S T A T E   O F   N E W   Y O R K
 ________________________________________________________________________
 
                                   5859
 
                        2017-2018 Regular Sessions
 
                           I N  A S S E M B L Y
 
                             February 16, 2017
                                ___________
 
 Introduced by M. of A. DINOWITZ -- read once and referred to the Commit-
   tee on Corporations, Authorities and Commissions
 
 AN ACT to amend the limited liability company law, in relation to estab-
   lishing the L3C act regarding low-profit limited liability companies
 
   THE  PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
 BLY, DO ENACT AS FOLLOWS:
 
   Section 1. This act may be known and shall be cited as the "L3C act".
   § 2. Section 102 of the limited liability company law  is  amended  by
 adding a new subdivision (n-1) to read as follows:
   (N-1) "LOW-PROFIT LIMITED LIABILITY COMPANY" MEANS A LIMITED LIABILITY
 COMPANY  THAT  HAS  SET FORTH IN ITS ARTICLES OF ORGANIZATION A BUSINESS
 PURPOSE THAT SATISFIES, AND THAT IS AT ALL TIMES  OPERATED  TO  SATISFY,
 EACH OF THE FOLLOWING REQUIREMENTS:
   (I)  THE  LIMITED  LIABILITY COMPANY SIGNIFICANTLY FURTHERS THE ACCOM-
 PLISHMENT OF ONE OR MORE CHARITABLE OR EDUCATIONAL PURPOSES  WITHIN  THE
 MEANING OF SECTION 170(C)(2)(B) OF THE INTERNAL REVENUE CODE OF 1986 (26
 U.S.C.  §  170(C)(2)(B)),  AND  WOULD  NOT  HAVE BEEN FORMED BUT FOR ITS
 RELATIONSHIP  TO  THE  ACCOMPLISHMENT  OF  CHARITABLE   OR   EDUCATIONAL
 PURPOSES;
   (II)  NO  SIGNIFICANT  PURPOSE OF THE LIMITED LIABILITY COMPANY IS THE
 PRODUCTION OF INCOME OR THE APPRECIATION OF PROPERTY; PROVIDED, HOWEVER,
 THAT THE FACT THAT THE LIMITED LIABILITY  COMPANY  PRODUCES  SIGNIFICANT
 INCOME  OR  CAPITAL  APPRECIATION  SHALL  NOT,  IN  THE ABSENCE OF OTHER
 FACTORS, BE CONCLUSIVE EVIDENCE OF A SIGNIFICANT PURPOSE  INVOLVING  THE
 PRODUCTION OF INCOME OR THE APPRECIATION OF PROPERTY; AND
   (III) NO PURPOSE OF THE LIMITED LIABILITY COMPANY IS TO ACCOMPLISH ONE
 OR  MORE POLITICAL OR LEGISLATIVE PURPOSES WITHIN THE MEANING OF SECTION
 170(C)(2)(D)  OF  THE  INTERNAL  REVENUE  CODE  OF  1986  (26  U.S.C.  §
 170(C)(2)(D)).
 
  EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                       [ ] is old law to be omitted.
                                                            LBD01524-01-7

              

