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California Bills to Watch in 2022

Updated: Feb 21

As a kind of follow-up to my Top 5 New Business Laws in California for 2022 (available here), here are the bills to watch for 2022 (and here are the bills to watch for Texas).


Annual Franchise Tax Changes


AB 91 – This bill would lower the franchise tax requirements for California corporations, LLCs, LPs, and LLPs. The $800 annual franchise tax would be lowered to $400 for "small businesses" and $200 annually for "microbusinesses," defined as average annual gross receipts of less than $10 million (or $250,000 if solely owned by a deployed servicemember) and $5 million respectively. The bill would also require no franchise tax in the business's first taxable year.


AB 632 – Similar to AB 91, this bill lowers the annual franchise tax for California corporations, LLCs, LPs, and LLPs with annual gross receipts of less than $15 million, but in a more tiered manner. At or above $15 million, the tax remains $800. Below $15 million but $7.5 million or more, the tax is $600. Below $7.5 million but $2.5 million or more, the tax is $400. Below $2.5 million, the tax is $200.


AB 664 – This bill removes the annual franchise tax requirement for "small businesses," defined as average annual gross receipts of less than $10 million (or $250,000 if solely owned by a deployed servicemember), until Gov. Newsom's March 4, 2020 state of emergency ends.


Real Property/Construction


AB 889 – This bill would require a "qualified entity" (defined as a corporation or LLC that owns property in California) to report the identity of its beneficial owners (with over 25% equity interest or "exercises substantial control" over the entity) who are natural persons to the Secretary of State.


AB 899 – Existing law allows non-licensed contractors to advertise for services only if their services and materials would be less than $500. This bill ties that amount to inflation.


SB 607 – This bill would make two important changes. First, CSLB-licensed contractors are currently required to have a $15,000 bond; this bill would raise that to $25,000. Second, contractors performing an inspection on property (per California Health & Safety Code section 17973) are prohibited from bidding on repairs to that property; this bill would remove that prohibition.


Business (Honorable Mention)


SB 288 – California law currently does not allow California corporations to convert into foreign entities. I find this bizarre. SB 288 would have amended the Corporations Code to allow corporations to convert into foreign entities. I contacted my senator's office (Senator Melendez), who informed me that, per Senator Jones's office, the bill is dead. Senator Jones' office confirmed, saying they were considering reintroduction this year.


But, in the meantime, if you want to convert your California corporation to another state, you will either need to dissolve the corporation, or you will need to convert it to another entity (like an LLC) before converting it to another state.

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