Senate Richard Pan, D-Sacramento, has agreed to carry legislation sponsored by FBA that will provide a definition for family businesses in California.

SB 483 will be amended to assist state and local governments in identifying family businesses that meet the requirements. This bill will define California family-owned businesses as:

  • companies domiciled in California
  • in operation for 10 years or more
  • and owned and controlled by related persons or a partnership of related persons that have passed the business through a generation or have a plan for future generational succession.

Sen. Richard Pan

This standardized definition of “family owned business” will provide one definition of family businesses across codes and policies.

Family-owned businesses have unique characteristics that distinguish them from other businesses; however, there is currently no standardized definition of a family-owned business. Having a standard definition across state and local jurisdictions will allow policy makers the opportunity to reference one definition across jurisdictions and codes as policies are considered.

During the last legislative session, for example, tax policy was considered in legislation that inadvertently removed the “surviving widow exemption” that excludes these intra-family property transfers from reassessment.

In response, the entire definition of a family business had to be amended into the proposal. The absence of a uniform definition creates difficulty in determining the exact measure of their contribution and leaves policy makers without accurate data when implementing specific policy issues such as tax and estate succession.

Senator Pan will be amending the legislation soon with FBA’s proposed definition that is substantially similar to AB 1260 (Medina) from 2014 that passed both houses of the Legislature unanimously but was vetoed by former Governor Jerry Brown. With the new Governor and administration, FBA has initiated conversations with the hope Governor Gavin Newsom will approve the measure if it makes it to his desk.

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