairman Anderson:

So this would be a nice thing to do but this isn’t the right way to do it?

 

Assemblywoman Buckley:

Maybe someone else on the Committee has more thoughts.

 

Assemblyman Brown:

I’ve had occasions of people bringing counter-claims and you want to proceed with them together in front of the same court, but I like the bill and am interested in seeing how it would work.

 

Assemblywoman Buckley:

I like the bill, too; if it’s the will of the Committee to see how it goes, I support solving this large problem.

 

Chairman Anderson:

I don’t have as much faith [in the bill] as the two of you do.

 

Senate Bill 205 (1st Reprint):  Prohibits impairment of minor by use of alcoholic beverage. (BDR 15-1030)

 

Allison Combs:

The next measure is Senate Bill 205; it’s on page 9 of the Work Session Document (Exhibit L).  Testimony indicated the measure was requested to address situations in which minors have already consumed alcohol, so they are not covered under existing statutory language prohibiting possession or consumption.  The proponents noted that by adding impairment to the statute, the youth would then be able to go through the evaluation and treatment process that’s prescribed in statute.  At the time of the hearing, there were no proposed amendments.

 

Chairman Anderson:

So the child is drunk and law enforcement gets to pick him up; if he even smells like [liquor], he wouldn’t have to be tested.  I’m concerned about this bill.  Let’s hold this one also.

 

Senate Bill 207 (1st Reprint):  Makes various changes concerning conveyances of property and wills and estates. (BDR 10-940)

 

Allison Combs:

Senate Bill 207 makes various changes involving property conveyances and will and estates (Exhibit L, page 9).  Don Ashworth from Clark County testified on the bill along with Todd Torvinen (Exhibit N) and Rocky Finseth.  Testimony indicated the measure was requested to update Nevada’s probate statutes.  Discussion focused largely on Section 1 of the measure, which was modeled after some legislation in Arizona.

 

The second amendment that’s proposed on page 10 (Exhibit L) by Mr. Finseth to more closely mirror…in fact, he submitted language specifically from Arizona, to record the deed during the grantor’s lifetime.

 

Mr. Ashworth noted that he had some concerns about listing all the “conveyances, assignments, contracts, mortgages, deeds of trust, liens, and other encumbrances.”  He agreed with Mr. Finseth that if the Committee chose to amend the bill that they are both fine with just referencing “liens.”  Mr. Torvinen submitted amendment language regarding the expenses of a personal representative.  On Section 19 of the bill, he proposed some substantive changed language to specify within “60 days after his appointment” as opposed to before his appointment related to compensation for his services.

 

Chairman Anderson:

If we take the “60 days after his appointment” language that’s suggested by Mr. Torvinen and the language to be deleted…

 

Risa Lang:

I think that if they want to leave the “liens” language and the second recommendation would be that the deed must be recorded during the grantor’s lifetime; the other language would already be included in existing section.

 

Chairman Anderson:

So we wouldn’t have to do the 60 days?

 

Risa Lang:

No, that’s not to the 60 days; that’s the other amendment from the Nevada Land Title Association.  If you were to go forward with that one, you wouldn’t be deleting subsection 1; you would be adding some language that says that the deed must be recorded during the grantor’s lifetime.

 

Chairman Anderson:

So the suggestion is the “60 days after his appointment” and the “grantor’s lifetime” amendment.

 

Assemblyman Carpenter:

I don’t understand why we are doing this; I thought things were working fairly well.  There are some big changes in here.

Assemblywoman Buckley:

We could Amend and Do Pass.

 

Chairman Anderson:

Are all the problems in Section 1?

 

Assemblywoman Buckley:

Section 1 is the only one that contains that information about the “no deed”; the rest of the bill updates our probate code and increases the amount for small estates.  Some of those are good changes so we could do an Amend and Do Pass eliminating just the deed part.

 

Chairman Anderson:

Do we still need to put in the “60 days?”

 

Assemblywoman Buckley:

Yes, because that would be Section 19 that could be included, too.

 

Chairman Anderson:

And the other amendment would also have to go?

 

Assemblywoman Buckley:

The second paragraph would be taken care of by deleting Section 1 in its entirety.

 

Chairman Anderson:

So the Amend and Do Pass on S.B. 207 would eliminate Section 1 of the bill in it’s entirety, and put in “within 60 days after his appointment” in Section 19.

 

Risa Lang:

I think Section 3 was existing language that we’re just moving from another section; I think it is in Section 5 and they thought it would be more appropriate in its own separate section.

 

Chairman Anderson:

The Chair will entertain.  [The Chairman restated the amendments.]

 

Assemblyman Brown:

I like the bill as a whole; I have no problems with Section 1.  I would be inclined to vote “no” on the amendment but I would reserve my right [to change my vote] on the Floor because I agree the bill needs to go through.

 

ASSEMBLYWOMAN BUCKLEY MOVED TO AMEND AND DO PASS S.B. 207 WITH THE AMENDMENTS AS STATED ABOVE.

 

VICE CHAIRMAN OCEGUERA SECONDED THE MOTION.

 

[Chair restated the motion.  Roll call vote taken.]

 

THE MOTION CARRIED WITH ASSEMBLYMAN BROWN VOTING NO.  (Ms. Ohrenschall was not present for the vote.)

 

[Chairman assigned the bill to Vice Chairman Oceguera to be defended on the Floor.  He also gave the Committee an update on the upcoming meeting schedule.] 

 

We are adjourned [at 12:25 p.m.].

 

RESPECTFULLY SUBMITTED:

 

 

                                                                       

Deborah Rengler

Transcribing Committee Secretary

 

 

APPROVED BY:

 

 

                                                                                         

Assemblyman Bernie Anderson, Chairman

 

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