California Senate Bill No. 816, has been signed into law and should dramatically change the reporting requirements that relate to the change of control of legal entities in California, and subject legal entities to very significant penalties.
Change in Control
In California, under the legendary Prop 13, property that is held by a legal entity (corporation, partnership, or LLC) is subject to re-assessment for property tax purposes when a new person or entity obtains control of the legal entity that owns the property. Control is defined as a greater than 50% interest in the legal entity. Since such changes in control are typically not subject to the public recording of documents, the county assessors and the State Board of Equalization (“SBE”) have relied on several means of detection, most prominent of which was the requirement that the legal entity file a Statement of Change in Control (form BOE-100-B) with the SBE within 45 days of such a control change.
Penalties for failure to make the 45 day filing deadline.
Prior to SB 816 there was no monetary penalty in place for failure to make the 45 day filing. There was only a 10% penalty applied if the legal entity failed to respond to a written request from the SBE or the County. The law carried no provision for failure to voluntarily file. If a 10% failure-to-respond penalty was imposed, it was abated if the statement was filed within 60 days of the Notice of Penalty. SB 816 has changed that.