Doing Business 2017 United States Economy Profile 2017 United States Doing Business 2017 United States 2 © 2017 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW, Washington DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org Some rights reserved 1 2 3 4 19 18 17 16 This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. 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Doing Business 2017 United States 3 CONTENTS Introduction .................................................................................................................................. 4 Starting a business ..................................................................................................................... 17 Dealing with construction permits ........................................................................................... 29 Getting electricity ....................................................................................................................... 49 Registering property .................................................................................................................. 61 Getting credit .............................................................................................................................. 73 Protecting minority investors ................................................................................................... 79 Paying taxes ................................................................................................................................ 86 Trading across borders .............................................................................................................. 94 Enforcing contracts .................................................................................................................. 100 Resolving insolvency ................................................................................................................ 109 Labor market regulation ......................................................................................................... 116 Distance to frontier and ease of doing business ranking .................................................... 123 Resources on the Doing Business website ............................................................................ 126 Doing Business 2017 United States 4 INTRODUCTION Doing Business sheds light on how easy or difficult it is it also provides data for other selected economies for a local entrepreneur to open and run a small to (comparator economies) for each indicator. The data in medium-size business when complying with relevant this report are current as of June 1, 2016 (except for the regulations. It measures and tracks changes in paying taxes indicators, which cover the period January– regulations affecting 11 areas in the life cycle of a December 2015). business: starting a business, dealing with construction The Doing Business methodology has limitations. Other permits, getting electricity, registering property, getting areas important to business—such as an economy’s credit, protecting minority investors, paying taxes, proximity to large markets, the quality of its trading across borders, enforcing contracts, resolving infrastructure services (other than those related to insolvency and labor market regulation. Doing Business trading across borders and getting electricity), the 2017 presents the data for the labor market regulation security of property from theft and looting, the indicators in an annex. The report does not present transparency of government procurement, rankings of economies on labor market regulation macroeconomic conditions or the underlying strength of indicators or include the topic in the aggregate distance institutions—are not directly studied by Doing Business. to frontier score or ranking on the ease of doing The indicators refer to a specific type of business, business. generally a local limited liability company operating in In a series of annual reports Doing Business presents the largest business city. Because standard assumptions quantitative indicators on business regulations and the are used in the data collection, comparisons and protection of property rights that can be compared benchmarks are valid across economies. The data not across 190 economies, from Afghanistan to Zimbabwe, only highlight the extent of obstacles to doing business; over time. The data set covers 48 economies in Sub- they also help identify the source of those obstacles, Saharan Africa, 32 in Latin America and the Caribbean, 25 supporting policy makers in designing regulatory reform. in East Asia and the Pacific, 25 in Eastern Europe and More information is available in the full report. Doing Central Asia, 20 in the Middle East and North Africa and Business 2017 presents the indicators, analyzes their 8 in South Asia, as well as 32 OECD high-income relationship with economic outcomes and presents economies. The indicators are used to analyze economic business regulatory reforms. The data, along with outcomes and identify what reforms have worked, where information on ordering Doing Business 2017, are and why. available on the Doing Business website at This economy profile presents the Doing Business http://www.doingbusiness.org. indicators for United States. To allow useful comparison, Doing Business 2017 United States 5 CHANGES IN DOING BUSINESS 2017 As part of a three-year update in methodology, Doing having equal evidentiary weight of women’s testimony in Business 2017 expands further by adding postfiling court. processes to the paying taxes indicator, including a Also for the first time this year Doing Business collects gender component in three of the indicators and data on Somalia, bringing the total number of developing a new pilot indicator on selling to the economies covered to 190. government. Also, for the first time this year Doing Business collects data on Somalia, bringing the total For more details on the changes, see the “”Old and new number of economies covered to 190. factors covered in Doing Business” section in the The paying taxes indicator is expanded this year to Overview chapter starting on page 1 of the Doing include postfiling processes – those processes that occur Business 2017 report. For more details on the data and after a firm complies with its regular tax obligations. methodology, please see the “Data Notes” chapter These include tax refunds, tax audits and tax appeals. In starting on page 114 of the Doing Business 2017 report. particular, Doing Business measures the time it takes to For more details on the distance to frontier metric, get a value added tax (VAT) refund, deal with a simple please see the “Distance to frontier and ease of doing mistake on a corporate tax return that can potentially business ranking” chapter in this profile. trigger an audit and good practices with administrative appeals process. This year’s Doing Business report presents a gender dimension in four of the indicator sets: starting a business, registering property, enforcing contracts and labor market regulation. Three of these areas are included in the distance to frontier score and in the ease of doing business ranking, while the fourth —labor market regulation—is not. Doing Business has traditionally assumed that the entrepreneurs or workers discussed in the case studies were men. This was incomplete by not reflecting correctly the Doing Business processes as applied to women—which in some economies may be different from the processes applied to men. Starting this year, Doing Business measures the starting a business process for two case scenarios: one where all entrepreneurs are men and one where all entrepreneurs are women. In economies where the processes are more onerous if the entrepreneur is a woman, Doing Business now counts the extra procedures applied to roughly half of the population that is female (for example, obtaining a husband’s consent or gender-specific requirements for opening a personal bank account when starting a business). Within the registering property indicators, a gender component has been added to the quality of land administration index. This component measures women’s ability to use, own, and transfer property according to the law. Finally, within the enforcing contracts indicator set, economies will be scored on Doing Business 2017 United States 6 THE BUSINESS ENVIRONMENT For policy makers trying to improve their economy’s regulatory environment for business, a good place to start ECONOMY OVERVIEW is to find out how it compares with the regulatory environment in other economies. Doing Business provides an aggregate ranking on the ease of doing business Region: OECD high income based on indicator sets that measure and benchmark regulations applying to domestic small to medium-size Income category: High income businesses through their life cycle. Economies are ranked from 1 to 190 by the ease of doing business ranking. Population: 321,418,820 Doing Business presents results for 2 aggregate measures: the distance to frontier score and the ease of doing GNI per capita (US$): 54,960 business ranking. The ranking of economies is determined by sorting the aggregate distance to frontier scores, DB2017 rank: 8 rounded to two decimals. An economy’s distance to frontier score is indicated on a scale from 0 to 100, where DB2016 rank: 7* 0 represents the worst performance and 100 the frontier. Change in rank: -1 (See the chapter on the distance to frontier and ease of doing business). DB 2017 DTF: 82.45 The ease of doing business ranking compares economies with one another; the distance to frontier score DB 2016 DTF: 82.46 benchmarks economies with respect to regulatory best practice, showing the absolute distance to the best Change in DTF: -0.01 performance on each Doing Business indicator. When compared across years, the distance to frontier score * DB2016 ranking shown is not last year’s published shows how much the regulatory environment for local ranking but a comparable ranking for DB2016 that entrepreneurs in an economy has changed over time in captures the effects of such factors as data revisions absolute terms, while the ease of doing business ranking and the changes in methodology. See the data notes can show only how much the regulatory environment has starting on page 114 of the Doing Business 2017 changed relative to that in other economies. report for sources and definitions. The 10 topics included in the ranking in Doing Business 2017: starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency. The labor market regulation indicators are not included in this year’s aggregate ease of doing business ranking, but the data are presented in the economy profile. Doing Business 2017 United States THE BUSINESS ENVIRONMENT Figure 1.1 Where economies stand in the global ranking on the ease of doing business Source: Doing Business database. Doing Business 2017 United States THE BUSINESS ENVIRONMENT For policy makers, knowing where their economy regional average (figure 1.2). The economy’s rankings stands in the aggregate ranking on the ease of doing (figure 1.3) and distance to frontier scores (figure 1.4) business is useful. Also useful is to know how it ranks on the topics included in the ease of doing business relative to comparator economies and relative to the ranking provide another perspective. Figure 1.2 How United States and comparator economies rank on the ease of doing business Note: The rankings are benchmarked to June 2016 and based on the average of each economy’s distance to frontier (DTF) scores for the 10 topics included in this year’s aggregate ranking. The distance to frontier score benchmarks economies with respect to regulatory practice, showing the absolute distance to the best performance in each Doing Business indicator. An economy’s distance to frontier score is indicated on a scale from 0 to 100, where 0 represents the worst performance and 100 the frontier. For the economies for which the data cover 2 cities, scores are a population-weighted average for the 2 cities. Source: Doing Business database. Doing Business 2017 United States 9 THE BUSINESS ENVIRONMENT Figure 1.3 Rankings on Doing Business topics - United States (Scale: Rank 190 center, Rank 1 outer edge) Figure 1.4 Distance to frontier scores on Doing Business topics - United States (Scale: Score 0 center, Score 100 outer edge) Source: Doing Business database. Note: The rankings are benchmarked to June 2016 and based on the average of each economy’s distance to frontier (DTF) scores for the 10 topics included in this year’s aggregate ranking. The distance to frontier score benchmarks economies with respect to regulatory practice, showing the absolute distance to the best performance in each Doing Business indicator. An economy’s distance to frontier score is indicated on a scale from 0 to 100, where 0 represents the worst performance and 100 the frontier. For the economies for which the data cover 2 cities, scores are a population-weighted average for the 2 cities. Doing Business 2017 United States 10 THE BUSINESS ENVIRONMENT Just as the overall ranking on the ease of doing business Doing Business introduced the distance to frontier score. tells only part of the story, so do changes in that ranking. This measure shows how far on average an economy is Yearly movements in rankings can provide some indication from the best performance achieved by any economy on of changes in an economy’s regulatory environment for each Doing Business indicator. firms, but they are always relative. Comparing the measure for an economy at 2 points in time Moreover, year-to-year changes in the overall rankings do allows users to assess how much the economy’s regulatory not reflect how the business regulatory environment in an environment as measured by Doing Business has changed economy has changed over time—or how it has changed over time—how far it has moved toward (or away from) in different areas. To aid in assessing such changes, the most efficient practices and strongest regulations in areas covered by Doing Business (figure 1.5). Figure 1.5 How far has United States come in the areas measured by Doing Business? Note: The distance to frontier score shows how far on average an economy is from the best performance achieved by any economy on each Doing Business indicator. Starting a business is comparable to 2010. Getting credit, protecting minority investors, paying taxes and resolving insolvency had methodology changes in 2014 and thus are only comparable to 2013. Dealing with construction permits, registering property, trading across borders, enforcing contracts and getting electricity had methodology changes in 2015 and thus are only comparable to 2014. The measure is normalized to range between 0 and 100, with 100 representing the best performance (the frontier). See the data notes starting on page 114 of the Doing Business 2017 report for more details on the distance to frontier score. Source: Doing Business database. Doing Business 2017 United States 11 THE BUSINESS ENVIRONMENT The absolute values of the indicators tell another part of regulation—such as a regulatory process that can be the story (table 1.1). The indicators, on their own or in completed with a small number of procedures in a few comparison with the indicators of a good practice days and at a low cost. Comparison of the economy’s economy or those of comparator economies in the indicators today with those in the previous year may region, may reveal bottlenecks reflected in large numbers show where substantial bottlenecks persist—and where of procedures, long delays or high costs. Or they may they are diminishing. reveal unexpected strengths in an area of business Table 1.1 Summary of Doing Business indicators for United States United Kingdom DB2017 Best performer globally Hong Kong SAR, China New York City DB2017 United States DB2017 United States DB2016 Los Angeles DB2017 Germany DB2017 Canada DB2017 Indicator DB2017 DB2017 Starting a Business 51 45 -- -- 2 114 3 16 1 (New Zealand) (Rank) Starting a Business (DTF 91.23 91.22 91.60 90.66 98.23 83.42 98.20 94.58 99.96 (New Zealand) Score) Procedure – Men 6.0 6.0 6.0 6.0 2.0 9.0 2.0 4.0 1.0 (New Zealand) (number) Time – Men (days) 5.6 5.6 4.0 8.0 1.5 10.5 1.5 4.5 0.5 (New Zealand) Cost – Men (% of 1.1 1.1 1.3 0.8 0.4 1.9 0.6 0.1 0.0 (Slovenia) income per capita) Procedure – Women 6.0 6.0 6.0 6.0 2.0 9.0 2.0 4.0 1.0 (New Zealand) (number) Time – Women (days) 5.6 5.6 4.0 8.0 1.5 10.5 1.5 4.5 0.5 (New Zealand) Cost – Women (% of 1.1 1.1 1.3 0.8 0.4 1.9 0.6 0.1 0.0 (Slovenia) income per capita) Paid-in min. capital (% 0.0 0.0 0.0 0.0 0.0 32.9 0.0 0.0 0.0 (127 Economies*) of income per capita) Dealing with 39 37 -- -- 57 12 5 17 1 (New Zealand) Construction Permits Doing Business 2017 United States 12 United Kingdom DB2017 Best performer globally Hong Kong SAR, China New York City DB2017 United States DB2017 United States DB2016 Los Angeles DB2017 Germany DB2017 Canada DB2017 Indicator DB2017 DB2017 (Rank) Dealing with Construction Permits 75.74 75.73 73.43 79.21 73.66 81.45 84.82 80.34 87.40 (New Zealand) (DTF Score) Procedures (number) 15.8 15.8 15.0 17.0 12.0 8.0 11.0 9.0 7.0 (4 Economies*) Time (days) 80.6 80.6 89.0 68.0 249.0 96.0 72.0 86.0 28.0 (Korea, Rep.) Cost (% of warehouse 0.1 (Trinidad and 1.0 1.0 0.3 1.9 1.3 1.1 0.7 1.1 value) Tobago) Building quality control 10.0 10.0 8.0 13.0 14.0 9.5 12.0 9.0 15.0 (Luxembourg*) index (0-15) Getting Electricity 36 32 -- -- 108 5 3 17 1 (Korea, Rep.) (Rank) Getting Electricity (DTF 83.39 83.39 91.23 71.64 63.76 98.79 99.02 89.12 99.88 (Korea, Rep.) Score) Procedures (number) 4.8 4.8 4.0 6.0 7.0 3.0 3.0 4.0 3.0 (15 Economies*) Time (days) 89.6 89.6 60.0 134.0 137.0 28.0 27.0 79.0 18.0 (Korea, Rep.*) Cost (% of income per 24.4 24.6 14.0 40.0 125.8 40.8 1.4 25.8 0.0 (Japan) capita) Reliability of supply and transparency of tariff 7.6 7.6 8.0 7.0 6.0 8.0 8.0 8.0 8.0 (26 Economies*) index (0-8) Registering Property 36 37 -- -- 43 79 61 47 1 (New Zealand) (Rank) Registering Property 76.80 76.85 76.66 77.02 75.40 65.72 69.79 74.11 94.46 (New Zealand) (DTF Score) Procedures (number) 4.4 4.4 4.0 5.0 6.0 6.0 5.0 6.0 1.0 (4 Economies*) Doing Business 2017 United States 13 United Kingdom DB2017 Best performer globally Hong Kong SAR, China New York City DB2017 United States DB2017 United States DB2016 Los Angeles DB2017 Germany DB2017 Canada DB2017 Indicator DB2017 DB2017 Time (days) 15.2 15.2 12.0 20.0 16.5 52.0 27.5 21.5 1.0 (3 Economies*) Cost (% of property 2.4 2.4 3.5 0.9 3.1 6.7 7.7 4.8 0.0 (Saudi Arabia) value) Quality of the land administration index (0- 17.6 17.6 18.0 17.0 21.5 22.0 23.0 24.0 29.0 (Singapore) 30) Getting Credit (Rank) 2 2 -- -- 7 32 20 20 1 (New Zealand) Getting Credit (DTF 95.00 95.00 95.00 95.00 85.00 70.00 75.00 75.00 100.00 (New Zealand) Score) Strength of legal rights 11.0 11.0 11.0 11.0 9.0 6.0 8.0 7.0 12.0 (3 Economies*) index (0-12) Depth of credit 8.0 8.0 8.0 8.0 8.0 8.0 7.0 8.0 8.0 (30 Economies*) information index (0-8) Credit registry coverage 0.0 0.0 0.0 0.0 0.0 1.9 0.0 0.0 100.0 (3 Economies*) (% of adults) Credit bureau coverage 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 (23 Economies*) (% of adults) Protecting Minority 41 39 -- -- 7 53 3 6 1 (New Zealand*) Investors (Rank) Protecting Minority 64.67 64.67 63.33 66.67 76.67 60.00 80.00 78.33 83.33 (New Zealand*) Investors (DTF Score) Strength of minority investor protection 6.5 6.5 6.3 6.7 7.7 6.0 8.0 7.8 8.3 (New Zealand) index (0-10) Extent of conflict of interest regulation 8.3 8.3 8.3 8.3 8.7 5.0 9.0 8.3 9.3 (New Zealand) index (0-10) Extent of shareholder 4.6 4.6 4.3 5.0 6.7 7.0 7.0 7.3 8.3 (Norway) governance index (0- Doing Business 2017 United States 14 United Kingdom DB2017 Best performer globally Hong Kong SAR, China New York City DB2017 United States DB2017 United States DB2016 Los Angeles DB2017 Germany DB2017 Canada DB2017 Indicator DB2017 DB2017 10) 1 (United Arab Paying Taxes (Rank) 36 34 -- -- 17 48 3 10 Emirates) Paying Taxes (DTF 99.44 (United Arab 83.85 83.89 82.92 85.25 88.86 82.1 98.69 90.74 Score) Emirates) Payments (number per 3.0 (Hong Kong SAR, 10.6 10.6 11.0 10.0 8.0 9.0 3.0 8.0 year) China*) Time (hours per year) 175.0 175.0 175.0 175.0 131.0 218.0 74.0 110.0 55.0 (Luxembourg) Total tax rate (% of 44.0 43.9 46.0 40.9 21.0 48.9 22.9 30.9 26.1 (32 Economies*) profit) Postfiling index (0-100) 93.1 93.1 76.4 97.5 98.6 87.4 98.5 (Estonia) Trading across Borders 35 35 -- -- 46 38 42 28 1 (10 Economies*) (Rank) Trading across Borders 100.00 (10 92.01 92.01 92.01 92.01 88.36 91.77 88.94 93.76 (DTF Score) Economies*) Time to export: Border 2 2 2 2 2 36 19 24 0 (18 Economies*) compliance (hours) Cost to export: Border 175 175 175 175 167 345 282 280 0 (18 Economies*) compliance (USD) Time to export: Documentary 2 2 2 2 1 1 1 4 1 (25 Economies*) compliance (hours) Cost to export: Documentary 60 60 60 60 156 45 57 25 0 (19 Economies*) compliance (USD) Time to import: Border 2 2 2 2 2 0 19 3 0 (25 Economies*) compliance (hours) Doing Business 2017 United States 15 United Kingdom DB2017 Best performer globally Hong Kong SAR, China New York City DB2017 United States DB2017 United States DB2016 Los Angeles DB2017 Germany DB2017 Canada DB2017 Indicator DB2017 DB2017 Cost to import: Border 175 175 175 175 172 0 266 0 0 (28 Economies*) compliance (USD) Time to import: Documentary 8 8 8 8 1 1 1 2 1 (29 Economies*) compliance (hours) Cost to import: Documentary 100 100 100 100 163 0 57 0 0 (30 Economies*) compliance (USD) Enforcing Contracts 20 20 -- -- 112 17 21 31 1 (Korea, Rep.) (Rank) Enforcing Contracts 72.61 72.61 79.06 62.93 54.35 73.17 72.57 69.36 84.15 (Korea, Rep.) (DTF Score) Time (days) 420.0 420.0 370.0 495.0 910.0 499.0 360.0 437.0 164.0 (Singapore) Cost (% of claim) 30.5 30.5 22.9 42.0 22.3 14.4 21.2 43.9 9.0 (Iceland) Quality of judicial 13.8 13.8 15.0 12.0 9.5 12.0 11.0 15.0 15.5 (Australia) processes index (0-18) Resolving Insolvency 5 4 -- -- 15 3 28 13 1 (Finland) (Rank) Resolving Insolvency 89.19 89.20 89.19 89.19 81.43 92.28 75.06 82.04 93.89 (Finland) (DTF Score) Recovery rate (cents on 78.6 78.6 78.6 78.6 87.4 84.4 87.2 88.6 92.9 (Norway) the dollar) Time (years) 1.5 1.5 1.5 1.5 0.8 1.2 0.8 1.0 0.4 (22 Economies*) Cost (% of estate) 10.0 10.0 10.0 10.0 7.0 8.0 5.0 6.0 1.0 (22 Economies*) Strength of insolvency 15.0 15.0 15.0 15.0 11.0 15.0 9.0 11.0 15.0 (6 Economies*) framework index (0-16) Source: Doing Business database. Note: DB2016 rankings shown are not last year’s published rankings but comparable rankings for DB2016 that capture the effects of such factors as data revisions and changes to the methodology. The global best performer on time for paying taxes is defined as the lowest Doing Business 2017 United States 16 time recorded among all economies in the DB2016 sample that levy the 3 major taxes: profit tax, labor taxes and mandatory contributions, and VAT or sales tax. If an economy has no laws or regulations covering a specific area—for example, insolvency—it receives a “no practice” mark. Similarly, an economy receives a “no practice” mark if regulation exists but is never used in practice or if a competing regulation prohibits such practice. Either way, a “no practice” mark puts the economy at the bottom of the ranking on the relevant indicator. * Two or more economies share the top ranking on this indicator. A number shown in place of an economy’s name indicates the number of economies that share the top ranking on the indicator. For a list of these economies, see the Doing Business website (http://www.doingbusiness.org). Doing Business 2017 United States 17 STARTING A BUSINESS Formal registration of companies has many WHAT THE STARTING A BUSINESS immediate benefits for the companies and for business owners and employees. Legal entities can INDICATORS MEASURE outlive their founders. Resources are pooled as several shareholders join forces to start a company. Procedures to legally start and operate a Formally registered companies have access to company (number) services and institutions from courts to banks as well Preregistration (for example, name as to new markets. And their employees can benefit verification or reservation, notarization) from protections provided by the law. An additional benefit comes with limited liability companies. These Registration in the economy’s largest limit the financial liability of company owners to their business city1 investments, so personal assets of the owners are not Postregistration (for example, social security put at risk. Where governments make registration registration, company seal) easy, more entrepreneurs start businesses in the formal sector, creating more good jobs and Obtaining approval from spouse to start a generating more revenue for the government. business, to leave the home to register the company or open a bank account. What do the indicators cover? Obtaining any gender specific document for Doing Business records all procedures officially company registration and operation, national required, or commonly done in practice, for an identification card or opening a bank entrepreneur to start up and formally operate an account. industrial or commercial business, as well as the time and cost to complete these procedures and the paid- Time required to complete each procedure in minimum capital requirement. These procedures (calendar days) include obtaining all necessary licenses and permits Does not include time spent gathering and completing any required notifications, information verifications or inscriptions for the company and employees with relevant authorities. The ranking of Each procedure starts on a separate day (2 economies on the ease of starting a business is procedures cannot start on the same day). determined by sorting their distance to frontier Procedures that can be fully completed scores for starting a business. These scores are the online are recorded as ½ day. simple average of the distance to frontier scores for Procedure completed once final document is each of the component indicators. received To make the data comparable across economies, No prior contact with officials several assumptions about the business and the procedures are used. It is assumed that any required Cost required to complete each procedure information is readily available and that the (% of income per capita) entrepreneur will pay no bribes. Assumptions about Official costs only, no bribes the business: No professional fees unless services required  Is a limited liability company (or its legal by law or commonly used in practice equivalent). If there is more than one type of limited liability company in the economy, the Paid-in minimum capital (% of income limited liability form most common among per capita) domestic firms is chosen. Information on the Deposited in a bank or with a notary before most common form is obtained from registration (or within 3 months) incorporation lawyers or the statistical office.  Operates in the economy’s largest business  The size of the entire office space is city. For 11 economies the data are also approximately 929 square meters (10,000 square collected for the second largest business city. feet).  Is 100% domestically owned and has five Doing Business 2017 United States 18 owners, none of whom is a legal entity  Does not qualify for investment incentives or any special benefits.  Has start-up capital of 10 times income per capita  Has at least 10 and up to 50 employees one month after the commencement of operations, all  Performs general commercial or industrial of them domestic nationals. activities, such as the production or sale to the public of products or services. The business  Has a turnover of at least 100 times income per does not perform foreign trade activities and capita. does not handle products subject to a special  Has a company deed 10 pages long. tax regime, for example, liquor or tobacco. It is not using heavily polluting production The owners: processes.  Have reached the legal age of majority and are  Leases the commercial plant or offices and is capable of making decisions as an adult. If there not a proprietor of real estate. is no legal age of majority, they are assumed to be 30 years old.  The amount of the annual lease for the office space is equivalent to 1 times income per  Are sane, competent, in good health and have no capita criminal record.  Are married, the marriage is monogamous and registered with the authorities.  Where the answer differs according to the legal system applicable to the woman or man in question (as may be the case in economies where there is legal plurality), the answer used will be the one that applies to the majority of the population. Doing Business 2017 United States 19 STARTING A BUSINESS Where does the economy stand today? What does it take to start a business in United States? refer to a case scenario in the largest business city of an According to data collected by Doing Business, starting a economy, except for 11 economies for which the data business there requires 6.0 procedures , takes 5.6 days, are a population-weighted average of the 2 largest costs 1.1% of income per capita for men, and requires business cities. See the chapter on distance to frontier 6.0 procedures , takes 5.6 days, costs 1.1% of income per and ease of doing business ranking at the end of this capita for women. A requirement of paid-in minimum profile for more details. capital of 0.0% of income per capita (figure 2.1) is legally . mandatory for both men and women. Most indicator sets Figure 2.1 What it takes to start a business in United States - New York City Paid-in minimum capital (% of income per capita): 0.0 Doing Business 2017 United States 20 What it takes to start a business in United States - Los Angeles Source: Doing Business database. Note: Time shown in the figure above may not reflect simultaneity of procedures. Online procedures account for 0.5 days in the total time calculation. For more information on the methodology of the starting a business indicators, see the Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter. Procedures in light blue are for married women only. Doing Business 2017 United States 21 STARTING A BUSINESS Globally, United States stands at 51 in the ranking of 190 average ranking provide other useful information for economies on the ease of starting a business (figure 2.2). assessing how easy it is for an entrepreneur in United The rankings for comparator economies and the regional States to start a business. Figure 2.2 How United States and comparator economies rank on the ease of starting a business Source: Doing Business database. Doing Business 2017 United States 22 STARTING A BUSINESS Economies around the world have taken steps making it they often are part of a larger regulatory reform easier to start a business—streamlining procedures by program. Among the benefits have been greater firm setting up a one-stop shop, making procedures simpler satisfaction and savings and more registered businesses, or faster by introducing technology and reducing or financial resources and job opportunities. eliminating minimum capital requirements. Many have What business registration reforms has Doing Business undertaken business registration reforms in stages—and recorded in United States (table 2.1)? Table 2.1 How has United States made starting a business easier—or not? By Doing Business report year from DB2011 to DB2017 DB year Reform In the United States starting a business became easier in New DB2015 York City thanks to faster online procedures. Source: Doing Business database. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Doing Business 2017 United States 23 STARTING A BUSINESS What are the details? Underlying the indicators shown in this chapter for STANDARDIZED COMPANY United States is a set of specific procedures—the bureaucratic and legal steps that an entrepreneur must complete to incorporate and register a new Legal form: NY Limited Liability Company firm. These are identified by Doing Business through collaboration with relevant local professionals and Paid-in minimum capital requirement: USD 0 the study of laws, regulations and publicly available City: New York City, Los Angeles information on business entry in that economy. Following is a detailed summary of those procedures, Start-up Capital: 10 times GNI per capita along with the associated time and cost. These procedures are those that apply to a company matching the standard assumptions (the “standardized company”) used by Doing Business in collecting the data (see the section in this chapter on what the indicators measure). Table 2.2 Summary of time, cost and procedures for starting a business in United States - New York City Time to No. Procedure Cost to complete complete Reserve the company's business name (optional), file the company's articles of organization and adopt the company's operating agreement The company founders may reserve the name of the company with the New York State Department of State Division of Corporations prior to filing the company's articles of organization. To reserve a name, the founders should file an application for Reservation of Name and pay a fee of USD 20. The name reservation can be done online at the following: http://www.dos.ny.gov/corps/llccorp.html . The application holds the name for 60 days and may be extended twice for additional periods of 60 days. The fee to extend the reservation of name is also USD 20. The company name must contain the words "Limited Liability Company," "L.L.C.," or "LLC." USD 275 (USD 200 Less than one day filing fee, USD 75 1 The founders must file the company's articles of organization with the (online procedure) expedited service New York Department of State Division of Corporations. Forms can be fee) purchased at a legal supply store or downloaded from the department’s website. The application processing time is about seven business days. However, optional expedited processing is available according to the following fee schedule: - 2-hour turnaround: USD 150 (additional fee) - Same-day service: USD 75 (additional fee) - 24-hour turnaround: USD 25 (additional fee) New York State requires an LLC to have a written operating agreement but such agreement does not have to be filed with the state. The business members may enter into an operating agreement before, at the time of, or within 90 days after the filing of the articles of organization. Regardless of when such an agreement was entered into, Doing Business 2017 United States 24 Time to No. Procedure Cost to complete complete it may be effective upon the formation of the LLC or at a later date specified in the operating agreement (provided, however, that under no circumstances shall an operating agreement become effective prior to the formation of such company). Agency: New York State Department of State, Division of Corporations Apply for federal identification number (EIN) for tax and employer purposes The company needs to apply for a federal Employer Identification Number ("EIN"), which is used for tax and employer purposes. Founders must file IRS Form SS-4 (available from the US Internal Revenue Service). It is possible to apply online at http://www.irs.gov/Businesses/Small- Less than one day 2 no charge Businesses-&-Self-Employed/Employer-ID-Numbers-EINs (processing (online procedure) time: immediate), by telephone (processing time: immediate), by fax (processing time: 4 business days), or by mail (processing time: 4 weeks). If applicants apply online, they do not need fill out IRS Form SS- 4. Agency: US Internal Revenue Service Register to collect state sales tax Businesses that "sell taxable tangible personal property, perform taxable services, receive amusement charges, or operate a hotel or motel, and restaurants, taverns, or other establishments that sell food and drink" must register as a sales tax vendor and obtain a Certificate of Authority, as well as those businesses that buy and sell for resale (for example, a wholesale distributor). See the Department of Taxation and Finance's Official Publication 750, "A Guide to Sales Tax in New York State." Less than one day 3 no charge (online procedure) To register, the founders must file Form DTF-17 or register online at the website of the New York State Department of Taxation and Finance (http://www.tax.ny.gov/). After the company has registered, it generally must file quarterly sales and use tax returns regardless of whether it has started or done any business. Agency: New York State Department of Taxation and Finance Register as an employer with the Unemployment Insurance Division at the State Labor Department Less than one day 4 no charge Founders must register as an employer by completing Form NYS-100 to (online procedure) determine whether or not the company is liable under the New York State Unemployment Insurance Law. If the company is determined Doing Business 2017 United States 25 Time to No. Procedure Cost to complete complete liable, the Department of Labor will send the company quarterly combined withholding, wage reporting and unemployment insurance returns for reporting wages paid to the company's employees. General business employers may register online at the New York State Department of Labor website (https://applications.labor.ny.gov/eRegWeb/registerEmployer/uiEPMWe lcomeMain.faces) or by completing Form NYS-100 and submitting it by mail or fax. Agency: New York State Department of Labor Arrange for workers' compensation and disability insurance As New York employers, the LLC founders must obtain and maintain workers’ compensation insurance and disability insurance for its employees by purchasing a workers’ compensation insurance policy and a disability benefits insurance policy from an authorized private insurance carrier or through the NYS Insurance Fund (or by self- insurance for workers' compensation). The company’s federal Employer Identification Number (""EIN"") is the 5 company’s primary identification with respect to communications with 1 day no charge the Workers’ Compensation Board or by becoming a member of a group self-insurer authorized by the board. The company must give its EIN to its insurance carrier when obtaining or maintaining its workers’ compensation or disability coverage. Workers’ compensation insurance floor is calculated using each employee’s risk classification, salary, and total payroll. Agency: New York State Workers' Compensation Board Arrange for publication and submit certificate and affidavits of publication Section 206 of the New York State Limited Liability Company Law requires that within 120 days (after the effectiveness of the initial articles of organization), a limited liability company (LLC) must publish in two newspapers a copy of the Articles of Organization or a notice related to the formation of the LLC once a week for six successive weeks. The newspapers must be designated by the county clerk of the county in which the office of the LLC is located, as stated in the Articles 1 day USD 475 6 of Organization. The State of New York website has a directory of all New York county websites (http://www.nysegov.com/citguide.cfm?context=citguide&content=mu nibycounty1), which entrepreneurs can use as a reference to find their relevant county for publishing. The cost of notice of publication varies by county. After publication, the printer or publisher of each newspaper will Doing Business 2017 United States 26 Time to No. Procedure Cost to complete complete provide the entrepreneur with a Certificate of Publication, with the affidavits of publication of the newspapers attached. It must be submitted to the New York Department of State, Division of Corporations, One Commerce Plaza, 99 Washington Avenue, Albany, NY 12231. The fee for filing the Certificate of Publication is USD 50. Agency: New York State Department of State, Division of Corporations * Takes place simultaneously with another procedure. Source: Doing Business database. Note: Online procedures account for 0.5 days in the total time calculation. Procedures in light blue are for married women only. Summary of time, cost and procedures for starting a business in United States - Los Angeles Time to No. Procedure Cost to complete complete Reserve the company name and file the Articles of Organization Organization of the company (i.e., company registration) has to be done in person at the Office of the Secretary of State of California located in Sacramento or can be mailed to the Office of the Secretary of State of California. The formation date is the date in which the document is received and accepted by the Secretary of State. The company may hire a “messenger” located in Sacramento to file on its behalf so that founders do not have to personally go to the Secretary of State office. The fee for hiring a messenger would be USD 20 in addition to the official company organization fees. The name of the limited liability company may not contain the words "bank," "trust," "trustee," "incorporated," "inc.," "corporation," or "corp.," and the name must not contain the words "insurer" or "insurance USD 70 (official fee company" or any other words suggesting that it is in the business of for organization of issuing policies of insurance and assuming insurance risks. 