MOORLACH UPDATE — MCO Tax and SB 1253 — February 25, 2016

The Los Angeles Daily News Editorial Board, in the first piece below, decided to single out eight of the fourteen California Republican Senators in making an interesting, but misinformed appeal.

I believe all of us are supportive of increasing developmental funding. And we know that with tax revenues exceeding budgeted forecasts, that the funds are available.

The awkward twist is that we are being asked to approve nearly a billion dollars in new spending ($973 million) in two bills (AB 133 and ABX2-1) and vote for a tax increase that will generate about $1.27 billion in net revenues with SBX2-2. What is amazing is that these are three separate bills.

So, voting for the spending increases can be done without voting for the new tax, as the costs can be absorbed with current revenues.

The spending allocations are not directly related to improving the state’s health care system. Some $518 million in AB 133 does not go to public health care, only $2 million does (less than 0.4 percent). The rest is an allocation to expedite the repayment of loans that the state owes from borrowings made during the recession and unfunded retiree medical promises made to its employees. These obligations will hopefully be paid in the near future anyway.

I guess the Editorial Board is assuming that we would not vote for the spending increases without also voting for the tax increase?

The managed care organization (MCO) tax increase will be the topic for this weekend, as we will vote on the bills Monday at noon.

The Centers for Medicare and Medicaid Services (CMS) wants California to tax itself in order to obtain funding. The MCOs will pay $740 million and the federal matching funds will be $1.3 billion, for $2.1 billion. This $2.1 billion will go to the State’s General Fund.

If CMS has $1.3 billion of California taxpayers’ money, then just give it to us. Forget the Obamacare machinations. If it is our money, then send it and don’t make our fragile health system go through the process of paying out with one hand, and receiving tax reductions in the other hand (which are not clearly specified as to amounts — it’s sort of voting for a "black box"), with the hope of breaking even.

I have more to share on this topic. Suffice it to say, I’m not amused with Democrats telling me that this is a "no brainer" to vote for when they constantly vote for keeping high speed rail (terminating this boondoggle is a "no brainer.") If another article includes me in this discussion over the weekend, expect to hear from me in greater detail. Enjoy the primer.

The second piece is from The National Law Review. We introduced a number of bills, which I will cover over the next few weeks. Today’s bill, SB 1253, is technical in nature and is probably my largest bill, as so many code sections need to be modified. Limited Liability Companies are not new. But, who can avail themselves of this ownership entity option is. We’re attempting to allow real estate brokers to make this an alternative in California. For clarification purposes, we do not have a sponsor. I did not talk with the reporter, but as you know, I am not in the habit of refusing to provide information to reporters.

What will it take to increase developmental funding in California? One Senate GOP vote.

A desperately needed increase in developmental funding will pivot on whether it can attract one “aye” vote from a Republican member of the state Senate.

Any Senate Republican will do.

Will it be Sen. Jim Nielsen, R-Roseville, or Sen. Jeff Stone, R-Murrieta, who co-authored a bill that would have provided the 10 percent across-the-board state reimbursement increase that the Lanterman Coalition — and this editorial board — have been advocating?

Will it be Sen. Mike Morrell, R-Rancho Cucamonga, vice chair of the Senate special session committee on public health and developmental services, who penned a guest commentary advocating an increase in developmental funding?

Will it be Sen. Joel Anderson, R-El Cajon, or Sen. John Moorlach, R-Costa Mesa, who serve on that committee with Morrell and Nielsen?

Will it be Sen. Bob Huff, R-Brea, a moderate and an author of health-related laws, who is running for Los Angeles County supervisor?

Will it be Sen. Tom Berryhill, R-Fresno, or Sen. Janet Nguyen, R-Garden Grove, members of the Senate Committee on Human Services?

The legislative special session that Gov. Jerry Brown called last June to deal with public health care and developmental services at long last has managed to advance a two-bill package to the floor of the Assembly and Senate. One bill would change the managed care organization (MCO) tax to make it compatible with federal requirements — preventing California from losing about $1.3 billion in Medi-Cal reimbursements from the feds — and the companion bill would provide the money to hike salaries by 7.5 percent for regional centers and community providers, and give 5 percent increases in state reimbursements for services such as supported and independent living, in-home and out-of-home respite, and transportation.

It’s a good enough deal that the Lanterman Coalition and other advocacy groups have embraced it enthusiastically. Democrats will vote for it.

The bills will need some Republican support in each house. Assembly GOP leader Chad Mayes is firmly behind the deal, so Assembly passage should not be an issue.

But Senate GOP leader Jean Fuller has urged her caucus to reject the MCO reform because she views it as a tax increase.

Californians with developmental disabilities are relying on one or more of her caucus members to rise above that advice and vote for this sensible and badly needed improvement in their lives.

Editor’s note: This editorial was updated after it was first posted because the vote that had been scheduled for Thursday has been postponed until next week.

Senator Introduces Bill To Allow LLCs To Be Licensed As Real Estate Brokers

"A limited liability company may have any lawful purpose, regardless of whether for profit, except the banking business, the business of issuing policies of insurance and assuming insurance risks, or the trust company business. A domestic or foreign limited liability company may render services that may be lawfully rendered only pursuant to a license, certificate, or registration authorized by the Business and Professions Code, the Chiropractic Act, the Osteopathic Act, or the Yacht and Ship Brokers Act, if the applicable provisions of the Business and Professions Code, the Chiropractic Act, the Osteopathic Act, or the Yacht and Ship Brokers Act authorize a limited liability company or foreign limited liability company to hold that license, certificate, or registration."

The California Real Estate Law, which is part of the Business & Professions Code, presently allows only individuals and corporations to obtain a real estate brokers’ license. This has proved to be a source of frustration to many who prefer the tax attributes of a limited liability company. Now, some relief may be in sight. Last week, Senator John Moorlach introduced a bill, SB 1253, that would authorize an LLC to be licensed as a real estate broker. The author’s office refused to name the sponsor of the bill is and it is a long and uncertain road to enactment. Even if enacted, the bill would not take effect until next year and then prospective licensees would have to wait until the Bureau of Real Estate adopted rules and procedures for licensing LLCs.

About this Author

Keith Paul Bishop, Corporate Transactions Lawyer, finance securities attorney, Allen Matkins Law Firm
Keith Paul Bishop

Keith Paul Bishop is a partner in Allen Matkins’ Corporate and Securities practice group, and works out of the Orange County office. He represents clients in a wide range of corporate transactions, including public and private securities offerings of debt and equity, mergers and acquisitions, proxy contests and tender offers, corporate governance matters and federal and state securities laws (including the Sarbanes-Oxley Act of 2002 and the Dodd-Frank Act), investment adviser, financial services regulation, and California administrative law. He regularly advises clients…


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