§ 6100. Alternate Payments -Businesses and Farm Operations.

(a) General.

(1) A person who is displaced from his place of business or farm operation and is eligible for payments under sections 6090, 6092, 6094, or 6096, and complies with the requirements of this section, may elect to receive and shall be paid, in lieu of such payments, a payment equal to the average annual net earnings of the business or farm operation (but not including a business as described in section 6096) as determined in accordance with subsection (b) below, except that such payment shall be not less than $1,000 nor more than $20,000. For purposes of this section, the dollar limitation specified in the preceding sentence shall apply to a single business, regardless of whether it is carried on under one or more legal entities.

(2) Loss of Goodwill. When payment under this section will precede settlement of a claim for compensation for loss of goodwill under the Eminent Domain Law, the public entity before tendering payment shall state in writing what portion of the payment, if any, is considered to be compensation for loss of goodwill and shall explain in writing that any payment made pursuant to Code of Civil Procedure, Sections 1263.510 et seq. (the Eminent Domain Law, Chapter 9, Article 6 - “Compensation for Loss of Goodwill”) will be reduced in the same amount. The portion considered to be compensation for loss of goodwill shall not exceed the difference between the payment made under this section and an amount which reasonably approximates the payments for which the displaced person otherwise would be eligible under Sections 6090, 6092, 6094, and 6096. Failure to provide such written statement and explanation shall constitute a conclusive indication that no portion of the payment is considered to be compensation for loss of goodwill for the purposes of that portion of the Code of Civil Procedure referenced above.

(b) Requirements -Businesses. Payment shall not be made under this section unless the public entity determines that:

(1) The business is not operated solely for rental purposes and cannot be relocated without a substantial loss of its existing patronage, based on a consideration of all pertinent circumstances including such factors as the type of business conducted, the nature of the clientele, the relative importance to the displaced business of its present and proposed location, and the availability of a suitable relocation site;

(2) The business is not part of a commercial enterprise having no more than three (3) other establishments which are not being acquired for a project and which is engaged in the same or similar business. Whenever the sole remaining facility of a business which has been displaced from its principal location:

(A) Has been in operation for less than two years;

(B) Has had average annual gross receipts of less than $2,000 during the two taxable years prior to displacement of the major component of the business; or

(C) Has had average annual net earnings of less than $1,000 during the two taxable years prior to the displacement of the major component of the business, the remaining facility will not be considered another “establishment” for purposes of this section; and

(3) The displaced business:

(A) Had average annual gross receipts of at least $5,000 during the two taxable years prior to displacement; or

(B) The displaced business had average annual net earnings of at least $1,000 during the two taxable years prior to displacement; or

(C) The displaced business contributed at least 33 1/3 percent of the total gross income of the owner(s) during each of the two taxable years prior to displacement. If in any case the public entity determines that the two year period prior to displacement is not representative of average receipts, earnings or income, it may make use of a more representative period.

(D) If the application of the above criteria creates an inequity or hardship, the displacing agency may use other criteria as permitted in 49 CFR 24.306.

(c) Determination of Number of Businesses.

In determining whether one or more legal entities, all of which have been acquired, constitute a single business, the following factors among others shall be considered:

(1) The extent to which the same premises and equipment are shared.

(2) The extent to which substantially identical or intimately interrelated business functions are pursued and business and financial affairs are commingled.

(3) The extent to which such entities are held out to the public, and to those customarily dealing with such entities, as one business.

(4) The extent to which the same person or closely related persons own, control or manage the affairs of the entities.

(d) Requirements -Farms. In the case of a farm operation, no payment shall be made under this section unless the public entity determines that the farm met the definition of a farm operation prior to its acquisition. If the displacement is limited to only part of the farm operation, the operator will be considered to have been displaced from a farm operation if: the part taken met the definition of a farm operation prior to the taking and the taking caused such a substantial change in the nature of the existing farm operation as to constitute a displacement.

(e) Requirements -Nonprofit Organizations. In the case of a nonprofit organization, no payment shall be made under this section unless the public entity determines that:

(1) The nonprofit organization cannot be relocated without a substantial loss of its existing patronage (the term “existing patronage” as used in connection with a nonprofit organization includes the membership, persons, community, or clientele served or affected by the activities of the nonprofit organization); and

(2) The nonprofit organization is not a part of an enterprise having more than three (3) other establishments not being acquired which is engaged in the same or similar activity.

(f) Net Earnings. The term “average annual net earnings” as used in this section means one-half of any net earnings of the business or farm operation, before federal and state income taxes, during the two (2) taxable years immediately preceding the taxable year in which the business or farm operation moves from the real property acquired for such project, or during such other period as the head of the public entity determines to be more equitable for establishing such earnings, and includes any compensation paid by the business or farm operation to the owner, his spouse or his dependents during such period. The term “owner” as used in this section includes the sole proprietor in a sole proprietorship, the principal partners in a partnership, and the principal stockholders of a corporation, as determined by the public entity. For purposes of determining a principal stockholder, stock held by a husband, his wife and their dependent children shall be treated as one unit.

(g) If a displaced person who conducts a business or farm operation elects to receive a fixed payment under this section, he shall provide proof of his earnings from the business or farm operation to the agency concerned. Proof of earnings may be established by income tax returns, financial statements and accounting records or similar evidence acceptable to the public entity.

HISTORY

1. Amendment of subsection (e)(2) filed 11-5-76 as an emergency; designated effective 11-27-76 (Register 76, No. 44).

2. Certificate of Compliance filed 2-16-77 (Register 77, No. 8).

3. Amendment of subsections (a)(1)-(b)(2) and (b)(3)(A), new subsection (b)(3)(D), amendment of subsections (e)(2) and (f), and new Note filed 8-12-97; operative 9-11-97 (Register 97, No. 33).

Note

Note: Authority cited: Section 50460, Health and Safety Code. Reference: Section 7262(c), Government Code.