 A. 5859                             2
 
   §  3.  Paragraph  7  of  subdivision (e) of section 203 of the limited
 liability company law is renumbered paragraph 8 and a new paragraph 7 is
 added to read as follows:
   (7)  IF  THE  COMPANY  IS  A  LOW-PROFIT LIMITED LIABILITY COMPANY, AS
 DEFINED IN SUBDIVISION (N-1) OF SECTION ONE HUNDRED TWO OF THIS CHAPTER,
 THAT THE COMPANY IS A LIMITED LIABILITY COMPANY.
   § 4. Subdivisions (g), (h) and (i)  of  section  204  of  the  limited
 liability  company  law,  subdivision (i) as added by chapter 316 of the
 laws of 2005, are amended and three new subdivisions (j),  (k)  and  (l)
 are added to read as follows:
   (g)  shall  not, unless the approval of the state department of social
 services OR ITS SUCCESSORS IN FUNCTION is attached to  the  articles  of
 organization  or  application for authority, contain the word "blind" or
 "handicapped." Such approval shall be granted by the state department of
 social services OR ITS SUCCESSORS IN FUNCTION if in its opinion the word
 "blind" or "handicapped" as used  in  the  limited  liability  company's
 proposed  name  will  not  tend  to  mislead  or confuse the public into
 believing that the limited liability company is organized for charitable
 or nonprofit purposes related to the blind or the handicapped; [and]
   (h) shall not, unless the approval of the attorney general is attached
 to the articles of organization or application  for  authority,  contain
 the  word  "exchange"  or  any  abbreviation or derivative thereof. Such
 approval shall not be granted by the attorney general if in his  or  her
 opinion  the  use of the word "exchange" in the limited liability compa-
 ny's proposed name would falsely imply that the limited liability compa-
 ny conducts its business at a place where trade is carried on in securi-
 ties or commodities by brokers, dealers or merchants[.];
   (i) shall not contain  the  following  terms:  "school,"  "education,"
 "elementary,"     "secondary,"     "kindergarten,"    "prekindergarten,"
 "preschool,"  "nursery  school,"  "museum,"   "history,"   "historical,"
 "historical society," "arboretum," "library," "college," "university" or
 other  term  restricted by section two hundred twenty-four of the educa-
 tion law; "conservatory," "academy," or "institute" or any  abbreviation
 or  derivative  of  such  terms,  shall have endorsed thereon or annexed
 thereto the consent of the commissioner of education[.];
   (J) SHALL, IN THE CASE OF  A  LOW-PROFIT  LIMITED  LIABILITY  COMPANY,
 CONTAIN THE WORDS "LOW-PROFIT LIMITED LIABILITY COMPANY" OR THE ABBREVI-
 ATIONS "L3C" OR "L3C", WITH OR WITHOUT PERIODS OR OTHER PUNCTUATION;
   (K)  SHALL  NOT, IN THE CASE OF A LOW-PROFIT LIMITED LIABILITY COMPANY
 UNLESS THE APPROVAL OF THE STATE DEPARTMENT OF SOCIAL  SERVICES  OR  ITS
 SUCCESSORS  IN  FUNCTION  IS ATTACHED TO THE ARTICLES OF ORGANIZATION OR
 APPLICATION FOR AUTHORITY, CONTAIN THE WORD  "BLIND"  OR  "HANDICAPPED."
 SUCH  APPROVAL  SHALL  BE  GRANTED  BY  THE  STATE  DEPARTMENT OF SOCIAL
 SERVICES OR ITS SUCCESSORS IN  FUNCTION  IF  IN  ITS  OPINION  THE  WORD
 "BLIND"  OR  "HANDICAPPED"  AS  USED  IN THE LIMITED LIABILITY COMPANY'S
 PROPOSED NAME WILL NOT TEND  TO  MISLEAD  OR  CONFUSE  THE  PUBLIC  INTO
 BELIEVING THAT THE LIMITED LIABILITY COMPANY IS ORGANIZED FOR CHARITABLE
 OR NONPROFIT PURPOSES RELATED TO THE BLIND OR THE HANDICAPPED; AND
   (L)  SHALL  NOT, IN THE CASE OF A LOW-PROFIT LIMITED LIABILITY COMPANY
 UNLESS THE APPROVAL OF THE ATTORNEY GENERAL IS ATTACHED TO THE  ARTICLES
 OF   ORGANIZATION   OR  APPLICATION  FOR  AUTHORITY,  CONTAIN  THE  WORD
 "EXCHANGE" OR ANY ABBREVIATION  OR  DERIVATIVE  THEREOF.  SUCH  APPROVAL
 SHALL  NOT  BE  GRANTED BY THE ATTORNEY GENERAL IF IN HIS OR HER OPINION
 THE USE OF THE  WORD  "EXCHANGE"  IN  THE  LIMITED  LIABILITY  COMPANY'S
 PROPOSED  NAME  WOULD  FALSELY  IMPLY THAT THE LIMITED LIABILITY COMPANY

 A. 5859                             3
 
 CONDUCTS ITS BUSINESS AT A PLACE WHERE TRADE IS CARRIED ON IN SECURITIES
 OR COMMODITIES BY BROKERS, DEALERS OR MERCHANTS.
   §  5.  Paragraphs  8  and  9  of subdivision (d) of section 211 of the
 limited liability company law are renumbered paragraphs 9 and 10  and  a
 new paragraph 8 is added to read as follows:
   (8) IF THE LIMITED LIABILITY COMPANY IS A LOW-PROFIT LIMITED LIABILITY
 COMPANY, ITS FAILURE TO MEET ANY OF THE REQUIREMENTS SET OUT IN SUBDIVI-
 SION (N-1) OF SECTION ONE HUNDRED TWO OF THIS CHAPTER.
   §  6.  Paragraph  5  of  subdivision (a) of section 701 of the limited
 liability company law is renumbered paragraph 6 and a new paragraph 5 is
 added to read as follows:
   (5) IF THE LIMITED LIABILITY COMPANY IS A LOW-PROFIT LIMITED LIABILITY
 COMPANY THAT HAS CEASED TO MEET ANY  OF  THE  REQUIREMENTS  SET  OUT  IN
 SUBDIVISION  (N-1)  OF  SECTION  ONE HUNDRED TWO OF THIS CHAPTER AND HAS
 FAILED FOR NINETY DAYS AFTER CEASING TO MEET THOSE REQUIREMENTS TO  FILE
 ARTICLES  OF AMENDMENT WITH THE DEPARTMENT OF STATE AMENDING ITS NAME TO
 CONFORM WITH THE REQUIREMENTS OF SECTION TWO HUNDRED FOUR OF THIS  CHAP-
 TER GOVERNING LIMITED LIABILITY COMPANY NAMES.
   § 7.  This act shall take effect immediately.