Bill Summary – FastDemocracy

Fiscal Note
                                       Fiscal Services Division
SF 266 – Model Business Corporations Act (LSB1234SV)
Staff Contact: Maria Wagenhofer (515.281.5270) maria.wagenhofer@legis.iowa.gov
Fiscal Note Version – New
Description
Senate File 266 amends and creates new provisions under Iowa Code chapter 490, the Iowa
Business Corporation Act (IBCA), relating to domestic or foreign for-profit corporations
authorized to do business in Iowa. In addition to making changes to existing law, the Bill
reconfigures various Secretary of State (SOS) filing fees for business entities governed under
the IBCA, and increases the electronic biennial report electronic filing fee from $45 to $60. The
changes are effective January 1, 2022.
Background
The IBCA governs the default requirements of for-profit corporations, including creation,
organization, operations, and relationships of the corporation. The IBCA was created in 1989
based on legislation by the American Bar Association (ABA) referred to as the Model Business
Corporation Act (MBCA) and has subsequently been amended to reflect changes in the MBCA.
Senate File 266 includes amendments to the IBCA that reflect the current version of the MBCA,
which was adopted by the ABA in 2016. The MBCA has been adopted in whole or in part in 30
states, including Iowa, and is a national model for corporation law in the United States. The
SOS administers the IBCA.
As established in Iowa Code chapter 9, the SOS’s Office, Business Services Division, is
responsible for reviewing, processing, approving, and filing, on a limited basis, statutory
documents relating to domestic and foreign business entities operating within Iowa. Each
domestic and foreign corporation registered to do business in the State must deliver to the SOS
a biennial report containing information related to the two-year period preceding the calendar
year in which the report is filed.
2017 Iowa Acts, chapter 170 (FY 2018 Standing Appropriations Act) created a Technology
Modernization Fund under the control of the SOS. From each fee collected by the SOS, the
amount credited to the Fund equals the difference between the fee amount collected and the
amount assessed for the same fee on June 30, 2017. No more than $2.0 million is credited to
the Fund in a fiscal year, and moneys in the Fund are appropriated to the SOS for purposes of
modernizing technology used by the SOS’s Office to fulfill its duties. The Fund will be repealed
on July 1, 2022 (FY 2023). The Fund is codified in Iowa Code section 9.4A.
In 2017, the SOS set biennial report filing fees in rule 721 IAC 40.8(3) for business entities
governed under the IBCA. Fees for electronic filings were set at $45 per biennial report, and
fees for paper filings were set at $60 per biennial report. Biennial report filing fees were
previously set at $30 for electronic filings and $45 for paper filings.
Assumptions
• Business entities governed under the IBCA file biennial reports with the SOS in even-
  numbered years. Limited liability corporations (LLCs) file biennial reports in odd-numbered
  years.
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• Senate File 266 sets the biennial report filing fee at $60 for business entities governed under
  the IBCA, regardless of filing mechanism, and the filing fee will remain at $60 following the
  repeal of the Technology Modernization Fund on July 1, 2022.
• The SOS’s Office will still continue to collect $15 per biennial report as established in 2017
  Iowa Acts, chapter 170, for deposit into the Technology Modernization Fund until July 1,
  2022.
• The additional fee revenue collected by the SOS from the increased biennial report filing fee
  for electronic filings established in SF266 will be deposited into the General Fund beginning
  January 1, 2022.
• Following the repeal of the Technology Modernization Fund on July 1, 2022, all filing fee
  revenue from biennial reports will be deposited into the General Fund.
• In FY 2020, the SOS processed 62,987 total biennial reports, of which 60,307 were filed
  electronically. While some of those filings may have included late LLC biennial reports, the
  majority of the filings were submitted by business entities governed under the IBCA. For
  estimation purposes, it is assumed that there will be approximately 60,000 biennial reports
  filed electronically in FY 2022 and each even-numbered fiscal year thereafter.
• In FY 2020, biennial report filing fee revenue was $2.9 million. The majority of that revenue
  was from business entities governed under the IBCA.
Fiscal Impact
Senate File 266 is projected to increase annual fee revenue in FY 2022 and FY 2024 and
subsequent even-numbered fiscal years by an estimated $900,000. This increased fee revenue
would be deposited into the General Fund. Following the repeal of the Technology
Modernization Fund on July 1, 2022, the total amount of fees collected would be deposited into
the General Fund in FY 2024.
Senate File 266 also creates a new fee for reinstatements without amended articles. However,
no historical data exists to make a fiscal impact estimate for this provision.
Sources
Secretary of State
LSA analysis
                                                                        /s/ Holly M. Lyons
                                                                         February 9, 2021
Doc ID 1211745
The fiscal note for this Bill was prepared pursuant to Joint Rule 17 and the Iowa Code. Data used in
developing this fiscal note is available from the Fiscal Services Division of the Legislative Services
Agency upon request.
                                            www.legis.iowa.gov
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Statutes affected: 
Introduced: 490.101, 490.120, 490.1622, 490.122, 490.123, 490.125, 490.127, 490.128, 490.129, 490.135, 490.140, 490.202, 490.143, 490.601, 490.850, 490.205, 490.206, 490.1020, 490.302, 490.303, 490.401, 490.301, 490.403, 490.502, 490.503, 490.504, 490.1507, 490.604, 490.625, 490.621, 490.622, 490.624, 490.626, 490.640, 490.701, 490.704, 490.703, 490.702, 490.728, 490.709, 490.707, 490.708, 490.720, 490.722, 490.724, 490.729, 490.1004, 490.727, 490.731, 490.732, 490.743, 490.744, 490.745, 490.746, 490.748, 490.803, 490.602, 490.806, 490.807, 490.808, 490.809, 490.741, 490.820, 490.821, 490.822, 490.823, 490.824, 490.825, 490.831, 490.1409, 490.842, 490.141, 490.856, 490.853, 490.854, 490.858, 490.851, 490.852, 490.861, 490.862, 490.860, 490.863, 490.932, 490.1005, 490.1003, 490.1006, 490.1021, 490.1102, 490.1105, 490.1104, 490.1108, 490.1201, 490.1202, 490.1302, 490.1322, 490.1325, 490.1324, 490.1326, 490.1330, 490.826, 490.1404, 490.1405, 490.1406, 490.1407, 490.1421, 490.1420, 490.1423, 490.1431, 490.1430, 490.1434, 490.1501, 490.1502, 490.1508, 490.1506, 490.1509, 490.1601, 490.1602, 490.1620, 490.1702, 249A.53, 455B.430, 490.1701, 499.69A, 490.902, 491.104, 491.17, 499.27A, 501A.804A, 501A.807, 504.701, 504.702A