With the May 8th Primary Election just around the corner, campaign season will soon be in full swing. That means we are fast approaching the period where Statehouse legislative activity will trickle to a full stop until after the General Election. Then, we brace ourselves for that infamous period known as "lame duck," when anything can happen (and often does!) as legislators scramble to get their priorities passed before the end of the two-year legislative cycle and before the official changing of the guard in the Governor's office.
In the meantime, here's a quick update on some of the bills the OSBA has its eyes on:
House Bill 292 – An Improved Brightline Domicile Test
As you may recall, this OSBA priority bill, sponsored by Representative Gary Sherer (R-Circleville), would put in place a new and improved brightline test for determining Ohio residency for tax purposes. House Bill 292 passed the Ohio House in November and ever since, the Ohio Senate has been doing its due diligence, holding five hearings on the bill to date. We are confident that the bill will move prior to the election break, likely with some tax-related amendments that the OSBA does not find objectionable. Thank you again to the OSBA Taxation Law Committee for all its work on this important bill.
Senate Bill 179 – The "Lazarus" Amendment for LLCs
In yet another example of the practical expertise the OSBA Corporation Law Committee brings to the legislative drafting table, the committee has proposed a constructive amendment to pending legislation that will ensure limited liability companies (LLCs) can stay in business and in compliance with state filing requirements.
Senate Bill 179, sponsored by Senator Frank LaRose (R-Hudson) would allow for the automatic dissolution of an LLC if the company fails to maintain an updated statutory agent for service of process with the Ohio Secretary of State's office following notice of noncompliance by the Secretary of State. Current law already provides for a similar provision for corporations, and as Senator LaRose has indicated, is designed to guard against fraudulent business filings and provide the Secretary of State a tool to better maintain a legitimate roster of Ohio companies. However, current law also has a "Lazarus" provision, allowing the corporation that has been dissolved to be reinstated if and when the corporation comes back into compliance with the statutory agent requirements as if it had never been dissolved. This is important as it allows legitimate corporations to remedy what are likely administrative oversights and avoid any question as to the validity of actions taken by the company during the time they were not in compliance.
The as-introduced version of SB 179, though allowing for the automatic dissolution of an LLC, does not provide for its automatic reinstatement. The Corporation Law Committee caught this oversight in the bill draft and has provided an LLC "Lazarus" amendment to Senator LaRose, tracking practically verbatim with the reinstatement language appearing in the corporation statute. Without this language, SB 179 would create a substantial risk for persons forming LLCs in Ohio and could discourage entrepreneurs from forming LLCs in Ohio when compared to Delaware or other jurisdictions that have automatic reinstatement provisions. The bill sponsor and members of the committee are supportive of the OSBA amendment and based upon comments made during a recent hearing on the bill, we expect the committee to add the OSBA amendment at a hearing in the near future.
House Bill 595- Omnibus Probate Bill the Sequel
Our hard-working and prolific Estate Planning, Trust and Probate Section is back with several additional proposals in their efforts to improve and streamline probate law in Ohio. Last General Assembly (via House Bill 432, which took effect last April) the Section had such great success working with Representatives Bob Cupp (R-Lima) and Jeffery Rezabek (R-Clayton) that we've gotten the band back together for round two. House Bill 595 was introduced this month. The bill would, among other things:
- Clarify and confirm when the terms of a trust may direct that the trustee and/or beneficiaries must settle disputes by arbitration;
- Clarify that the exception to the antilapse statutes preventing the creation of a substitute gift in the descendants of the deceased class member only applies if the defined class is multi-generational; and
- Add a new chapter and delete certain sections of the ORC to allow a living settlor to determine the validity of his or her trust, just as a living testator may determine the validity of his or her will under current law, as well as make some modifications to the provisions for testators, and coordinate the two sets of provisions into a single chapter.