2 days (with 24- an LLC) + USD 10 1 hour rush filing) (name reservation Pursuant to Section 17702.01, Articles of Organization shall contain the fee) + USD 350 (24- below statement: hour rush fee) THE PURPOSE OF THE LIMITED LIABILITY COMPANY IS TO ENGAGE IN ANY LAWFUL ACT OR ACTIVITY FOR WHICH A LIMITED LIABILITY COMPANY MAY BE ORGANIZED UNDER THE CALIFORNIA REVISED UNIFORM LIMITED LIABILITY COMPANY ACT. The special handling fee or preclearance and expedited filing services are not applicable to documents submitted by mail. In addition to the time-frames specified in the previous year report, the Secretary of State offers a 4-hour expedited filing service for additional $500.00 to those who precleared their documents, i.e. submitted their documents for review in advance and paid special fee. Agency: California Secretary of State Doing Business 2017 United States 27 Time to No. Procedure Cost to complete complete Apply for a Federal Employer Identification Number (EIN) The company needs to apply for the federal employer identification number (""EIN""), used for tax and employer purposes, founders must file IRS Form SS-4 (available from the US Internal Revenue Service). Less than one day 2 It is possible to apply online (processing time: immediate), by telephone no charge (online procedure) (processing time: immediate), by fax (processing time: 4 business days) or by mail (processing time: 4 weeks). Agency: US Internal Revenue Service Register for California State Sales Tax and Obtain Seller’s Permit from the California Board of Equalization Businesses that are either: (i) engaged in business in California; (ii) intend to sell or lease tangible personal property that would ordinarily be subject to sales tax if sold at retail (this includes wholesalers, manufactures and retailers.); or (iii) will make sales for a temporary period, normally lasting no longer than 90 days at one or more locations (for example, fireworks booth, Christmas tree lots, garage sale) must register for a seller’s permit with Less than one day 3 no charge Board of Equalization (""BOE"") . (online procedure) A company may register online at the BOE website or in person at one of the BOE field offices. After the company has registered, the BOE assigns a filing frequency (quarterly prepay, quarterly, monthly, fiscal yearly, yearly) based on your reported sales tax or your anticipated taxable sales at the time of registration. Agency: Board of Equalization Register for taxes with the City of Los Angeles and Obtain the Tax Registration Certificate (TRC) Pursuant to Section 21.03 of the Los Angeles Municipal Code (Imposition of Tax), every person engaged in any trade, calling, occupation, vocation, profession or other means of livelihood in the City of Los Angeles, must obtain a Tax Registration Certificate (TRC) and pay the required business tax due, specified in Sections 21.41 to 21.199 of the Business Tax Ordinance. The Office of Finance of the City of Los Less than one day 4 no charge Angeles is responsible for the collection of business taxes. The amount (online procedure) of business tax due is based on the company’s gross receipts generated during the previous reporting period, subject to applicable reductions under City Clerk Rulings. After submitting the online application, a temporary business tax registration certificate will be issued for the company to print and display at its place of business (please see below a sample TRC certificate for a Professional Corporation, similar to that of a Limited Doing Business 2017 United States 28 Time to No. Procedure Cost to complete complete Liability Company as an example). A permanent certificate will be sent via mail and should arrive within 4 weeks from completing the online registration. Inspectors may sometimes pass by the business premises to make sure that this certificate is properly displayed and that the taxpayer company has fulfilled all of its tax duties. Agency: City of Los Angeles Office of Finance Register for the California State Employer Payroll Tax Account Number All employers conducting business in California are subject to the employment tax laws of the California Unemployment Insurance Code (CUIC). Pursuant to Section 1086 of the California Unemployment Insurance Code, every employer in California must register for employer tax payroll number. Once a business hires an employee, the business is Less than one day 5 considered an employer and must register with the Employment no charge (online procedure) Development Department (EDD) within 15 days after paying wages in excess of $100 in a quarter. No distinction is made between full-time and part-time or permanent and temporary employees in meeting this requirement. Agency: Employment Development Department File a Statement of Information with the California Secretary of State Pursuant to Article 2 (Formation: Articles of Organization and Other Filings [17702.09]) of the California Revised Uniform Limited Liability Company Act (RULLCA), every registered limited liability company must file a Statement of Information with the Secretary of State in Sacramento within 90 days after filing of its original Articles of 6 Organization. In addition, a Statement of Information must be filed 4 days USD 20 every 2 years thereafter during the applicable filing period. The Statement of Information is to be filed on form LLC-12 by mailing the form to the Secretary of State with a USD 20 filing fee. It can also be delivered in person to the Secretary of State's Sacramento office. Agency: California Secretary of State * Takes place simultaneously with another procedure. Source: Doing Business database. Note: Online procedures account for 0.5 days in the total time calculation. Procedures in light blue are for married women only. Doing Business 2017 United States 29 DEALING WITH CONSTRUCTION PERMITS Regulation of construction is critical to protect the WHAT THE DEALING WITH CONSTRUCTION public. But it needs to be efficient, to avoid excessive PERMITS INDICATORS MEASURE constraints on a sector that plays an important part in every economy. Where complying with building regulations is excessively costly in time and money, Procedures to legally build a warehouse many builders opt out. They may pay bribes to pass (number) inspections or simply build illegally, leading to Submitting all relevant documents and hazardous construction that puts public safety at risk. obtaining all necessary clearances, licenses, Where compliance is simple, straightforward and permits and certificates inexpensive, everyone is better off. Submitting all required notifications and What do the indicators cover? receiving all necessary inspections Doing Business records all procedures required for a Obtaining utility connections for water and business in the construction industry to build a sewerage warehouse along with the time and cost to complete Registering and selling the warehouse after its each procedure. In addition, this year Doing Business completion introduces a new measure, the building quality Time required to complete each procedure control index, evaluating the quality of building (calendar days) regulations, the strength of quality control and safety mechanisms, liability and insurance regimes, and Does not include time spent gathering professional certification requirements. information The ranking of economies on the ease of dealing with Each procedure starts on a separate day. Procedures that can be fully completed online construction permits is determined by sorting their are recorded as ½ day distance to frontier scores for dealing with construction permits. These scores are the simple Procedure considered completed once final average of the distance to frontier scores for each of document is received the component indicators. No prior contact with officials To make the data comparable across economies, Cost required to complete each procedure (% several assumptions about the construction of warehouse value) company, the warehouse project and the utility Official costs only, no bribes connections are used. Building quality control index (0-15) Assumptions about the construction company Sum of the scores of six component indices: The construction company (BuildCo): Quality of building regulations (0-2)  Is a limited liability company (or its legal equivalent). Quality control before construction (0-1)  Operates in the economy’s largest business city. Quality control during construction (0-3) For 11 economies the data are also collected for Quality control after construction (0-3) the second largest business city.  Is 100% domestically and privately owned. Liability and insurance regimes (0-2)  Has five owners, none of whom is a legal entity. Professional certifications (0-4)  Is fully licensed and insured to carry out construction projects, such as building warehouses. The construction company (BuildCo) (continued):  Has 60 builders and other employees, all of them nationals with the technical expertise and Doing Business 2017 United States 30 professional experience necessary to obtain  Will be a new construction (there was no previous construction permits and approvals. construction on the land), with no trees, natural  Has is a licensed architect and a licensed water sources, natural reserves or historical engineer, both registered with the local monuments of any kind on the plot. association of architects or engineers. BuildCo is  Will have complete architectural and technical plans not assumed to have any other employees who prepared by a licensed architect. If preparation of are technical or licensed experts, such as the plans requires such steps as obtaining further geological or topographical experts. documentation or getting prior approvals from  Has paid all taxes and taken out all necessary external agencies, these are counted as procedures. insurance applicable to its general business  Will include all technical equipment required to be activity (for example, accidental insurance for fully operational. construction workers and third-person liability).  Will take 30 weeks to construct (excluding all delays  Owns the land on which the warehouse will be due to administrative and regulatory requirements). built and will sell the warehouse upon its completion. Assumptions about the utility connections  Is valued at 50 times income per capita. The water and sewerage connections:  Will be 150 meters (492 feet) from the existing Assumptions about the warehouse water source and sewer tap. If there is no water delivery infrastructure in the economy, a borehole The warehouse: will be dug. If there is no sewerage infrastructure, a  Will be used for general storage activities, septic tank in the smallest size available will be such as storage of books or stationery. The installed or built. warehouse will not be used for any goods  Will not require water for fire protection reasons; a requiring special conditions, such as food, fire extinguishing system (dry system) will be used chemicals or pharmaceuticals. instead. If a wet fire protection system is required  Will have two stories, both above ground, by law, it is assumed that the water demand with a total constructed area of specified below also covers the water needed for approximately 1,300.6 square meters (14,000 fire protection. square feet). Each floor will be 3 meters (9  Will have an average water use of 662 liters (175 feet, 10 inches) high. gallons) a day and an average wastewater flow of  Will have road access and be located in the 568 liters (150 gallons) a day. Will have a peak periurban area of the economy’s largest water use of 1,325 liters (350 gallons) a day and a business city (that is, on the fringes of the peak wastewater flow of 1,136 liters (300 gallons) a city but still within its official limits). For 11 day. economies the data are also collected for the  Will have a constant level of water demand and second largest business city. wastewater flow throughout the year.  Will not be located in a special economic or  Will be 1 inch in diameter for the water connection industrial zone. Will be located on a land plot and 4 inches in diameter for the sewerage of approximately 929 square meters (10,000 connection. square feet) that is 100% owned by BuildCo and is accurately registered in the cadastre and land registry. Doing Business 2017 United States 31 DEALING WITH CONSTRUCTION PERMITS Where does the economy stand today? What does it take to comply with the formalities to build business city of an economy, except for 11 economies for a warehouse in United States? According to data which the data are a population-weighted average of the collected by Doing Business, dealing with construction 2 largest business cities. See the chapter on distance to permits there requires 15.8 procedures, takes 80.6 days frontier and ease of doing business ranking at the end of and costs 1.0% of the warehouse value (figure 3.1). this profile for more details. Most indicator sets refer to a case scenario in the largest Figure 3.1 What it takes to comply with formalities to build a warehouse in United States - New York City Doing Business 2017 United States 32 What it takes to comply with formalities to build a warehouse in United States - Los Angeles Source: Doing Business database. Note: Time shown in the figure above may not reflect simultaneity of procedures. Online procedures account for 0.5 days in the total time calculation. For more information on the methodology of the dealing with construction permits indicators, see the Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter. Doing Business 2017 United States 33 dealing with construction permits Globally, United States stands at 39 in the ranking of 190 other useful information for assessing how easy it is for economies on the ease of dealing with construction an entrepreneur in United States to legally build a permits (figure 3.2). The rankings for comparator warehouse. economies and the regional average ranking provide Figure 3.2 How United States and comparator economies rank on the ease of dealing with construction permits Source: Doing Business database. Doing Business 2017 United States 34 DEALING WITH CONSTRUCTION PERMITS What are the details? The indicators reported here for United States are BUILDING A WAREHOUSE based on a set of specific procedures—the steps that a company must complete to legally build a warehouse—identified by Doing Business through Estimated value of information collected from experts in construction 2821855.2 warehouse : licensing, including architects, civil engineers, construction lawyers, construction firms, utility New York City, Los service providers and public officials who deal with City : Angeles building regulations. These procedures are those that apply to a company and structure matching the standard assumptions used by Doing Business in The procedures, along with the associated time and cost, collecting the data (see the section in this chapter on are summarized below. what the indicators cover). Table 3.2 Summary of time, cost and procedures for dealing with construction permits in United States - New York City Time to No. Procedure Cost to complete complete Submit the new Zoning Diagram (ZD1), PW1, Schedule A, Form TR2 & TR3 and obtain approval BuildCo must submit the Zoning Diagram (ZD1), PW1 and Schedule A. PW1 Plan/Work Approval Application must include information about the project such as a description, intended location, etc. However, separate PW1 applications must be filed for: 1. General construction 2. Sprinkler protection 3. Fire alarm 4. Standpipe System 5. Boiler 1 6. Plumbing 30 days USD 2,040 7. Pavement 8. Foundation and earth work 9. Electrical 10. Elevator/lift (to comply with law on disability) For Forms TR2 and TR3, the director of the licensed concrete laboratory must provide his/her name, sign and date the report, and place his/her seal in the space provided identifying responsibility of conducting the testing in accordance with Building Code 1905.6 and Building Code 1704.1. Agency: New York City Department of Buildings (DOB) Request and obtain plan approval from the New York City Department of Buildings (DOB) 2 21 days USD 3,640 The applicant must be either a Registered Architect (RA) or a Professional Engineer (PE) to submit the plans. The Department of Buildings (DOB) reviews construction plans to ensure that they Doing Business 2017 United States 35 Time to No. Procedure Cost to complete complete comply with the Building Code and meet current safety standards and zoning requirements. Once plans are approved, a contractor or contractor’s representative may apply for a construction work permit. Simple projects, as in the case of BuildCo, can opt for a fast-track service offered by the New York City Department of Buildings (DOB), called the Professional Certification Program. The program, introduced in 1996, enables registered architects and professional engineers to certify, through an affidavit signed by the owner, contractor, and all responsible professionals (architects, engineers, plumbers, and the like) that the plans they file with the department are in compliance with all applicable laws. This reduces the amount of time a builder normally would wait for a DOB permit by eliminating the process of DOB examination and approval of the plans. The professional certification must be submitted at the time of pre-filing and in advance. A professionally certified application goes through the same pre-filing, payment, and data entry process as normal applications: • Information on the availability of a public sewer system • If a private sewage treatment plant is proposed, evidence of submission of plans for approval of such a plant to the department of environmental protection and the department of health as required by law • The lot diagram showing compliance with the zoning resolution • The foundation plans • The floor and roof plans showing compliance with exit requirements • The detailed architectural, structural, and mechanical drawings • General description of the proposed work After analyzing the plans (assuming that all required documents are present), the DOB approves the application at the end of data entry. A professionally certified application does not go through plan examination. The applicant can check the application status by using the Buildings Information System and, upon approval, can retrieve the application folder from the DOB to apply for a permit. Twenty percent of all professionally certified applications are selected for audit within 10 days of first permit issuance. The audits for new projects may take place within 30 days after the application is issued. The overall time of application clearance is 5 days on average. According to the 2008 Building Code No. 26-212, the fee for the new building permit is USD 0.26 per square foot. The plumbing permit and foundation fee are calculated inside the above flat rate. The Building Code says that "fifty percent of the total fee for the work permit, but not less than one hundred dollars, or the total Doing Business 2017 United States 36 Time to No. Procedure Cost to complete complete fee for the work permit where such fee is less than one hundred dollars, shall be paid by or on behalf of the owner or lessee of the building premises or property affected, and shall accompany the first application for the approval of plans or other statement describing the building work when submitted prior to submission of the permit application; and the whole or remainder of the total fee shall be paid before the work permit may be issued.” Still, most companies of BuildCo’s size would opt to pay the amount upfront, not in two separate transactions. Only for large projects is dividing the amount widespread. Starting in 2011, the NYC Department of Buildings began accepting digital plans for new buildings. While our contributors have noted that the processing time isn't any faster in practice than submitting in person, it does allow the applicant more project control and improved accessibility to the plan examiner and inter-agency communications, as well as online tracking of application progress. Agency: New York City Department of Buildings (DOB) Submit application and receive Sewer Availability Certification Sewer certification application must be submitted by a New York State licensed Professional Engineer (PE) or Registered Architect (RA). Applicant submits 6 copies of the application form, signed and sealed by RA/PE, with signed cover letter, fees, attachments and completed checklist to DEP. DEP reviews the application to *3 ensure it is accurate, complete and compliant with applicable 21 days no charge DEP rules and regulations. DEP then issues Sewer Certification (valid for 2 years). Once the application is certified, the applicant is notified that it may be picked up from the DEP Borough Water and Sewer Office or it may be mailed upon request. Agency: Department of Environmental Protection (DEP) Master Plumber applies for and receives Sewer Connection Permit The Licensed Master Plumber must apply for a Sewer Connection Permit prior to obtaining the work permit. DEP Bureau of Water and Sewer reviews the permit application for accuracy and completion. Licensed Master Plumber brings stamped DEP 4 permit along with permit fees to to DEP Bureau of Customer 21 days USD 2,155 Service local office. Once the permit is approved, the Master Plumber can connect to water and sewage at any point during or after construction. Agency: Department of Environmental Protection (DEP) Doing Business 2017 United States 37 Time to No. Procedure Cost to complete complete Notarize signatures of contractor and site safety manager on work permit application form, PW2 form and cost affidavit form (PW3 form) The site safety manager must be an employee of BuildCo and possess a valid site safety manager certificate. The cost affidavit 1 day USD 12 5 must be filed to certify estimated and actual costs, in order to obtain a work permit. Agency: Notary Obtain work permit from the Department of Buildings (DOB) After obtaining the Building permit, the company must request a work permit. The request should be accompanied by a copy of the current insurance policy of workers’ compensation insurance. This procedure must be done by the contractor even if they are not the owner of the land. Different types of work require separate licenses. However, in one application, more than one permit can be requested. For instance, plumbing and construction work permits can be requested in the same application. 1 day no charge 6 For a warehouse, BuildCo must request a new building permit, a plumbing permit, and a foundation and earthwork permit. The request must include the detailed architectural, structural, and mechanical plans. One to two days prior to construction works, the company must notify the DOB by phone. Agency: Department of Buildings (DOB) Submit notice to Department of Buildings on commencement of foundation and earthwork The foundation and earthwork permit shall be issued on the condition that the applicant provides a written notice to the Department of Buildings at least 24 hours, but no more than 48 1 day no charge 7 hours prior to the commencement of the foundation or earthwork. Agency: New York City Department of Buildings (DOB) Notify all the owners of adjacent plots about the works Notification of adjacent owners, done 5 days prior to excavations for new building foundations, is necessary for obtaining the *8 foundation and earthwork permit. 1 day no charge Agency: Owners of adjacent plots Doing Business 2017 United States 38 Time to No. Procedure Cost to complete complete Request and obtain work permit from the Department of Transportation A Construction Activity Permit fee costs USD 50.00, and is valid for 90 days unless otherwise stated. Once the 90 days expire, the company buys another work permit for the remaining period of construction. Upon applying, the company gets an account number, and the next day obtains the work permit. Unless otherwise authorized, permits shall be kept at the work 9 site or designated field headquarters at all times and shall be 2 days USD 50 made available for inspection upon request of any police officer or any authorized employee of the Departments of Environmental Protection, Buildings, Police, and Transportation, or any other city employees specifically authorized by the Commissioner to enforce these rules. Agency: Department of Transportation Receive on-site inspection by the Department of Transportation (DOT) and obtain approval Approval from the Department of Transportation is granted after * 10 inspection. 1 day USD 320 Agency: Department of Transportation Request occupancy certificate from the Department of Buildings (DOB) Upon completion of construction, the company must arrange for DOB inspections. For construction and plumbing, the company should contact the borough office where property is located. After completion of satisfactory inspections and submission of the required fillings (including inspections reports), DOB issues a new certificate of occupancy that describes the legal use and occupancy of a property. Each application must be accompanied by an accurate and 1 day no charge 11 complete lot survey made by a licensed surveyor. If the certificate of occupancy application is not signed by a professional engineer or registered architect, the form must be notarized by an official notary public. To obtain the certificate of occupancy, the company must obtain the work permit/approval from the Bureau of Electrical Control, the Department of Environmental Protection, and the Department of Transportation. If these approvals have not yet been granted at the time of applying for the certificate of occupancy, a temporary certificate can be issued. The company then has a year to obtain all the necessary approvals. Doing Business 2017 United States 39 Time to No. Procedure Cost to complete complete If the building does not comply with all the plans and the New York City building code, the company must make the necessary changes. Then the Department of Buildings inspects the warehouse again. This process is repeated until the building complies with all the rules. It is common to have 2 -- 3 inspections of this sort. Once the building passes the inspection, the issuance of the certificate of occupancy is immediate. Agency: Department of Buildings (DOB) Receive final inspection by the Department of Buildings (DOB) The inspection takes place after all inspections (electricity, water * 12 and sewerage, and transport) have taken place. 1 day no charge Agency: Department of Buildings (DOB) Obtain occupancy certificate from the Department of Buildings (DOB) 13 8 days USD 100 Agency: Department of Buildings (DOB) Receive final inspection by the Department of Environmental Protection (DEP) and obtain approval Approval from the Department of Environmental Protection is * 14 granted after inspection. 1 day no charge Agency: Department of Environmental Protection (DEP) Receive sewer connection inspection and obtain Certificate of Inspection The licensed master plumber will notify DEP when sewer connection is ready for inspection. The trench must be open for any un-inspected length and all work on pipes, joints etc must be visible. The connection inspection must be scheduled at least 24 hours in advance. DEP will issue Certificate of Inspection after 1 day no charge * 15 all works are in compliance with the sewer certification. The original Certificate of Inspection is stored with the DEP Burough Water and Sewer Office and a copy is sent to the plumber and DOB. Agency: Department of Environmental Protection (DEP) * Takes place simultaneously with another procedure. Doing Business 2017 United States 40 Source: Doing Business database. Note: Online procedures account for 0.5 days in the total time calculation. Summary of time, cost and procedures for dealing with construction permits in United States - Los Angeles Time to No. Procedure Cost to complete complete Receive building plan check and permit Building plans are screened for completeness and accuracy. An option to expedite the plan check is available for an expedite fee of 50% of the plan check fee. Plans that are expedited are usually handled in 5 calendar days, as expedited plans can include weekend work, instead of the normal 3-4 week waiting period. Smaller projects such as tenant improvements and small offices may receive a counter plan check that takes only 45-60 minutes. Building plans must be submitted to the Department of Building and Safety, including: • Description of the work to be covered by the permit. • Description of the land on which the proposed work is to be done, and the street address. • Description of the use for which the proposed work is intended. • Two sets of site plans, including all boundaries, lot lines, existing and proposed buildings and structures, neighboring public ways, and dimensions. • Valuation of any new building. • Be signed by the permittee, or an authorized agent. • Give such other data and information as may be required by the Superintendent of Building. Building plan checks include electrical, mechanical, disabled access and 1 structural plan checks. Grading plan checks may also be required if the 15 days USD 48,646 location is in a hillside area. Mechanical plan checks may also be required when there are HVAC systems or elevators required. HVAC systems may be required if the building is in the desert areas, but would not be required in the beach or basin areas. BuildCo's warehouse is also not likely to require an elevator, according to the CBC Title 42 Chapter 11B, because it is fewer than three stories, and "a reasonable portion of [the] facilities and accommodations normally sought by the public... are accessible to and usable by persons with disabilities." Costs include: - For the plan check, a total of $22,782.75 including: • Plan check fee: $9,699 (90% of the building permit fee) but if expedited this amounts to $14,548.53 (additional 50% of the plan check fee for expedited services) • Planning fee: $1,610.34 • One stop surcharge: $290.97 • System development surcharge: $872.91 • Arts development surcharge: $5,460.00 ($0.39 / sq. ft. and it is only applicable to commercial projects valued at $500,000 or more) - For the building permit, total of $25,863.45 including: • Permit fee: $10,776.69 • Fire hydrant fee: $5,526.82 • Plan maintenance fee: $215.53 • EQ instrumentation fee: $531.38 • Planning fee: $1,209.14 Doing Business 2017 United States 41 Time to No. Procedure Cost to complete complete • One stop surcharge: $230.47 • System development surcharge: $691.42 • State green building surcharge: $102.00 • School district fee: $6,580.00 (applicable to projects with a total area of 500 square feet or more) Agency: Department of Building and Safety (LADBS) Receive plumbing plan check and permit The cost includes the following: - For the plumbing plan check, a total of $179.63 including: • Plan check fee of $110.88 (70% of the plumbing permit fee) but if expedited this amounts to $166.32 (additional 50% of the permit fee for expedited services) • One stop surcharge: $3.33 • System development surcharge: $9.98 *2 - For the plumbing permit, a total of $195.91 including: 1 day USD 376 • Expedited permit includes: 1 sink/lavatory ($23.00), 1 water service connection ($64.00), one water using device (sub-pump) ($17.00), 1 public sewer connection ($40.00) • Permit issuance fee: $23 • One stop surcharge: $3.63 • System development surcharge: $10.88 Agency: Department of Building and Safety (LADBS) Bonded plumber applies for and receives sewer connection permit. A sewer permit is required for all new connections to sewers. This is an over-the-counter permit and can be issued in as little as 30 minutes. In order to issue an S-Permit, BuildCo must identify the address of the property and work. This will be verified by the Bureau of Engineering (BOE) staff, and they will confirm the availability of the main line sewer. Furthermore, the BOE District Office where the project is located must be identified, in case the District Engineer’s input is required. *3 1 day USD 715 Only a bonded plumber can apply for this permit. The Doing Business methodology assumes that BuildCo has a registered plumber on staff. The cost includes: • $265 flat fee • 2% one-stop surcharge • 7% equipment and training surcharge • $2.84 per linear foot of sewer connection for the inspection Agency: Los Angeles Department of Sanitation Doing Business 2017 United States 42 Time to No. Procedure Cost to complete complete File a Service Advisory Request (SAR) and receive the maximum flow requirements report A Service Advisory Request (SAR) must be filed with the Los Angeles Department of Power and Water. Information required: • Address of proposed service installation or legal description of property • Proposed service location (distance from property line or distance to centerline of nearest cross street) • Flow requirements (gallons per minute [gpm]) or size, and type of service desired (fire, domestic, irrigation) *4 A customized hydraulic analysis of existing LADWP facilities serving 10 days USD 210 your location is made. The analysis is based on your service location and your maximum flow requirements. The time required to analyze and process your SAR report generally ranges from a few days to two weeks depending on the volume of requests and the complexity of the analysis. At this time, the average turnaround time is approximately 10 days. The SAR report will be mailed and/or faxed to you at your request. A copy of the completed report is sent to the DBS so that you may obtain your fire sprinkler permit. Agency: Los Angeles Department of Water and Power Receive fire sprinkler plan check and permit The cost details include the following: - For the sprinkler plan check, a total of $620.30 including: • Plan check fee: $382.90 but if expedited this amounts to $574.35 (50% additional fee for expedited services) • One stop surcharge: $11.49 • System development surcharge: $34.46 5 - For the sprinkler permit, a total of $760.32 including: 1 day USD 1,381 • Expedited permit: 180 sprinkler heads (about 90 per floor) ($547.00) and 2 standpipe flush risers (1 per floor) ($134.00) • Permit issuance fee: $23 • One stop surcharge: $14.08 • System development surcharge: $42.24 Agency: Department of Building and Safety (LADBS) Doing Business 2017 United States 43 Time to No. Procedure Cost to complete complete Request and receive foundation inspection This inspection occurs when the excavation for footings is complete and footing forms and required reinforcing steel are in place, but before any concrete is placed. 6 1 day no charge The request can be made online. The cost of inspection is included in the cost of the permit. Agency: Department of Building and Safety (LADBS) Request and receive inspection of wood framing This inspection occurs when all roof, walls and floor framing, fire stopping and bracing are complete and all pipes are in place, but before any of this work is covered. 7 1 day no charge The request can be made online. The cost of inspection is included in the cost of the permit. Agency: Department of Building and Safety (LADBS) Request and receive inspection of wall covering This inspection takes place when the backing and lath or drywall are in place ready for plaster, stucco or taping. 8 The request can be made online. The cost of inspection is included in 1 day no charge the cost of the permit. Agency: Department of Building and Safety (LADBS) Request and receive inspection of reinforced concrete This inspection takes place when forms and reinforcing steel are in place ready for concrete. 9 The request can be made online. The cost of inspection is included in 1 day no charge the cost of the permit. Agency: Department of Building and Safety (LADBS) Request and receive inspection of reinforced masonry This inspection takes place in grouted masonry when vertical reinforcing steel is in place and other reinforcing steel distributed and ready for placing, but before any units are laid up. 1 day no charge 10 The request can be made online. The cost of inspection is included in the cost of the permit. Agency: Department of Building and Safety (LADBS) Doing Business 2017 United States 44 Time to No. Procedure Cost to complete complete Request and receive inspection of structural steel This inspection takes place when structural steel members are in place and required connections are complete, but before concealing any members or connection. 11 1 day no charge The request can be made online. The cost of inspection is included in the cost of the permit. Agency: Department of Building and Safety (LADBS) Request and receive final interior plumbing inspection The plumbing inspection must be completed before water may be turned on. This inspection would include inspection of the installed sub-meter. The request can be made online. The cost of the plumbing inspection is included in the cost of the plumbing permit. 1 day no charge 12 Note: There may also be one or two rough inspections of the installation of the plumbing during the construction, but the main control check takes place during the final inspection Agency: Department of Building and Safety (LADBS) Request and receive water connection The sub-meter purchased from the LADWP can be installed by a licensed plumber. After installation, LADWP will turn on the meter for usage. 13 42 days USD 3,584 Agency: Los Angeles Department of Water and Power Request and receive final sewer inspection The sewer connection is made by a bonded plumber, which BuildCo is assumed to have on staff. Upon completion of the sewer connection * 14 work, the inspector will perform a final inspection. If the work is done 1 day no charge correctly, the inspector will sign off on the permit, and a copy of the permit with the inspector's signature will be sent electronically to the Bureau of Engineering. If the work is part of a Department of Building and Safety (DBS) permit and all other conditions are cleared, the Department of Public Works will agree to the issuance of a Certificate Doing Business 2017 United States 45 Time to No. Procedure Cost to complete complete of Occupancy by LADBS. The cost of the final inspection is included in the cost of the sewer permit. Agency: Bureau of Contract Administration Request and receive final fire sprinkler inspection This inspection takes place to ensure full functionality of fire sprinklers after everything is completed. 15 The request can be made online. The cost of the fire inspection is 1 day no charge included in the cost of the fire sprinkler permit. Agency: Los Angeles Fire Department (LAFD) Request and receive final building inspection This inspection takes place when the construction or work is completed and the structure ready for occupancy, but before being occupied. 16 The request can be made online. The cost of inspection is included in 1 day no charge the cost of the building permit. Agency: Department of Building and Safety (LADBS) Receive certificate of occupancy After the receipt and approval of the final inspection report from each of the divisions of the Department of Building and Safety, and after the city engineer has reported that all required public improvements have been completed, the Superintendent of Building shall issue a certificate 17 of occupancy, without charge, to the owner of the building. 1 day no charge In practice this takes 1-2 days. Agency: Department of Building and Safety (LADBS) * Takes place simultaneously with another procedure. Source: Doing Business database. Note: Online procedures account for 0.5 days in the total time calculation. . Doing Business 2017 United States 46 DEALING WITH CONSTRUCTION PERMITS Building Quality Control Index The building quality control index is the sum of the The index ranges from 0 to 15, with higher values scores on the quality of building regulations, quality indicating better quality control and safety mechanisms in control before construction, quality control during the construction permitting system. construction, quality control after construction, The indicator is based on the same case study liability and insurance regimes, and professional assumptions as the measures of efficiency. certifications indices. Table 3.3 Summary of time quality control and safety mechanisms in United States Answer Score (New Answer (Los Score (Los (New York York City) Angeles) Angeles) City) Building quality control index (0-15) 8.0 13.0 Which third-party entities are required by law to verify Licensed Licensed that the building plans are in compliance with existing architect. engineer. building regulations? (0-1) Quality of building regulations index (0-2) 2.0 2.0 Available 1.0 Available How accessible are building laws and regulations in your online; Free online; Free of 1.0 economy? (0-1) of charge. charge. List of 1.0 List of required required documents; Which requirements for obtaining a building permit are documents; Fees to be clearly specified in the building regulations or on any Fees to be 1.0 paid; accessible website, brochure or pamphlet? (0-1) paid; Required Required preapproval preapprovals. s. Quality control before construction index (0-1) 1.0 1.0 Which third-party entities are required by law to verify Licensed 1.0 Licensed that the building plans are in compliance with existing architect. 1.0 engineer. building regulations? (0-1) Quality control during construction index (0-3) 0.0 2.0 . 0.0 Inspections by in-house engineer; Inspections at What types of inspections (if any) are required by law to various 1.0 be carried out during construction? (0-2) phases; No inspections are legally required during Doing Business 2017 United States 47 Answer Score (New Answer (Los Score (Los (New York York City) Angeles) Angeles) City) construction. Mandatory 0.0 inspections are not Mandatory always inspections Do legally mandated inspections occur in practice during done in are always 1.0 construction? (0-1) practice done in during practice. constructio n. Quality control after construction index (0-3) 3.0 3.0 Yes, final 2.0 Yes, final Is there a final inspection required by law to verify that inspection inspection is the building was built in accordance with the approved is done by done by 2.0 plans and regulations? (0-2) government government agency. agency. Final 1.0 Final inspection Do legally mandated final inspections occur in practice? inspection always 1.0 (0-1) always occurs occurs in in practice. practice. Liability and insurance regimes index (0-2) 0.0 1.0 No party is 0.0 Architect or held liable engineer; under the Professional Which parties (if any) are held liable by law for structural law. in charge of flaws or problems in the building once it is in use (Latent 1.0 the Defect Liability or Decennial Liability)? (0-1) supervision; Construction company. No party is 0.0 Which parties (if any) are required by law to obtain an No party is required by insurance policy to cover possible structural flaws or required by law to 0.0 problems in the building once it is in use (Latent Defect law to obtain obtain Liability Insurance or Decennial Insurance)? (0-1) insurance . insurance . Professional certifications index (0-4) 2.0 4.0 Minimum 2.0 Minimum number of number of What are the qualification requirements for the years of years of professional responsible for verifying that the experience; experience; University University 2.0 architectural plans or drawings are in compliance with existing building regulations? (0-2) degree in degree in architecture architecture or or engineering engineering; Doing Business 2017 United States 48 Answer Score (New Answer (Los Score (Los (New York York City) Angeles) Angeles) City) ; Being a Being a registered registered architect or architect or engineer; engineer; Passing a Passing a certification certification exam. exam. Minimum 0.0 Minimum number of number of years of years of experience; experience; Being a University registered degree in What are the qualification requirements for the architect or engineering, professional who supervises the construction on the 2.0 engineer. construction ground? (0-2) or construction management; Passing a certification exam. Source: Doing Business database. Doing Business 2017 United States 49 GETTING ELECTRICITY Access to reliable and affordable electricity is vital for WHAT THE GETTING ELECTRICITY businesses. To counter weak electricity supply, many firms in developing economies have to rely on self- INDICATORS MEASURE supply, often at a prohibitively high cost. Whether electricity is reliably available or not, the first step for Procedures to obtain an electricity connection a customer is always to gain access by obtaining a (number) connection. Submitting all relevant documents and What do the indicators cover? obtaining all necessary clearances and permits Doing Business records all procedures required for a Completing all required notifications and local business to obtain a permanent electricity receiving all necessary inspections connection and supply for a standardized warehouse, Obtaining external installation works and as well as the time and cost to complete them. These possibly purchasing material for these works procedures include applications and contracts with Concluding any necessary supply contract and electricity utilities, clearances from other agencies obtaining final supply and the external and final connection works. In addition, this year Doing Business adds two new Time required to complete each procedure measures: the reliability of supply and transparency (calendar days) of tariffs index (included in the aggregate distance to Is at least 1 calendar day frontier score and ranking on the ease of doing Each procedure starts on a separate day business) and the price of electricity (omitted from these aggregate measures). The ranking of Does not include time spent gathering economies on the ease of getting electricity is information determined by sorting their distance to frontier Reflects the time spent in practice, with little scores for getting electricity. These scores are the follow-up and no prior contact with officials simple average of the distance to frontier scores for Cost required to complete each procedure (% each of the component indicators. To make the data of income per capita) comparable across economies, several assumptions are used. Official costs only, no bribes Excludes value added tax Assumptions about the warehouse The reliability of supply and transparency of The warehouse: tariffs index  Is owned by a local entrepreneur. Sum of the scores of six component indices:  Is located in the economy’s largest business city. Duration and frequency of outages For 11 economies the data are also collected for Tools to monitor power outages the second largest business city. Tools to restore power supply  Is located in an area where similar warehouses are typically located. In this area a new electricity Regulatory monitoring of utilities’ performance connection is not eligible for a special investment Financial deterrents aimed at limiting outages promotion regime (offering special subsidization Transparency and accessibility of tariffs or faster service, for example). Price of electricity (cents per kilowatt-hour)*  Is located in an area with no physical constraints. For example, the property is not near a railway. Price based on monthly bill for commercial warehouse in case study  Is a new construction and is being connected to electricity for the first time. *Price of electricity is not included in the calculation of distance to frontier nor ease of doing business ranking The warehouse (continued): Doing Business 2017 United States 50  Has two stories, both above ground, with a total surface area of approximately 1,300.6 square Assumptions about the monthly consumption meters (14,000 square feet). The plot of land on which it is built is 929 square meters (10,000  It is assumed that the warehouse operates 30 days square feet). a month from 9:00 a.m. to 5:00 p.m. (8 hours a day),  Is used for storage of goods. with equipment utilized at 80% of capacity on average and that there are no electricity cuts Assumptions about the electricity connection (assumed for simplicity reasons).  The monthly energy consumption is 26,880 The electricity connection: kilowatt-hours (kWh); hourly consumption is 112  Is a permanent one. kWh.  Is a three-phase, four-wire Y connection with a  If multiple electricity suppliers exist, the warehouse subscribed capacity of 140-kilo-volt-ampere is served by the cheapest supplier. (kVA) with a power factor of 1, when 1 kVA = 1  Tariffs effective in March of the current year are kilowatt (kW). used for calculation of the price of electricity for the  Has a length of 150 meters. The connection is to warehouse. Although March has 31 days, for either the low- or medium-voltage distribution calculation purposes only 30 days are used. network and is either overhead or underground, whichever is more common in the area where the warehouse is located Requires works that involve the crossing of a 10-meter road (such as by excavation or overhead lines) but are all carried out on public land. There is no crossing of other owners’ private property because the warehouse has access to a road.  Includes only a negligible length in the customer’s private domain.  Does not require work to install the internal wiring of the warehouse. This has already been completed up to and including the customer’s service panel or switchboard and the meter base Doing Business 2017 United States 51 GETTING ELECTRICITY Where does the economy stand today? What does it take to obtain a new electricity connection business city of an economy, except for 11 economies for in United States? According to data collected by Doing which the data are a population-weighted average of the Business, getting electricity there requires 4.8 procedures, 2 largest business cities. See the chapter on distance to takes 89.6 days and costs 24.4% of income per capita frontier and ease of doing business ranking at the end of (figure 4.1). this profile for more details. Most indicator sets refer to a case scenario in the largest Figure 4.1 What it takes to obtain an electricity connection in United States - New York City Doing Business 2017 United States 52 What it takes to obtain an electricity connection in United States - Los Angeles Source: Doing Business database. Note: Time shown in the figure above may not reflect simultaneity of procedures. For more information on the methodology of the getting electricity indicators, see the Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter. Doing Business 2017 United States 53 GETTING ELECTRICITY Globally, United States stands at 36 in the ranking of 190 average ranking provide another perspective in assessing economies on the ease of getting electricity (figure 4.2). how easy it is for an entrepreneur in United States to The rankings for comparator economies and the regional connect a warehouse to electricity. Figure 4.2 How United States and comparator economies rank on the ease of getting electricity Source: Doing Business database. Doing Business 2017 United States 54 GETTING ELECTRICITY What are the details? The indicators reported here for United States are based OBTAINING AN ELECTRICITY CONNECTION* on a set of specific procedures—the steps that an entrepreneur must complete to get a warehouse connected to electricity by the local distribution utility— identified by Doing Business. Data are collected from the distribution utility, then completed and verified by electricity regulatory agencies and independent Name of utility - Los Los Angeles Department professionals such as electrical engineers, electrical Angeles: of Water and Power contractors and construction companies. The electricity distribution utility surveyed is the one serving the area Name of utility - New York City: Con Edison (or areas) in which warehouses are located. If there is a choice of distribution utilities, the one serving the largest number of customers is selected. Price of electricity (US cents per kWh) - 17.2 The procedures are those that apply to a warehouse and Los Angeles: electricity connection matching the standard assumptions used by Doing Business in collecting the Price of electricity data (see the section in this chapter on what the (US cents per kWh) - 23.1 indicators cover). The procedures, along with the New York City: associated time and cost, are summarized below. City: New York City, Los Angeles *Price is calculated as a monthly consumption of 26,880 kWh for business customers, based on a standardized case study adopted by the Getting Electricity methodology. Doing Business measures the price of electricity but does not include these data when calculating the distance to frontier score for getting electricity or the ranking on the ease of getting electricity. Table 4.2 Summary of time, cost and procedures for getting electricity in United States Time to No. Procedure Cost to complete complete File contractor work request with Con Edison and receive service layout Application for service may be made by mail, fax or by using Con Edison web site at www.coned.com/es/. However, written confirmation is required. 1 16 calendar days USD 7,500 The customer or their contractor should consult Con Edison regarding the characteristics of service available before plans are completed, equipment purchased or construction started on facilities to be connected to the company's distribution system. Information the customer or their contractor furnishes Con Edison with regard to the customer's proposed electrical installation, must be in writing. The Doing Business 2017 United States 55 Time to No. Procedure Cost to complete complete company has Electrical Contractor or Work Request Pads for your convenience. Only licensed electricians can conduct electrical connections. The licensing is done by the City of NY. The electrician hired by customer should be a licensed master electrician. The licensing is done by the City of New York. The service layout usually requires an inspection by Coned's staff who then give the technical conditions on the spot. After that the electrician can start the works. The electrician could have completed the works until the panels/ switchboard before Coned comes and inspects and then only do the wiring when they know from Coned where the service room is going to be. If the electrician however, wants to avoid to have to re-wire, they can first wait for the service layout that tells them where the service room should be. The electrician is in charge of all the works until the connection point. The connection point should be on the customer's land and within a distance of 10 feet from the property line (border between public and private lands), which we assume here. The service layout usually require an inspection by Coned's staff who then give the technical conditions on the spot. After that the electrician can start the works. Now, the electrician could have completed the works until the panels/ switchboard before Coned comes and inspects and then only do the wiring when they know from Coned where the service room is going to be, etc. If they want to avoid to have to re-wire though, they can first wait for the service layout that tells them where the service room should be. The electrician is in charge of all the works until the connection point. The connection point should be on the customer's land and within a distance of 10 feet from the property line (border between public and private lands). Agency: Coned Submit final checklist to Con Edison, pay security deposit and request and receive external works The security deposit will not be recorded as it is refunded to the customer in 3 months time. The security deposit amount is twice the average monthly usage. Con Edison representative performs an inspection to verify that the site is ready for service construction (property-line box or sweep is installed, area graded to within 6” of final grade, curbs are installed, sewer & water lines installed, etc.). Electrician 30 calendar days USD 0 2 submits final checklist to Coned, requests and receives the works. The works consist of laying out a cable from the connection point to the closest supply source on the LV network (usually a manhole and not necessarily all the way to the distribution transformer). The works by Coned can be carried out in parallel with the electrician's works. Agency: Coned Doing Business 2017 United States 56 Time to No. Procedure Cost to complete complete Request and receive internal wiring inspection by NYC Department of Buildings The NY Building Dept Electric division inspector does the internal and external wiring inspection once all wiring and connections are final. This step is usually carried out after electricity has been turned on, and is not a requirement to obtain supply. It is required however in order to obtain an occupancy permit. If the inspector finds that everything is ok, he submits his report to the clerk in the NY Buildings office, who files it, and 3 then publishes the Certificate of Completion online on the NY Buildings 7 calendar days USD 380 Website. This is usually done on the same day or next business day after inspection. The actual application for Certificate of Internal Inspection is done by the electrician before internal wiring commences. The Dept of Buildings then issues a Control Number to the electrician. Agency: NY Dept. of Buildings Request meter installation and electricity turn-on from Con Edison The electrician contacts the utility to inform them that the certificate of completion has been obtained, gives them the Dept of Buildings Control 4 Number, and requests the utility to turn electricity on. 7 calendar days USD 0 Agency: Coned * Takes place simultaneously with previous procedure. Source: Doing Business database. Summary of time, cost and procedures for getting electricity in United States - Los Angeles Time to No. Procedure Cost to complete complete Submit application materials and await commitment letter At the time of initial contact with the utility office, customer provides the following items: a. A completed Service Planning Information sheet b. Electrical plans including load schedules, single-line diagrams, and equipment elevation drawings. 1 c. Plot, grading, elevation, and site improvement plans. 70 calendar days USD 0 d. Any additional information requested by the service planner needed to assist the Department in finalizing the customer’s plans. Agency: Los Angeles Department of Water and Power Doing Business 2017 United States 57 Time to No. Procedure Cost to complete complete Receive commitment letter and request and receive external site inspection Once the utility has reviewed the project, they provide a commitment letter. After receiving the commitment letter, the customer contacts the utility's Electric Service Representative to schedule a site inspection. . The 1 calendar day USD 0 2 utility engineer visits the warehouse to locate the site of the transformer and connection Agency: Los Angeles Department of Water and Power Await completion of external works by utility The utility furnishes the customer with a commitment letter, along with estimated cost. The cost of transformer itself is borne by the utility. The customer is charged for certain administrative fees and taxes. The connection works project could be sent out for bid by the utility depending on the utility's work load. With regards to transformer installation at customer premises, the utility furnishes and installs: (a) All electrical equipment at, or in, the installation except for equipment which is provided by the customer as specified in the utility's customer requirement drawings. (b) Conductors supplying the primary side of the utility-owned transformers and secondary distribution conductors to supply points. (c) Service supply conductors from the utility-owned transformer, or 3 supply point, to the point of service. 56 calendar days USD 2,500 (5) The customer shall furnish and install all facilities specified by the utility on the Customer requirement drawings, including: (a) Cable bus structures from the terminating room or enclosure to the service terminating enclosure when required or approved for use by the customer station design engineer. The Department will furnish and supply the conductors. (b) Busway service (bus duct) from the transformer room or enclosure to the point of service when approved for use by the customer station design engineer. The bus duct will be owned and maintained by the customer at the customer's cost. Agency: Los Angeles Department of Water and Power Submit internal wiring plan to obtain electrical permit and internal wiring inspection The customer's electrical contractor applies for a electrical permit with 21 calendar days USD 97.2 *4 the Los Angeles Department of Building & Safety. This permit can be applied for online. The contractor needs to specify the type of work, and pay the necessary fees online. Once the contractor has received the permit number online, he can request for an inspection (this request can Doing Business 2017 United States 58 Time to No. Procedure Cost to complete complete be done online or by phone). The proposed date of the inspection is then informed to the contractor. Agency: Los Angeles Department of Building and Safety Hire private contractor to undertake civil works Customer's contractor undertakes underground wiring, excavation, conduits, construction of concrete slab. 14 calendar days USD 20,000 *5 Agency: Customer's contractor Submit application for energizing connection and receive meter installation and electricity flow Customer's contractor applies online for "turn on" of electricity, providing details of connection and proof of electrical permit approval 6 by Los Angeles Department of Building and Safety. Contractor calls the 7 calendar days USD 0 utility for scheduling of inspection of power release. Agency: Los Angeles Department of Water and Power * Takes place simultaneously with previous procedure. Source: Doing Business database. Doing Business 2017 United States 59 GETTING ELECTRICITY Reliability of supply and transparency of tariffs index The reliability of supply and transparency of tariffs Doing Business uses the system average interruption index encompasses quantitative data on the duration duration index (SAIDI) and the system average and frequency of power outages as well as interruption frequency index (SAIFI) to measure the qualitative information on the mechanisms put in duration and frequency of power outages in the largest place by the utility for monitoring power outages business city of each economy (for 11 economies the data and restoring power supply, the reporting are also collected for the second largest business city). relationship between the utility and the regulator for SAIDI is the average total duration of outages over the power outages, the transparency and accessibility of course of a year for each customer served, while SAIFI is tariffs and whether the utility faces a financial the average number of service interruptions experienced deterrent aimed at limiting outages (such as a by a customer in a year. Annual data (covering the requirement to compensate customers or pay fines calendar year) are collected from distribution utility when outages exceed a certain cap). companies and national regulators on SAIDI and SAIFI. Both SAIDI and SAIFI estimates include load shedding. The index ranges from 0 to 8, with higher values indicating greater reliability of electricity supply and greater transparency of tariffs. Table 4.3 Reliability of Supply and Transparency of Tariff Index in United States Answer (New Score (New Answer (Los Score (Los York City) York City) Angeles) Angeles) Reliability of supply and transparency of tariff index 8.0 7.0 (0-8) Total duration and frequency of outages per customer 3.0 2.0 a year (0-3) System average interruption duration index (SAIDI) 0.21 1.42 System average interruption frequency index (SAIFI) 0.11 0.7 Mechanisms for monitoring outages (0-1) 1.0 1.0 Does the distribution utility use automated tools to Yes Yes monitor outages? Mechanisms for restoring service (0-1) 1.0 1.0 Does the distribution utility use automated tools to Yes Yes restore service? Regulatory monitoring (0-1) 1.0 1.0 Does a regulator—that is, an entity separate from the utility—monitor the utility’s performance on reliability Yes Yes of supply? Financial deterrents aimed at limiting outages (0-1) 1.0 1.0 Doing Business 2017 United States 60 Answer (New Score (New Answer (Los Score (Los York City) York City) Angeles) Angeles) Does the utility either pay compensation to customers or face fines by the regulator (or both) if outages Yes Yes exceed a certain cap? Communication of tariffs and tariff changes (0-1) 1.0 1.0 Are effective tariffs available online? Yes Yes https://ww w.ladwp.co m/ladwp/fa ces/wcnav_ externalId/ a-fr- www.coned.c elecrate- Link to the website, if available online om/es/resour schel?_adf.c ces.asp trl- state=ky4hi 9d9n_4&_a frLoop=55 500144422 2369 Are customers notified of a change in tariff ahead of Yes Yes the billing cycle? Price of electricity (US cents per kWh) 23.1 17.2 Source: Doing Business database. Note: If data on power outages is not collected or if the SAIFI index or SAIDI index are above the threshold of 100, the economy is not eligible to obtain a score in the Reliability of Supply and Transparency of Tariff Index. If SAIDI and SAIFI are 12 (equivalent to an outage of one hour each month) or below, a score of 1 is assigned. If SAIDI and SAIFI are 4 (equivalent to an outage of one hour each quarter) or below, 1 additional point is assigned. Finally, if SAIDI and SAIFI are 1 (equivalent to an outage of one hour per year) or below, 1 more point is assigned. Doing Business measures the price of electricity but does not include these data when calculating the distance to frontier score for getting electricity or the ranking on the ease of getting electricity. The price of electricity is measured in cents per kilowatt-hour. On the basis of the assumptions about monthly consumption, a monthly bill for a commercial warehouse in the largest business city of the economy is computed for the month of March (for 11 economies the data are also collected for the second largest business city). As noted, the warehouse uses electricity 30 days a month, from 9:00 a.m. to 5:00 p.m., so different tariff schedules may apply if a time-of- use tariff is available. Doing Business 2017 United States 61 REGISTERING PROPERTY Ensuring formal property rights is fundamental. WHAT THE REGISTERING PROPERTY Effective administration of land is part of that. If INDICATORS MEASURE formal property transfer is too costly or complicated, formal titles might go informal again. And where property is informal or poorly Procedures to legally transfer title on administered, it has little chance of being accepted immovable property (number) as collateral for loans—limiting access to finance. Preregistration (for example, checking for liens, notarizing sales agreement, paying property What do the indicators cover? transfer taxes) Doing Business records the full sequence of Registration in the economy’s largest business procedures necessary for a business to purchase city2 property from another business and transfer the property title to the buyer’s name. The transaction is Postregistration (for example, filing title with the municipality) considered complete when it is opposable to third parties and when the buyer can use the property, Time required to complete each procedure use it as collateral for a bank loan or resell it. In (calendar days) addition, this year Doing Business adds a new Does not include time spent gathering measure to the set of registering property information indicators, an index of the quality of the land administration system in each economy. The Each procedure starts on a separate day. ranking of economies on the ease of registering Procedures that can be fully completed online are recorded as ½ day. property is determined by sorting their distance to frontier scores for registering property. These scores Procedure considered completed once final are the simple average of the distance to frontier document is received scores for each of the component indicators. To No prior contact with officials make the data comparable across economies, several assumptions about the parties to the Cost required to complete each procedure transaction, the property and the procedures are (% of property value) used. Official costs only, no bribes The parties (buyer and seller): No value added or capital gains taxes included  Are limited liability companies, 100% Quality of land administration index (0-30) domestically and privately owned and perform . The parties (buyer and seller): general commercial activities in the economy’s largest business city.  Are limited liability companies, 100% domestically and privately owned and perform general  Have 50 employees each, all of whom are commercial activities in the economy’s largest nationals. business city. The property (fully owned by the seller):  Have 50 employees each, all of whom are nationals.  Has a value of 50 times income per capita. The The property (fully owned by the seller): sale price equals the value and entire property will be transferred.  Has a value of 50 times income per capita. The sale price equals the value and entire property will be  Is registered in the land registry or cadastre, or transferred. both, and is free of title disputes.  Is registered in the land registry or cadastre, or both, Is located in a periurban commercial zone, and no and is free of title disputes. rezoning is required. Doing Business 2017 United States 62 REGISTERING PROPERTY Where does the economy stand today? What does it take to complete a property transfer in Most indicator sets refer to a case scenario in the largest United States? According to data collected by Doing business city of an economy, except for 11 economies for Business, registering property there requires 4.4 which the data are a population-weighted average of the procedures, takes 15.2 days and costs 2.4% of the 2 largest business cities. See the chapter on distance to property value (figure 5.1). The score on the quality of frontier and ease of doing business ranking at the end of land administration index is 17.6 this profile for more details. Figure 5.1 What it takes to register property in United States - New York City What it takes to register property in United States - Los Angeles Doing Business 2017 United States 63 Source: Doing Business database. Note: Time shown in the figure above may not reflect simultaneity of procedures. Online procedures account for 0.5 days in the total time calculation. For more information on the methodology of the registering property indicators, see the Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter. Doing Business 2017 United States 64 REGISTERING PROPERTY Globally, United States stands at 36 in the ranking of 190 regional average ranking provide other useful economies on the ease of registering property (figure information for assessing how easy it is for an 5.2). The rankings for comparator economies and the entrepreneur in United States to transfer property. Figure 5.2 How United States and comparator economies rank on the ease of registering property Source: Doing Business database. Doing Business 2017 United States 65 REGISTERING PROPERTY What are the details? The indicators reported here are based on a set of STANDARD PROPERTY TRANSFER specific procedures—the steps that a buyer and seller must complete to transfer the property to the buyer’s name—identified by Doing Business through information collected from local property lawyers, Property value: 2821855.2 notaries and property registries. These procedures are those that apply to a transaction matching the New York City, Los City: standard assumptions used by Doing Business in Angeles collecting the data (see the section in this chapter on what the indicators cover). The procedures, along with the associated time and cost, are summarized below. Table 5.2 Summary of time, cost and procedures for registering property in United States New York City Time to No. Procedure Cost to complete complete Obtain a title report A title report is obtained from one of many competing private companies, regulated by the state. Fees for title insurance are set by state regulators. Fees for services vary. A title report is not technically mandatory, but is routinely used to analyze the quality of title. A title report is an essential prerequisite to securing title insurance. No title company would offer title insurance without a title report tracing the deed history and clearly articulating the liens, covenants and other About 10 days 9,500 (title report limitations on title. A title report and title insurance are typically required (simultaneous and title 1 by lenders. Most buyers purchase a title insurance to assure the title is with Procedure 2) insurance) clear (i.e. no defects in the title). One application for title report and title insurance is enough. Thus, no additional Procedure or time is needed. Banks usually require title insurance for a property to be accepted as a collateral for a loan. The cost of such title insurance is USD 9,500 given the assumptions of our case study, including the cost of the title report. Agency: Private Company Conduct an environmental review Varies depending on factual The environmental review is typically conducted by a private firm circumstances specializing in the field. It is not technically mandatory, but a prudent (simultaneous Depends on investor will routinely require an environmental review and no bank with Procedure 1) nature and extent would ever advance a commercial mortgage without conducting an *2 environmental review. The environmental review may have up to 3 of contamination, phases: 1. The history of the property in the public records is analyzed to (According to the if any check if there was any record of contamination or any violation. 2. If yes, assumptions of an inspection of the property takes place, where some samples are taken the case study, it 3. Clean-up phase if needed. is assumed that no violation nor Doing Business 2017 United States 66 Time to No. Procedure Cost to complete complete Agency: Private Company problem is found in the first phase of the review, and that the whole Procedure does not take more than the 10 days that it takes to obtain the title report in Procedure 1) The buyer obtains and fills the forms needed for the transfer All NYC transfers should be done using ACRIS system. It generates all of the required transfer tax forms, i.e. NYS Transfer Tax Form TP-584 regarding real estate transfer tax, and the NYS Real Property Transfer Report (Equalization) Form RP-5217, as well as necessary documents as smoke detector's affidavit, customer registration, etc. The state forms RP- 5217 and TP-584 are available in many local government offices and on the Internet. Additionally, the property disclosure form is typically Filing fee for state drafted by the attorney for the seller and given to the buyer prior to or at form RP-5217 is closing. The title deed is usually prepared by the seller. The fees for state forms RP-5217 and TP-584 are typically collected by the title company at $250 + Filing fee closing, prior to recording, and must be paid to the state upon filing the for state form TP- deed for recording with the registry. It is common practice to obtain title 584 is $5 + 2.625% 3 insurance from one of the competing title insurance companies. (The 1 day of property value cost of title insurance will cost $9,500). The title insurance can only be greater than $500 acquired at closing, after the transaction has been completed between 000 (NYC transfer buyer and seller and the price has been paid. Where financing is tax) + $2.00/500 of involved, the lender typically requires the purchaser to obtain insurance property value as a condition of the loan. There is a separate mortgage recording tax (NYS transfer tax) required to be paid, in addition to the real property transfer tax. Real property transfer tax is paid by the seller at rates 0.4% for NYS transfer tax and 2.625% for NYC transfer tax (of property value exceeding $500,000). The title insurance company will take the responsibility of recording the title at the county clerk. Agency: Office of the City Register The title is recorded with the County Clerk $32 + $5 cover The transfer deed (together with the applicable tax forms and payment) page + $5 per is then presented to the applicable public official, e.g. county clerk, for page (assuming 4 recordation in the public records of the jurisdiction. The date of 1 day that the title acceptance of the deed by the clerk is the date which controls for consists of about transfer purposes. Nonetheless, it often can take many weeks (and even 12 pages) months) for the actual recordation to take place and become available on the public record. However, the transaction is valid and opposable to Doing Business 2017 United States 67 Time to No. Procedure Cost to complete complete third parties on the date it is submitted. Although the law states that title passes upon delivery of the deed, where there are competing claims the law recognizes the 1st recorded deed. The title insurance company usually takes the responsibility of recording the title at the County Clerk, paying the fees for state forms RP-5217 and TP-584 . The documentation shall include: Title deed NYS Real Property form TP-584 on real estate transfer tax Property Disclosure Form Real Property form RP-5217 Title Insurance Agency: County Clerk * Takes place simultaneously with another procedure. Source: Doing Business database. Note: Online procedures account for 0.5 days in the total time calculation. Summary of time, cost and procedures for registering property in United States Los Angeles Time to No. Procedure Cost to complete complete Obtain a title report The preliminary title report is to investigate any outstanding issues on the property such as easements or dues to utility companies, existing mortgages on the property, and CC&Rs (Covenants, Conditions and Included in 1 Restrictions which are rules and restrictions placed on the property by About 3 days procedure 2 the owners association, etc.) Agency: Private company Obtain Title Insurance policy (Environmental requirement and inspections) Parties sign an escrow agreement. The agreement would usually allow USD 10,003 (Title for a period of 30 days for due diligence checks and is subject to certain Insurance, Escrow, contingencies (i.e. the property meeting the contingency requirements to Environmental 2 move forward with the sale). At the end of this period, the buyer's 2 weeks report, Natural deposit will no longer be refundable. During this period, a variety of Hazards Disclosure inspections take place. The checks may be completed before this period report) ends, but cannot exceed this period. In the due-diligence phase, the two following requirements have to be undertaken: - Phase I Environmental inspection. This is a visual inspection to check if there are any hazardous materials such as oil stains or chemicals on the property Doing Business 2017 United States 68 Time to No. Procedure Cost to complete complete or if it is located near or formerly used as a gas station or dry cleaners for instance. - Natural Hazards Disclosure Statement (usually ordered online by the escrow company and provided to the Buyer; it is public data. This Report is required by law as of 1998 for all real estate transactions in California: Assembly Bill 1195 now knows as California Civil Code 1103. It mandates 3 natural hazard disclosures into one statutory form: Seismic, fire and floods, given that California is especially sensitive to seismic movements and earthquakes. More information can be found here: http://archive.calbar.ca.gov/calbar/2cbj/99aug/mclestdy.htm) Agency: Private company Sign and Notarize Deed with a Notary Public 3 1 day USD 20 Agency: Notary The buyer obtains and fills the forms needed for the transfer Documentary Transfer Tax Los Angeles City charges $4.5 per 1,000 and USD 4.5 per 1,000 Los Angeles County (according to LA City Ordinance) charges $1.10 per (Los Angeles City) 1,000 (or 0.55 cents per $500, rounding up to the highest $500 according 1 day and USD 1.1 per 4 to the California Revenue and Taxation Code) 1000 (Los Angeles County) Agency: Los Angeles County Treasurer and tax collector The title is recorded with the County Clerk To record the deed, the following documents must be filed: - Notarized Deed - Preliminary Change of Ownership Form (If this is not filed, a USD 20 fee is added per Revenue and Taxation Code 480.3) - Declaration of Documentary Transfer Tax These forms can be obtained from the website of the RRCC: http://www.lavote.net/recorder/Document_Recording.cfm The recording fees are: - Base Fee, $10.00 (Cal. Govt. Code § 27361(a)); - 1 day USD 23 5 First Page, $1.00 (Cal. Govt. Code §27361.4(a), (b), and (c); - Each additional page, $3.00; - Electronic recording fee, $1.00 (Cal. Govt. Code § 27397(c)(1)). - Special Real Estate Fraud Prosecution Program Fee, $4.00; - Social Security Number Truncation Program, $1.00 (AB 1168, § 627) Agency: County clerk's office * Takes place simultaneously with another procedure. Note: Online procedures account for 0.5 days in the total time calculation. Source: Doing Business database. Doing Business 2017 United States 69 REGISTERING PROPERTY Quality of land administration The quality of land administration index is the sum of If private sector entities were unable to register property the scores on the reliability of infrastructure, transfers in an economy between June 2014 and June transparency of information, geographic coverage 2015, the economy receives a “no practice” mark on the and land dispute resolution indices. procedures, time and cost indicators. A “no practice” economy receives a score of 0 on the quality of land The index ranges from 0 to 30, with higher values administration index even if its legal framework includes indicating better quality of the land administration provisions related to land administration. system. Table 5.3 Summary of quality of land administration in United States Answer (New Score (New Answer (Los Score (Los York City) York City) Angeles) Angeles) Quality of the land administration index (0-30) 18.0 17.0 Reliability of infrastructure index (0-8) 7.0 7.0 Los Angeles What is the institution in charge of immovable Office of the County property registration? City Register Recorder Office In what format are the majority of title or deed records Computer/Sc Computer/ kept in the largest business city—in a paper format or in 1.0 2.0 anned Fully digital a computerized format (scanned or fully digital)? Is there an electronic database for checking for encumbrances (liens, mortgages, restrictions and the Yes 1.0 Yes 1.0 like)? In what format are the majority of maps of land plots Computer/Ful Computer/ kept in the largest business city—in a paper format or in 2.0 2.0 ly digital Fully digital a computerized format (scanned or fully digital)? Is there an electronic database for recording boundaries, checking plans and providing cadastral Yes 1.0 Yes 1.0 information (geographic information system)? Is the information recorded by the immovable property Different registration agency and the cadastral or mapping Separate databases 1.0 0.0 agency kept in a single database, in different but linked databases but linked databases or in separate databases? Do the immovable property registration agency and cadastral or mapping agency use the same Yes 1.0 Yes 1.0 identification number for properties? Doing Business 2017 United States 70 Answer (New Score (New Answer (Los Score (Los York City) York City) Angeles) Angeles) Transparency of information index (0–6) 3.0 3.5 Who is able to obtain information on land ownership at Freely Freely the agency in charge of immovable property accessible by 1.0 accessible 1.0 registration in the largest business city? anyone by anyone Is the list of documents that are required to complete any type of property transaction made publicly Yes, online 0.5 Yes, online 0.5 available–and if so, how? http://www. lavote.net/ http://a836- home/recor Link for online access: acris.nyc.gov/ ds/real- CP/ estate- records/ge neral-info Is the applicable fee schedule for any property transaction at the agency in charge of immovable Yes, online 0.5 Yes, online 0.5 property registration in the largest business city made publicly available–and if so, how? https://ww w.lavote.ne https://a836- t/home/rec acris.nyc.gov/ ords/prope Link for online access: CP/CoverPag rty- e/CalculateTa document- xes recording/f ees Does the agency in charge of immovable property registration commit to delivering a legally binding document that proves property ownership within a No 0.0 No 0.0 specific time frame–and if so, how does it communicate the service standard? Link for online access: Is there a specific and separate mechanism for filing complaints about a problem that occurred at the No 0.0 No 0.0 agency in charge of immovable property registration? Contact information: Are there publicly available official statistics tracking the number of transactions at the immovable property No 0.0 No 0.0 registration agency? Doing Business 2017 United States 71 Answer (New Score (New Answer (Los Score (Los York City) York City) Angeles) Angeles) Number of property transfers in the largest business city in 2015: Freely Freely Who is able to consult maps of land plots in the largest accessible by 0.5 accessible 0.5 business city? anyone by anyone Is the applicable fee schedule for accessing maps of No cost 0.5 No cost 0.5 land plots made publicly available—and if so, how? Link for online access: Does the cadastral or mapping agency commit to delivering an updated map within a specific time No 0.0 No 0.0 frame—and if so, how does it communicate the service standard? Link for online access: Is there a specific and separate mechanism for filing complaints about a problem that occurred at the No 0.0 Yes 0.5 cadastral or mapping agency? Geographic coverage index (0–8) 4.0 4.0 Are all privately held land plots in the economy No 0.0 No 0.0 formally registered at the immovable property registry? Are all privately held land plots in the largest business city formally registered at the immovable property Yes 2.0 Yes 2.0 registry? Are all privately held land plots in the economy No 0.0 No 0.0 mapped? Are all privately held land plots in the largest business Yes 2.0 Yes 2.0 city mapped? Land dispute resolution index (0–8) 4.0 2.5 Does the law require that all property sale transactions be registered at the immovable property registry to No 0.0 No 0.0 make them opposable to third parties? Is the system of immovable property registration Yes 0.5 Yes 0.5 subject to a state or private guarantee? Is there a specific compensation mechanism to cover for losses incurred by parties who engaged in good faith in a property transaction based on erroneous Yes 0.5 No 0.0 information certified by the immovable property registry? Doing Business 2017 United States 72 Answer (New Score (New Answer (Los Score (Los York City) York City) Angeles) Angeles) Does the legal system require a control of legality of the documents necessary for a property transaction Yes 0.5 Yes 0.5 (e.g., checking the compliance of contracts with requirements of the law)? Registrar; If yes, who is responsible for checking the legality of Registrar; Lawyer; the documents? Lawyer. Interested Parties. Does the legal system require verification of the Yes 0.5 Yes 0.5 identity of the parties to a property transaction? If yes, who is responsible for verifying the identity of Registrar. Notary. the parties? Is there a national database to verify the accuracy of No 0.0 No 0.0 identity documents? For a standard land dispute between two local Los businesses over tenure rights of a property worth 50 NYS Supreme Angeles times gross national income (GNI) per capita and Court Superior located in the largest business city, what court would be Court in charge of the case in the first instance? How long does it take on average to obtain a decision Between 1 Between 2 from the first-instance court for such a case (without 2.0 1.0 and 2 years and 3 years appeal)? Are there any statistics on the number of land disputes No 0.0 No 0.0 in the first instance? Number of land disputes in the largest business city in 2015: Equal access to property rights index (-2–0) 0.0 0.0 Do unmarried men and unmarried women have equal Yes 0.0 Yes 0.0 ownership rights to property? Do married men and married women have equal Yes 0.0 Yes 0.0 ownership rights to property? Source: Doing Business database. Doing Business 2017 United States 73 GETTING CREDIT Two types of frameworks can facilitate access to WHAT THE GETTING CREDIT INDICATORS credit and improve its allocation: credit information MEASURE systems and borrowers and lenders in collateral and bankruptcy laws. Credit information systems enable lenders to view and consider a potential borrower’s Strength of legal rights index (0–12) financial history (positive or negative) when assessing Rights of borrowers and lenders through risk and they allow borrowers to establish a good collateral laws credit history that will facilitate their access to credit. Protection of secured creditors’ rights through Sound collateral laws enable businesses to use their bankruptcy laws assets, especially movable property, as security to generate capital—while strong creditors’ rights have Depth of credit information index (0–8) been associated with higher ratios of private sector Scope and accessibility of credit information credit to GDP. distributed by credit bureaus and credit registries What do the indicators cover? Credit bureau coverage (% of adults) Doing Business assesses the sharing of credit information and the legal rights of borrowers and Number of individuals and firms listed in lenders with respect to secured transactions through largest credit bureau as percentage of adult 2 sets of indicators. The depth of credit information population index measures rules and practices affecting the Credit registry coverage (% of adults) coverage, scope and accessibility of credit Number of individuals and firms listed in information available through a credit registry or a credit registry as percentage of adult credit bureau. The strength of legal rights index population measures whether certain features that facilitate lending exist within the applicable collateral and bankruptcy laws. Doing Business uses two case scenarios, Case A and Case B, to determine the scope of the secured transactions system, involving a  Has up to 50 employees. secured borrower and a secured lender and  Is 100% domestically owned, as is the lender. examining legal restrictions on the use of movable collateral (for more details on each case, see the Data The ranking of economies on the ease of getting credit Notes section of the Doing Business 2017 report). is determined by sorting their distance to frontier These scenarios assume that the borrower: scores for getting credit. These scores are the distance to frontier score for the strength of legal rights index  Is a domestic limited liability company. and the depth of credit information index.  Has its headquarters and only base of operations in the largest business city. For the 11 economies with a population of more than 100 million, data for a second city have been added. Doing Business 2017 United States 74 GETTING CREDIT Where does the economy stand today? How well do the credit information system and collateral Globally, United States stands at 2 in the ranking of 190 and bankruptcy laws in United States facilitate access to economies on the ease of getting credit (figure 6.1). The credit? The economy has a score of 8.0 on the depth of rankings for comparator economies provide useful credit information index and a score of 11.0 on the information for assessing how well regulations and strength of legal rights index (see the summary of institutions in United States support lending and scoring at the end of this chapter for details). Higher borrowing. scores indicate more credit information and stronger legal rights for borrowers and lenders. Figure 6.1 How United States and comparator economies rank on the ease of getting credit Source: Doing Business database. Doing Business 2017 United States 75 GETTING CREDIT One way to put an economy’s score on the getting credit rights index for United States and shows the scores for indicators into context is to see where the economy comparator economies as well as the regional average stands in the distribution of scores across economies. score. Figure 6.3 shows the same for the depth of credit Figure 6.2 highlights the score on the strength of legal information index. Figure 6.2 How strong are legal rights for borrowers Figure 6.3 How much credit information is shared — and lenders? and how widely? Economy scores on strength of legal rights index Economy scores on depth of credit information index Source: Doing Business database. Source: Doing Business database. Note: Higher scores indicate that collateral and bankruptcy Note: Higher scores indicate the availability of more credit laws are better designed to facilitate access to credit. information, from either a credit registry or a credit bureau, Source: Doing Business database. to facilitate lending decisions. If the credit bureau or registry is not operational or covers less than 5% of the adult population, the total score on the depth of credit information index is 0. Doing Business 2017 United States 76 GETTING CREDIT What are the details? The getting credit indicators reported here for United The data on the legal rights of borrowers and lenders are States are based on detailed information collected in gathered through a survey of financial lawyers and that economy. The data on credit information sharing are verified through analysis of laws and regulations as well collected through a survey of a credit registry and/or as public sources of information on collateral and credit bureau (if one exists). To construct the depth of bankruptcy laws. For the strength of legal rights index, a credit information index, a score of 1 is assigned for each score of 1 is assigned for each of 10 aspects related to of 8 features of the credit registry or credit bureau (see legal rights in collateral law and 2 aspects in bankruptcy summary of scoring below). law. New York City Los Angeles Strength of legal rights index (0–12) Index score: 11.0 Index score: 11.0 Does an integrated or unified legal framework for secured transactions that extends to the creation, publicity and enforcement of functional 1 1 equivalents to security interests in movable assets exist in the economy? Does the law allow businesses to grant a non possessory security right in a single category of movable assets, without requiring a specific description 1 1 of collateral? Does the law allow businesses to grant a non possessory security right in substantially all of its assets, without requiring a specific description of 1 1 collateral? May a security right extend to future or after-acquired assets, and may it extend automatically to the products, proceeds or replacements of the 1 1 original assets? Is a general description of debts and obligations permitted in collateral agreements; can all types of debts and obligations be secured between 1 1 parties; and can the collateral agreement include a maximum amount for which the assets are encumbered? Is a collateral registry in operation for both incorporated and non- incorporated entities, that is unified geographically and by asset type, with 0 0 an electronic database indexed by debtor's name? Can banks and financial institutions access borrowers’ credit information online (for example, through a web interface, a system-to-system 1 1 connection or both)? Does a modern collateral registry exist in which registrations, amendments, cancellations and searches can be performed online by any 1 1 interested third party? Are secured creditors paid first (i.e. before tax claims and employee 1 1 claims) when a debtor defaults outside an insolvency procedure? Doing Business 2017 United States 77 New York City Los Angeles Strength of legal rights index (0–12) Index score: 11.0 Index score: 11.0 Are secured creditors paid first (i.e. before tax claims and employee 1 1 claims) when a business is liquidated? Are secured creditors subject to an automatic stay on enforcement when a debtor enters a court-supervised reorganization procedure? Does the law 1 1 protect secured creditors’ rights by providing clear grounds for relief from the stay and/or sets a time limit for it? Does the law allow parties to agree on out of court enforcement at the time a security interest is created? Does the law allow the secured creditor 1 1 to sell the collateral through public auction and private tender, as well as, for the secured creditor to keep the asset in satisfaction of the debt? Depth of credit information index (0–8) Credit bureau Credit registry Index score: 8.0 Are data on both firms and individuals distributed? Yes No 1 Are both positive and negative credit data distributed? Yes No 1 Are data from retailers or utility companies - in addition to data from banks and financial institutions - Yes No 1 distributed? Are at least 2 years of historical data distributed? (Credit bureaus and registries that distribute more than 10 years of negative data or erase data on Yes No 1 defaults as soon as they are repaid obtain a score of 0 for this component.) Are data on loan amounts below 1% of income per Yes No 1 capita distributed? By law, do borrowers have the right to access their Yes No 1 data in the credit bureau or credit registry? Can banks and financial institutions access borrowers’ credit information online (for example, through an Yes No 1 online platform, a system-to-system connection or both)? Are bureau or registry credit scores offered as a value- added service to help banks and financial institutions Yes No 1 assess the creditworthiness of borrowers? Note: An economy receives a score of 1 if there is a "yes" to either bureau or registry. If the credit bureau or registry is not operational or covers less than 5% of the adult population, the total score on the depth of credit information index is 0. Doing Business 2017 United States 78 Coverage Credit bureau Credit registry Number of individuals 220,000,000 0 Number of firms 23,987,763 0 Total 243,987,763 0 Total percentage of adult population 100.0 0.0 Source: Doing Business database. Doing Business 2017 United States 79 PROTECTING MINORITY INVESTORS Protecting minority investors matters for the ability of companies to raise the capital they need to grow, WHAT THE PROTECTING MINORITY innovate, diversify and compete. Effective regulations INVESTORS INDICATORS MEASURE define related-party transactions precisely, promote clear and efficient disclosure requirements, require shareholder participation in major decisions of the Extent of disclosure index (0–10) company and set detailed standards of accountability Review and approval requirements for related-party for company insiders. transactions; Disclosure requirements for related- What do the indicators cover? party transactions Doing Business measures the protection of minority Extent of director liability index (0–10) investors from conflicts of interest through one set of Ability of minority shareholders to sue and hold indicators and shareholders’ rights in corporate interested directors liable for prejudicial related- governance through another. The ranking of economies party transactions; Available legal remedies on the strength of minority investor protections is (damages, disgorgement of profits, fines, determined by sorting their distance to frontier scores imprisonment, rescission of the transaction) for protecting minority investors. These scores are the Ease of shareholder suits index (0–10) simple average of the distance to frontier scores for the extent of conflict of interest regulation index and the Access to internal corporate documents; Evidence extent of shareholder governance index. To make the obtainable during trial and allocation of legal data comparable across economies, a case study uses expenses several assumptions about the business and the Extent of conflict of interest regulation index transaction. (0–10) The business (Buyer): Simple average of the extent of disclosure, extent of director liability and ease of shareholder indices  Is a publicly traded corporation listed on the economy’s most important stock exchange If the Extent of shareholder rights index (0-10) number of publicly traded companies listed on that Shareholders’ rights and role in major corporate exchange is less than 10, or if there is no stock decisions exchange in the economy, it is assumed that Buyer is a large private company with multiple Extent of ownership and control index (0-10) shareholders. Governance safeguards protecting shareholders  Has a board of directors and a chief executive from undue board control and entrenchment officer (CEO) who may legally act on behalf of Buyer Extent of corporate transparency index (0-10) where permitted, even if this is not specifically required by law. Corporate transparency on ownership stakes,  Has a supervisory board (applicable to economies compensation, audits and financial prospects with a two-tier board system) on which 60% of the Extent of shareholder governance index shareholder-elected members have been appointed (0–10) by Mr. James, who is Buyer’s controlling Simple average of the extent of shareholders rights, shareholder and a member of Buyer’s board of extent of ownership and control and extent of directors. corporate transparency indices  Has not adopted any bylaws or articles of Strength of minority investor protection association that differ from default minimum index (0–10) standards and does not follow any nonmandatory codes, principles, recommendations or guidelines Simple average of the extent of conflict of interest regulation and extent of shareholder governance relating to corporate governance. indices Doing Business 2017 United States 80  Is a manufacturing company with its own distribution network. The transaction involves the following details:  Mr. James owns 60% of Buyer and elected two directors to Buyer’s five-member board.  Mr. James also owns 90% of Seller, a company that operates a chain of retail hardware stores. Seller recently closed a large number of its stores Mr. James proposes that Buyer purchase Seller’s unused fleet of trucks to expand Buyer’s distribution of its food products, a proposal to which Buyer agrees. The price is equal to 10% of Buyer’s assets and is higher than the market value.  The proposed transaction is part of the company’s ordinary course of business and is not outside the authority of the company.  Buyer enters into the transaction. All required approvals are obtained, and all required disclosures made (that is, the transaction is not fraudulent).  The transaction causes damages to Buyer. Shareholders sue Mr. James and the other parties that approved the transaction. Doing Business 2017 United States 81 PROTECTING MINORITY INVESTORS Where does the economy stand today? How strong are minority investor protections against protection index (figure 7.1). While the indicator does self-dealing in United States? The economy has a score not measure all aspects related to the protection of of 6.5 on the strength of minority investor protection minority investors, a higher ranking does indicate that an index, with a higher score indicating stronger economy’s regulations offer stronger minority investor protections. protections against self-dealing in the areas measured. Globally, United States stands at 41 in the ranking of 190 economies on the strength of minority investor Figure 7.1 How United States and comparator economies perform on the strength of minority investor protection index Source: Doing Business database. Doing Business 2017 United States 82 PROTECTING MINORITY INVESTORS One way to put an economy’s scores on the A summary of scoring for the protecting minority investors protecting minority investors indicators into context indicators at the end of this chapter provides details on is to see where the economy stands in the how the indices were calculated. distribution of scores across comparator economies. Figure 7.2 highlights the scores on the various minority investor protection indices for United States. Figure 7.2 Summary of the various minority investor protection indices for United States and comparator economies. Source: Doing Business database. Doing Business 2017 United States 83 PROTECTING MINORITY INVESTORS What are the details? The protecting minority investors indicators reported to disclosure, director liability, shareholder suits, here for United States are based on detailed information shareholder rights, ownership and control and corporate collected through a survey of corporate and securities transparency in a standard case study (for more details, lawyers about securities regulations, company laws and see the Data Notes section of the Doing Business 2017 court rules of evidence and procedure. To construct the report). The summary below shows the details underlying six indicators on minority investor protection, scores are the scores for United States. assigned to each based on a range of conditions relating Table 7.2 Summary of scoring for the protecting minority investors indicators in United States Answer (New Score (New Answer (Los Score (Los York City) York City) Angeles) Angeles) Strength of minority investor protection index (0-10) 6.3 6.7 Extent of conflict of interest regulation index (0-10) 8.3 8.3 Extent of disclosure index (0-10) 7.0 8.0 Shareholders or Board of board of directors Which corporate body is legally sufficient to approve the directors 1.0 excluding 2.0 Buyer-Seller transaction? (0-3) including interested interested parties members Full disclosure Must Mr. James disclose his conflict of interest to the board Full disclosure of 2.0 of all material 2.0 of directors? (0-2) all material facts facts Disclosure on Disclosure on the the transaction Must Buyer disclose the transaction in published periodic transaction and 2.0 and on the 2.0 filings (annual reports)? (0-2) on the conflict of conflict of interest interest Disclosure on Disclosure on the the transaction Must Buyer immediately disclose the transaction to the transaction and 2.0 and on the 2.0 public and/or shareholders? (0-2) on the conflict of conflict of interest interest Must an external body review the terms of the transaction No 0.0 No 0.0 before it takes place? (0-1) Extent of director liability index (0-10) 9.0 8.0 Can shareholders representing 10% of Buyer's share capital sue directly or derivatively for the damage the transaction Yes 1.0 Yes 1.0 caused to Buyer? (0-1) Can shareholders hold the interested director liable for the Liable if unfair or Liable if 2.0 1.0 damage the transaction caused to Buyer? (0-2) prejudicial negligent Can shareholders hold the other directors liable for the Liable if unfair or Liable if unfair 2.0 2.0 damage the transaction caused to Buyer (0-2) prejudicial or prejudicial Must Mr. James pay damages for the harm caused to Buyer Yes 1.0 Yes 1.0 upon a successful claim by shareholders? (0-1) Must Mr. James repay profits made from the transaction Yes 1.0 Yes 1.0 upon a successful claim by shareholders? (0-1) Doing Business 2017 United States 84 Is Mr. James disqualifed or fined and imprisoned upon a No 0.0 No 0.0 successful claim by shareholders? (0-1) Voidable if Can a court void the transaction upon a successful claim by Voidable if unfair 2.0 unfair or 2.0 shareholders? (0-2) or prejudicial prejudicial Ease of shareholder suits index (0-10) 9.0 9.0 Before suing can shareholders representing 10% of Buyer's Yes 1.0 Yes 1.0 share capital inspect the transaction documents? (0-1) Can the plaintiff obtain any documents from the defendant Any relevant Any relevant 3.0 3.0 and witnesses at trial? (0-3) document document Can the plaintiff request categories of documents from the Yes 1.0 Yes 1.0 defendant without identifying specific ones? (0-1) Can the plaintiff directly question the defendant and Yes 2.0 Yes 2.0 witnesses at trial? (0-2) Is the level of proof required for civil suits lower than that of Yes 1.0 Yes 1.0 criminal cases? (0-1) Can shareholder plaintiffs recover their legal expenses from Yes if Yes if successful 1.0 1.0 the company? (0-2) successful Extent of shareholder governance index (0-10) 4.3 5.0 Extent of shareholder rights index (0-10) 4.0 4.0 Does the sale of 51% of Buyer's assets require shareholder Yes 1.0 Yes 1.0 approval? Can shareholders representing 10% of Buyer's share capital No 0.0 Yes 1.0 call for an extraordinary meeting of shareholders? Must Buyer obtain its shareholders’ approval every time it No 0.0 No 0.0 issues new shares? Do shareholders automatically receive preemption rights No 0.0 No 0.0 every time Buyer issues new shares? Must shareholders approve the election and dismissal of the No 0.0 No 0.0 external auditor? Are changes to the rights of a class of shares only possible if Yes 1.0 No 0.0 the holders of the affected shares approve? Assuming that Buyer is a limited company, does the sale of Yes 1.0 Yes 1.0 51% of its assets require member approval? Assuming that Buyer is a limited company, can members representing 10% call for an extraordinary meeting of Yes 1.0 Yes 1.0 members? Assuming that Buyer is a limited company, must all members No 0.0 No 0.0 consent to add a new member? Assuming that Buyer is a limited company, must a member first offer to sell his interest to the existing members before No 0.0 No 0.0 selling to a non-member? Extent of ownership and control index (0-10) 4.0 5.0 Is it forbidden to appoint the same individual as CEO and No 0.0 No 0.0 chair of the board of directors? Must the board of directors include independent and Yes 1.0 Yes 1.0 nonexecutive board members? Can shareholders remove members of the board of directors Yes 1.0 Yes 1.0 without cause before the end of their term? Must the board of directors include a separate audit Yes 1.0 Yes 1.0 committee exclusively comprising board members? Must a potential acquirer make a tender offer to all No 0.0 No 0.0 Doing Business 2017 United States 85 shareholders upon acquiring 50% of Buyer? Must Buyer pay dividends within a maximum period set by No 0.0 Yes 1.0 law after the declaration date? Is a subsidiary prohibited from acquiring shares issued by its No 0.0 No 0.0 parent company? Assuming that Buyer is a limited company, is there a Yes 1.0 Yes 1.0 management deadlock breaking mechanism? Assuming that Buyer is a limited company, must a potential acquirer make a tender offer to all shareholders upon No 0.0 No 0.0 acquiring 50% of Buyer? Assuming that Buyer is a limited company, must Buyer distribute profits within a maximum period set by law after No 0.0 No 0.0 the declaration date? Extent of corporate transparency index (0-10) 5.0 6.0 Must Buyer disclose direct and indirect beneficial ownership Yes 1.0 Yes 1.0 stakes representing 5%? Must Buyer disclose information about board members’ other directorships as well as basic information on their Yes 1.0 Yes 1.0 primary employment? Must Buyer disclose the compensation of individual Yes 1.0 Yes 1.0 managers? Must a detailed notice of general meeting be sent 21 days No 0.0 Yes 1.0 before the meeting? Can shareholders representing 5% of Buyer’s share capital No 0.0 No 0.0 put items on the agenda for the general meeting? Must Buyer's annual financial statements be audited by an Yes 1.0 Yes 1.0 external auditor? Must Buyer disclose its audit reports to the public? Yes 1.0 Yes 1.0 Assuming that Buyer is a limited company, must members No 0.0 No 0.0 meet at least once a year? Assuming that Buyer is a limited company, can members No 0.0 No 0.0 representing 5% put items on the meeting agenda? Assuming that Buyer is a limited company, must Buyer's annual financial statements be audited by an external No 0.0 No 0.0 auditor? Source: Doing Business database. Doing Business 2017 United States 86 PAYING TAXES Taxes are essential. The level of tax rates needs to be WHAT THE PAYING TAXES INDICATORS carefully chosen—and needless complexity in tax rules avoided. Firms in economies that rank better MEASURE on the ease of paying taxes in the Doing Business study tend to perceive both tax rates and tax Tax payments for a manufacturing company administration as less of an obstacle to business in 2014 (number per year adjusted for according to the World Bank Enterprise Survey electronic and joint filing and payment) research. Total number of taxes and contributions paid, What do the indicators cover? including consumption taxes (value added tax, sales tax or goods and service tax) Using a case scenario, Doing Business records the Method and frequency of filing and payment taxes and mandatory contributions that a medium- size company must pay in a given year as well as Time required to comply with 3 major taxes measures of the administrative burden of paying (hours per year) taxes and contributions and dealing with postfiling Collecting information and computing the tax processes. This case scenario uses a set of financial payable statements and assumptions about transactions made over the year. Information is also compiled on Completing tax return forms, filing with the frequency of filing and payments, time taken to proper agencies comply with tax laws, time taken to comply with the Arranging payment or withholding requirements of postfiling processes and time Preparing separate tax accounting books, if waiting for these processes to be completed. The required ranking of economies on the ease of paying taxes is determined by sorting their distance to frontier Total tax rate (% of profit before all taxes) scores on the ease of paying taxes. These scores are Profit or corporate income tax the simple average of the distance to frontier scores Social contributions and labor taxes paid by for each of the four component indicators – number the employer of tax payments. time, total tax rate and postfiling index – with a threshold and a nonlinear Property and property transfer taxes transformation applied to one of the component Dividend, capital gains and financial indicators, the total tax rate1. If both VAT (or GST) transactions taxes and corporate income tax apply, the postfiling index Waste collection, vehicle, road and other taxes is the simple average of the distance to frontier scores for each of the four components: the time to Postfiling Index comply with a VAT or GST refund, the time to obtain The time to comply with a VAT or GST refund a VAT or GST refund, the time to comply with a corporate income tax audit and the time to complete The time to receive a VAT or GST refund a corporate income tax audit. If only VAT (or GST) or The time to comply with a corporate income corporate income tax applies, the postfiling index is tax audit the simple average of the scores for only the two The time to complete a corporate income tax components pertaining to the applicable tax. If audit neither VAT (or GST) nor corporate income tax 1 The nonlinear distance to frontier for the total tax rate is equal to the distance to frontier for the total tax rate to the power of 0.8. The threshold is defined as the total tax rate at the 15th percentile of the overall distribution for all years included in the analysis up to and including Doing Business 2015, which is 26.1%. All economies with a total tax rate below this threshold receive the same score as the economy at the threshold. Doing Business 2017 United States 87 applies, the postfiling index is not included in the Assumptions about the corporate income tax ranking of the ease of paying taxes. audit process: Taxes and mandatory contributions include  An error in the calculation of the income tax corporate income tax, turnover tax and all labor liability (for example, use of incorrect tax taxes and contributions paid by the company. A depreciation rates, or incorrectly treating an range of standard deductions and exemptions are expense as tax deductible) leads to an also recorded. incorrect income tax return and consequently All financial statement variables are proportional to an underpayment of corporate income tax. 2012 income per capita. To make the data  TaxpayerCo. discovered the error and comparable across economies, several assumptions voluntarily notified the tax authority of the are used. error in the corporate income tax return. TaxpayerCo is a medium-size business that started operations on January 1, 2014. The business starts from the same financial position in each economy. All the taxes and mandatory contributions paid during the second year of operation are recorded. Taxes and mandatory contributions are measured at all levels of government. Assumptions about the VAT refund process:  In June 2015, TaxpayerCo. makes a large capital purchase: one additional machine for manufacturing pots.  The value of the machine is 65 times income per capita of the economy.  Sales are equally spread per month (that is, 1,050 times income per capita divided by 12).  Cost of goods sold are equally expensed per month (that is, 875 times income per capita divided by 12).  The seller of the machinery is registered for VAT or general sales tax (GST).  Excess input VAT incurred in June will be fully recovered after four consecutive months if the VAT or GST rate is the same for inputs, sales and the machine and the tax reporting period is every month. . Doing Business 2017 United States 88 PAYING TAXES Where does the economy stand today? What is the administrative burden of complying with tax table 8.3 at the end of this chapter for details). Most obligations and postfiling processes in United States— indicator sets refer to a case scenario in the largest and how much do firms pay in taxes? Globally, United business city of an economy, except for 11 economies for States stands at in the ranking of 190 economies on the which the data are a population-weighted average of the ease of paying taxes (figure 8.1). The rankings for 2 largest business cities. See the chapter on distance to comparator economies and the regional average ranking frontier and ease of doing business ranking at the end of provide other useful information for assessing the tax this profile for more details. compliance burden for businesses in (see table 8.2 and . Figure 8.1 How United States and comparator economies rank on the ease of paying taxes Source: Doing Business database. Doing Business 2017 United States 89 PAYING TAXES Economies around the world have made paying taxes and exemptions. Many have lowered tax rates. Changes faster, easier and less costly for businesses—such as by have brought concrete results. Some economies consolidating payments and filings of taxes, offering simplifying tax payment and reducing rates have seen electronic systems for filing and payment, establishing tax revenue rise. What tax reforms has Doing Business taxpayer service centers or allowing for more deductions recorded in United States (table 8.1)? Table 8.1 How has United States made paying taxes easier—or not? By Doing Business report year from DB2011 to DB2017 DB year Reform In the United States the introduction of a new tax on payroll DB2011 increased taxes on companies operating within the New York City metropolitan commuter transportation district. Source: Doing Business database. Note: For information on reforms in earlier years (back to DB2006), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Doing Business 2017 United States 90 PAYING TAXES What are the details? The indicators reported here for United States are LOCATION OF STANDARDIZED COMPANY based on the taxes and contributions that would be paid by a standardized case study company used by Doing Business in collecting the data (see the section City: New York City, Los Angeles in this chapter on what the indicators cover). Tax practitioners are asked to review a set of financial statements as well as a standardized list of The taxes and contributions paid are listed in table 8.2 assumptions and transactions that the company below, along with the associated number of payments, completed during its 2nd year of operation. time and tax rate. Respondents are asked how much taxes and mandatory contributions the business must pay how The postfiling index is based on four components—the these taxes are filed and paid, how much time time to comply with a VAT or GST refund, the time to taxpayers spend preparing, filing and paying three obtain a VAT or GST refund, the time to comply with a major taxes (profit taxes, labor taxes including corporate income tax audit and the time to complete a mandatory contributions and consumption taxes) and corporate income tax audit. These components are how much time taxpayers spend complying with based on expanded case study assumptions. If only VAT postfiling processes and waiting for these processes (or GST) or corporate income tax applies for an to be completed. economy, the postfiling index is the simple average of the scores for only the two components pertaining to the applicable tax. If neither VAT (or GST) nor corporate income tax applies, the postfiling index is not included in the ranking of the ease of paying taxes. Table 8.2 Summary of tax rates and administration Total tax Notes on New York City: Tax or Payments Notes on Time Statutory Tax base rate (% of total tax mandatory contribution (number) payments (hours) tax rate profit) rate 10.323% NY City and State property 45% of 1 per $100 7.12 tax FMV valuation gross Employer paid - Federal old- salaries age, survivors and disability 1 online 55 6.2% 6.99 with insurance tax (OASDI) ceiling taxable NYS corporation tax 0 jointly 7.1% 5.47 income taxable NYC corporation tax 1 online 8.85% 4.00 income Doing Business 2017 United States 91 Total tax Notes on New York City: Tax or Payments Notes on Time Statutory Tax base rate (% of total tax mandatory contribution (number) payments (hours) tax rate profit) rate 34% taxable Federal corporate income tax 1 online 87 (progressiv 17.80 income e schedule) Employer paid - Hospital gross 0 jointly 1.45% 1.64 insurance contributions salaries NYC real estate transfer tax 1 2.63% sale price 1.59 gross Employer paid - NYS salaries 1 online 4.1% 0.86 unemployment tax with ceiling Employer paid - Metropolitan gross commuter transportation 1 online 0.34% 0.38 salaries mobility tax (MCTMT) 0.6% (6% gross Employer paid - Federal FUTA - salaries 1 online 0.08 unemployment tax (FUTA) 5.4% tax with credit) ceiling NY City and State sales and leasing 1 8.875% 0.07 use tax of lease truck expenses 18.4 cents fuel small Fuel tax 1 + 8 cents consumpti 0.00 amount per gallon on Sales tax 1 online 33 8.875% sales 0.00 withheld gross Employee paid - Federal old- salaries age, survivors and disability 0 online 6.2% 0.00 withheld with insurance tax (OASDI) ceiling Employee paid - Hospital gross 0 jointly 1.45% 0.00 withheld insurance contributions salaries Totals 11.0 175.0 46.0 Total tax Notes on Los Angeles: Tax or Payments Notes on Time Statutory Tax base rate (% of total tax mandatory contribution (number) payments (hours) tax rate profit) rate gross Federal Old-age, survivors salaries and disability insurance tax 1 online 55 6.2% 6.99 with (OASDI) ceiling Doing Business 2017 United States 92 Total tax Notes on Los Angeles: Tax or Payments Notes on Time Statutory Tax base rate (% of total tax mandatory contribution (number) payments (hours) tax rate profit) rate taxable CA State corporation tax 1 online 8.84% 6.75 income 34% taxable Federal corporate income tax 1 online 87 (progressiv 20.29 income e schedule) Los Angeles City Business Tax gross 1 online 0.127% 2.25 ("LACBT") receipts MV of land LA & State Property Taxes 1 online 1.198% and 1.77 buildings Employer paid - Hospital gross 0 jointly 1.45% 1.64 insurance contributions salaries 4.5% (3.4% gross UI + 0.1% salaries CA State unemployment tax 1 online 0.76 ETT + 1% with SDI ) ceiling $2.80 per $500 of LA Real Estate Transfer Tax 1 sale price 0.34 considerati on 0.6% (6% gross Federal unemployment tax FUTA - salaries 1 online 0.08 (FUTA) 5.4% tax with credit) ceiling 18.4 cents fuel small Fuel tax 1 + 8 cents consumpti 0.00 amount per gallon on Sales tax 1 online 33 9% sales 0.00 withheld gross Employee paid - Federal old- salaries age, survivors and disability 0 jointly 6.2% 0.00 withheld with insurance tax (OASDI) ceiling Employee paid - Hospital gross 0 jointly 1.45% 0.00 withheld insurance contributions salaries CA State & City Sales and Use leasing 0 jointly 8.875% 0.00 Tax on lease of new truck expenses Totals 10.0 175.0 40.9 Source: Doing Business database. Doing Business 2017 United States 93 Doing Business 2017 United States 94 TRADING ACROSS BORDERS In today’s globalized world, making trade between WHAT THE TRADING ACROSS BORDERS economies easier is increasingly important for INDICATORS MEASURE FOR IMPORT & EXPORT business. Excessive use of paper documents, burdensome customs procedures, inefficient port operations and inadequate infrastructure all lead Documentary compliance – cost & time to extra costs and delays for exporters and Obtain, prepare and submit documents: importers, stifling trade potential. -During transport, clearance, inspections and port What do the indicators cover? or border handling in origin economy Doing Business records the time and cost -Required by origin, destination and transit associated with the logistical process of exporting economies and importing goods. Under the new Covers all documents by law and in practice methodology introduced this year, Doing Business Border compliance – cost & time measures the time and cost (excluding tariffs) associated with three sets of procedures — Customs clearance and inspections documentary compliance, border compliance and Inspections by other agencies if applied to more domestic transport—within the overall process of than 10% of shipments) exporting or importing a shipment of goods. The Port or border handling ranking of economies on the ease of trading across borders is determined by sorting their Processing documents during clearance, distance to frontier scores for trading across inspections and port or border handling borders. These scores are the simple average of Domestic transport* the distance to frontier scores for the time and Loading and unloading of shipment cost for documentary compliance and border compliance to export and import (domestic Transport between warehouse and terminal/port transport is not used for calculating the ranking). Transport between terminal/port and border Traffic delays and road police checks while To make the data comparable across economies, a shipment is en route few assumptions are made about the traded goods and the transactions: * Although Doing Business collects and publishes data on the time and cost for domestic transport, it does not use these Time data in calculating the distance to frontier score for trading  Time is measured in hours, and 1 day is 24 across borders or the ranking on the ease of trading across hours (for example, 22 days are recorded as 22 borders. × 24 = 528 hours). If customs clearance takes 7.5 hours, the data are recorded as is. Cost Alternatively, suppose that documents are  Insurance cost and informal payments for which no submitted to a customs agency at 8:00 a.m., are receipt is issued are excluded from the costs recorded. processed overnight and can be picked up at Costs are reported in U.S. dollars. Contributors are 8:00 a.m. the next day. In this case the time for asked to convert local currency into U.S. dollars based customs clearance would be recorded as 24 on the exchange rate prevailing on the day they answer hours because the actual procedure took 24 the questionnaire. hours. Doing Business 2017 United States 95 Assumptions of the case study  If government fees are determined by the value of the shipment, the value is assumed to be $50,000.  For each of the 190 economies covered by Doing Business, it is assumed that a shipment  The product is new, not secondhand or used travels from a warehouse in the largest business merchandise. city of the exporting economy to a warehouse in the largest business city of the importing  The exporting firm is responsible for hiring and paying economy. For 11 economies the data are also for a freight forwarder or customs broker (or both) and collected, under the same case study pays for all costs related to international shipping, assumptions, for the second largest business domestic transport, clearance and mandatory city. inspections by customs and other government agencies, port or border handling, documentary  The import and export case studies assume compliance fees and the like for exports. The importing different traded products. It is assumed that firm is responsible for the above costs for imports. each economy imports a standardized shipment of 15 metric tons of containerized  The mode of transport is the one most widely used for auto parts (HS 8708) from its natural import the chosen export or import product and the trading partner—the economy from which it imports partner, as is the seaport, airport or land border the largest value (price times quantity) of auto crossing. parts. It is assumed that each economy exports the product of its comparative advantage  All electronic submissions of information requested by (defined by the largest export value) to its any government agency in connection with the natural export partner—the economy that is the shipment are considered to be documents obtained, largest purchaser of this product. Special prepared and submitted during the export or import products such as precious metal and gems, live process. animals and pharmaceuticals are excluded from the list of possible export products. However,  A port or border is defined as a place (seaport, airport the second largest product category is or land border crossing) where merchandise can enter considered as needed. or leave an economy.  A shipment is a unit of trade. Export shipments  Government agencies considered relevant are agencies do not necessarily need to be containerized, such as customs, port authorities, road police, border while import shipments of auto parts are guards, standardization agencies, ministries or assumed to be containerized. departments of agriculture or industry, national security agencies and any other government authorities. Doing Business 2017 United States 96 TRADING ACROSS BORDERS Where does the economy stand today? The Trading across Borders indicator refers to a case Globally, United States stands at 35 in the ranking of 190 study scenario of a warehouse in the largest business city economies on the ease of trading across borders (figure of an economy (except for 11 economies for which the 9.1). data are a population-weighted average of the 2 largest While not included in the distance to frontier or ease of business cities) trading with the main import and export doing business ranking, data on domestic transportation partner through the economy’s main border crossing. is also recorded for all economies and provided in Table 9.3. Figure 9.1 How United States and comparator economies rank on the ease of trading across borders Source: Doing Business database. Doing Business 2017 United States 97 TRADING ACROSS BORDERS What are the details? The indicators reported here for United States are LOCATION OF STANDARDIZED COMPANY based on a set of specific predefined procedures for trading a shipment of goods by the most widely used mode of transport (whether sea or land). The City: New York City, Los Angeles information on the time and cost to complete export and import is collected from local freight forwarders, The details on the predefined set of procedures, and the customs brokers and traders. associated time and cost, for exporting and importing a shipment of goods are listed in the summary bellow, along with the required documents. Table 9.2 Summary of export and import time and cost for trading across borders in United States New York City Los Angeles OECD high income Time to export: Border compliance 2 2 12 (hours) Cost to export: Border compliance 175 175 150 (USD) Time to export: Documentary 2 2 3 compliance (hours) Cost to export: Documentary 60 60 36 compliance (USD) Time to import: Border compliance 2 2 9 (hours) Cost to import: Border compliance 175 175 115 (USD) Time to import: Documentary 8 8 4 compliance (hours) Cost to import: Documentary 100 100 26 compliance (USD) Source: Doing Business database. Table 9.3 Summary of trading details, transport time and documents for trading across borders in United States New York City Los Angeles Export Import Export Import HS 84 : Nuclear HS 8708: Parts and HS 84 : Nuclear HS 8708: Parts and Product reactors, boilers, accessories of reactors, boilers, accessories of machinery and motor vehicles machinery and motor vehicles Doing Business 2017 United States 98 New York City Los Angeles Export Import Export Import mechanical mechanical appliances; parts appliances; parts thereof thereof Trade partner Canada Mexico Canada Mexico Buffalo border Laredo border Detroit border El Paso border Border crossing crossing crossing crossing Distance (km) 600 3192 3670 1295 Domestic transport time (hours) 24 109 85 31 Domestic transport cost (USD) 1361 4373 6017 1931 Source: Doing Business database. Documents used to export Inland bill of lading Commercial Invoice/ cargo control document NAFTA Certificate of origin/ Canadian Customs Invoice Packing List Documents used to import Inland bill of lading NAFTA - Certificate of origin Commercial Invoice Packing List Customs Release Form 3461 Customs Entry Form 7501 Source: Doing Business database. Note: Doing Business continues to collect data on the number of documents needed to trade internationally. Unlike in previous years, however, these data are excluded from the calculation of the distance to frontier score and ranking. The time and cost for documentary compliance serve as better measures of the overall cost and complexity of compliance with documentary requirements than does the number of documents required. Doing Business 2017 United States 99 Figure 9.2 Summary of United States on the ease of trading across borders Export (New York City) Import (New York City) Export (Los Angeles) Import (Los Angeles) