Bill Text: CA AB401 | 2009-2010 | Regular Session | Chaptered
Bill Title: Financial institutions: finance lenders: exemptions.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Passed) 2009-08-06 - Chaptered by Secretary of State - Chapter 103, Statutes of 2009. [AB401 Detail]
Download: California-2009-AB401-Chaptered.html
BILL NUMBER: AB 401 CHAPTERED
BILL TEXT
CHAPTER 103
FILED WITH SECRETARY OF STATE AUGUST 6, 2009
APPROVED BY GOVERNOR AUGUST 5, 2009
PASSED THE SENATE JUNE 24, 2009
PASSED THE ASSEMBLY APRIL 20, 2009
INTRODUCED BY Assembly Member Ruskin
FEBRUARY 23, 2009
An act to amend Section 22064 of the Financial Code, relating to
financial institutions.
LEGISLATIVE COUNSEL'S DIGEST
AB 401, Ruskin. Financial institutions: finance lenders:
exemptions.
Existing law, the California Finance Lenders Law, provides for the
licensure and regulation of finance lenders, as defined, by the
Commissioner of Corporations and prohibits a person from engaging in
the business of a finance lender or broker without a license. Until
January 1, 2010, existing law exempts from its requirements a
program-related investment by a private foundation, tax-exempt
organization, and a loan, guaranty, or investment made by a public
charity, tax-exempt organization meeting specified requirements.
This bill would eliminate the January 1, 2010, sunset provision,
allowing the exemptions to continue indefinitely.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 22064 of the Financial Code is amended to read:
22064. (a) This division does not apply to the following:
(1) A program-related investment defined in subsection (c) of
Section 4944 of the Internal Revenue Code and United States Treasury
Regulations Section 53.4944-3 that is made by a private foundation,
tax-exempt organization within the meaning of Section 509(a) of the
Internal Revenue Code.
(2) A loan, guaranty, or investment made by a public charity,
tax-exempt organization within the meaning of paragraph (1), (2), or
(3) of subsection (a) of Section 509 of the Internal Revenue Code
that meets all of the following requirements:
(A) The primary purpose of the loan, guaranty, or investment is to
accomplish one or more of the exempt purposes of the public charity
making the loan, as described in Section 170(c)(2)(B) of the Internal
Revenue Code.
(B) Neither the production of income nor the appreciation of
property is a significant purpose of the loan, guaranty, or
investment.
(C) No purpose of the loan, guaranty, or investment is to
accomplish one or more of the purposes described in Section 170(c)(2)
(D) of the Internal Revenue Code.
(b) Subdivision (a) shall not exempt from the provisions of this
division a tax-exempt organization that is making consumer loans as
defined in Sections 22203 and 22204.
(c) A loan that is secured by any assets owned by an individual
shall be exempt under subdivision (a) only if the individual
providing the security is an "accredited investor" as defined in
paragraph (5) or (6) of subsection (a) of Section 230.501 of Title 17
of the Code of Federal Regulations. Property held by an individual
for personal, family, or household purposes, including an individual'
s personal residence, may not be taken as security for a loan.
(d) A program-related investment by a private foundation, and any
loan, guaranty, or investment made by a public charity that is exempt
under subdivision (a) is subject to the implied covenant of good
faith and fair dealing under Section 1655 of the Civil Code.
(e) (1) Subdivision (a) shall exempt from the provisions of this
division a program-related investment by a private foundation, or a
loan, guaranty, or investment by a public charity, only if the
following conditions are satisfied:
(A) The organization making the program-related investment, loan,
guaranty, or investment is exempt from federal income taxes under
Section 501(c)(3) of the Internal Revenue Code and is organized and
operated exclusively for one or more of the purposes described in
Section 501(c)(3) of the Internal Revenue Code.
(B) No part of the net earnings of the organization making the
program-related investment, loan, guaranty or investment inures to
the benefit of a private shareholder or individual.
(C) No broker's fee will be paid in connection with the making of
the program-related investment, loan, guaranty, or investment or
placement of the program-related investment, loan, guaranty or
investment.
(2) This subdivision does not prohibit the organization making the
program-related investment, loan, guaranty, or investment from
charging interest on the loan or investment or fees on the guaranty.
(f) Subdivision (a) shall only exempt from the provisions of this
division a program-related investment by a private foundation or a
loan, guaranty, or investment by a public charity that is made for
the primary purpose of accomplishing one or more of the organization'
s exempt purposes described in Section 501(c)(3) of the Internal
Revenue Code, and no significant purpose of which is the production
of income or the appreciation of property within the meaning of
subsection (c) of Section 4944 of the Internal Revenue Code. A
recipient shall be required to use all funds received from the
private foundation or the public charity only for the charitable
purposes for which the program-related investment, loan, guaranty, or
investment was made.
(g) Subdivision (a) shall only exempt from the provisions of this
division a program-related investment by a private foundation or a
loan, guaranty, or investment by a public charity if the organization
consummates not more than 35 loans in a calendar year. In the making
and negotiating of these loans, the private foundation or public
charity shall take into consideration the financial ability of the
recipients to repay the loans in the time and manner provided.
(h) Nothing in this section is intended to abrogate or diminish
the application of any other applicable laws that are designed to
govern the tax-exempt organizations described in subdivision (a),
including, but not limited to, laws pertaining to recordkeeping and
reporting to the Attorney General and the Internal Revenue Service or
to protect borrowers, including, but not limited to, laws pertaining
to licenses, unfair competition, usury, and conflicts of interest.
