Prohibit Contingency Fees for Economic Development Act

Summary: The Prohibit Contingency Fees for Economic Development Act bans the practice of lobbyists receiving a percentage of an economic development grant as compensation for their work.

Based on California Senate Bill 434

SECTION 1. SHORT TITLE

This Act may be cited as the “Prohibit Contingency Fees for Economic Development Act.”

SECTION 2. PURPOSE

This law is enacted to prevent corruption or the appearance of corruption in the award of economic development subsidies.

SECTION 3. CONTINGENCY FEES

After section XXX, the following new section XXX shall be inserted:

(A) Definitions—In this Act:

1. "Contingent fee" means any fee charged upon the occurrence of a contingency and includes, but is not limited to, a fee that is based on a percentage of the refund reported on a return, a fee that is based on a percentage of the taxes reduced, or a fee that depends upon the specific tax result attained.

2. “Economic development subsidy” means any expenditure of public funds with a value of at least $25,000.00 for the purpose of stimulating economic development within the [state/city/county], including but not limited to bonds, grants, loans, loan guarantees, enterprise zones, empowerment zones, tax increment financing, grants, fee waivers, land price subsidies, matching funds, tax abatements, tax exemptions, and tax credits.

(B) Prohibition

A person shall not charge a contingent fee for services rendered in connection with obtaining an economic development subsidy.

(C) Enforcement

1. Violators of this provision shall pay 150 percent of the contingent fee charged, whether or not any contingent fee was actually paid or otherwise received, directly or indirectly, by the provider.

2. Companies that agree to pay such a contingent fee shall be ineligible for economic development subsidies or government contracts for a period of five years.

SECTION 4. EFFECTIVE DATE

This Act shall take effect on July 1, XXXX.


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