An Act to End Business Welfare Abuse

International Law Center for Human, Economic & Environmental Defense
National Lawyers Guild, 8124 W. Third Street, Suite 201, Los Angeles, California
90048, USA
Telephone 213/736-1094. Fax 213/380-3769. E-mail : heed@igc.org

Section 1. The Business and Professions Code, Division 7 (General Business Regulations), Part 2 (Preservation and Regulation of Competition) is amended to add a new Chapter 8, to read:

Partnership between business and government is the foundation of a successful society.

But some government handouts of taxes and other public resources to business have become a system of business welfare. That system rewards socially and environmentally destructive behavior. It also produces generations of entrepreneurs who become dependent on the public dole rather than on their own initiative.

It is the purpose of this Act to remove some of the government incentives that reward socially and environmentally destructive behavior, and to help businesses end their welfare dependency.

The People further find that the web of state and local laws supporting business welfare is so extensive that it is impractical to amend them one by one. Therefore, the People enact this Business Welfare Responsibility Act which shall supersede state and local laws inconsistent with its terms to the extent of the inconsistency.

This Act applies to every business enterprise with total assets of more than two million dollars doing business in California. "Business enterprise" includes a corporation, limited liability company, partnership, sole proprietorship or other form of doing business.

Any taxpayer of this state may bring an action in superior court against a business enterprise to which this Act applies for a judicial declaration that the enterprise is a welfare abuser.

(a) Reimbursement to the public treasury. Upon a finding by the court that the business enterprise is a welfare abuser, the court shall order the enterprise to reimburse the public treasury which suffered a loss because of the abuse. The amount of the reimbursement shall be the dollar value of tax and other benefits gained by the enterprise because of the abuse, plus interest at the rate of ten percent per year from the time the benefits accrued.

(b) Punitive damages. If any of the three highest paid officers of the enterprise received any increase in compensation during the period of the abuse, then the court shall order those officers to pay punitive damages to the public treasury in an amount equal to three times the increases they received.

(c) Three strikes and out of the state. Upon a finding that the enterprise has been declared a welfare abuser by three final judgments within any ten year period, the court may revoke the enterprise’s qualification to do business in this state for ten years.

The court shall find that a business enterprise is a welfare abuser if, after trial, clear and convincing evidence establishes that the enterprise has engaged in any of the following conduct after the effective date of this Act:

(a) Looting of natural resources. "Looting of natural resources" means entering into an agreement to pay less than fair market value for any interest in water, land, minerals, oil, gas or timber sold or leased to the enterprise by any public agency organized under state or local law. It also means taking a deduction from state taxes for depletion or depreciation of improvements for mines, oil or gas wells, other natural deposits or timber.

(b) Paying less than fair share for public services. "Paying less than fair share for public services" means paying less than the enterprise's fair share for public expenditures on fire and police protection, schools, water, sewage treatment, waste disposal, or roads and other physical infrastructure improvements. The fair share is the amount of assessment needed to fully cover the public expenditures directly caused by the enterprise’s activities.

(c) Billing the public for private pollution cleanup. "Billing the public for private pollution cleanup" means taking a deduction from state taxes for expenses incurred in complying with a court order, administrative order, or a settlement agreement to clean up air, land or water pollution in California. This subsection applies, however, only when a criminal or civil penalty has been imposed as part of the order or settlement agreement.

(d) Abandoning a community. "Abandoning a community" means accepting a public financial incentive to locate, retain, or expand business operations in a California community and then, at any time within five years after accepting the incentive, causing a net loss of jobs or business assets at that location through transfer of jobs or assets to a different community in or out of California. "Public financial incentive" means any grant, loan, loan guarantee, or bond made available by any public agency organized under state or local law. It also means any tax incentive authorized by any provision of state or local law that reduces the amount of tax revenues that would otherwise accrue to the public treasury.

If any part or application of this Act is declared invalid or unconstitutional by a court of law, that part or application shall be severed from the whole and the rest of the Act shall remain in effect.