House Bill 182 - Debt Settlement Industry & UPL
We were disappointed recently when the Ohio House moved forward in passing House Bill 182, a bill that would authorize debt settlement companies to operate in Ohio. This is an industry which the Ohio Supreme Court has ruled, in no uncertain terms, constitutes the unauthorized practice of law (UPL), and which members of the OSBA UPL Committee have encountered countless times as they sought to defend consumers who have fallen victim to its business practices. The legislation did not pass without significant objection (37 votes against), including from State Representative Nicholas Celebrezze (D-Parma), an attorney, who cautioned his colleagues in a floor speech that HB182 was likely unconstitutional because it is the Supreme Court and not the General Assembly, that regulates the practice of law in Ohio. Despite this setback, there is still ample opportunity to affect change as the bill now moves to the Ohio Senate. In fact, the OSBA has already begun to raise its concerns with Senators, which can be summed up in the public statement we issued following the vote. In the weeks ahead, we'll be encouraging OSBA members to contact their Senators directly to ensure lawmakers know why this bill would be bad for consumers and bad for Ohio.
Senate Bill 263 - Modernizing Notary Public
Senate Bill 263, sponsored by Senators Matt Huffman (R-Lima) and Steve Wilson (R-Maineville), seeks to "modernize" the notary public system in Ohio. The bill would pave the way for Ohioans to be able to get their documents notarized by connecting with a commissioned Ohio notary online using live audio-video communications technology, rather than having to meet face to face. To protect those consumers, the bill includes provisions to ensure the authenticity of electronic signatures and online notarial acts. It would also centralize notary commissions to be under the sole authority of the Ohio Secretary of State's Office. Currently, there are 88 counties and 88 different processes and requirements under which notaries are commissioned in Ohio. SB 263 would make the process uniform, requiring all new applicants to submit to background checks, participate in an approved training course and pass an assessment before they could get that coveted seal.
It is important to note that the commissions of all current attorney notaries would not be impacted by the new rules, though, if the bill is adopted, it could certainly impact how they provide the service to clients in the future. As such, we are grateful to the bill's sponsors for proactively seeking our input, and we look forward to working with them and the members of the Senate Insurance & Financial Institutions Committee as the bill moves through the legislative process.
May 8 Primary Election
Voting in the May 7 Primary Election begins on April 10, 2018. In addition to weighing in on which candidates will represent their respective parties in the General Election for a variety of statewide, local and judicial offices, Ohio voters will also have their say on State Issue 1 -- a Congressional Redistricting Reform proposal for Ohio. The proposal received unprecedented bipartisan support from the Ohio General Assembly, which earned it its rightful place on the May ballot. With redistricting processes and maps being challenged all over the country, a bipartisan plan certainly stands out – we'll see how Ohio voters respond. For more information on State Issue 1, visit the OSBA's 2018 Primary Election information page.
Congress boosts legal aid funding
Finally, a little news to celebrate coming out of Washington, D.C. recently (we'll take it when we can get it!). When Congress passed an omnibus spending bill to fund the government through September 30, 2018 (and avert a government shutdown), the Legal Services Corporation not only maintained its funding levels, but its appropriation was increased by $25 million. Over the past year, the OSBA, in partnership with the Ohio Legal Assistance Foundation (OLAF) and the metro bar associations, has been working to steadily reeducate and persuade members of Ohio's Congressional delegation to oppose any effort to defund the Legal Services Corporation (LSC). LSC provides approximately one third of funding for Ohio legal aid programs and assists more than 1.8 million low-income Americans annually. We are pleased that our hard work has paid off and are grateful to all members of the Ohio Congressional delegation who supported the bill. We are especially appreciative that Representatives Steve Stivers (R-Columbus), Mike Turner (R-Dayton), Joyce Beatty (D-Columbus) and Marcia Fudge (D-Cleveland), who were willing to add their names to a recent bipartisan "Dear Colleague" letter which called for robust funding for legal aid.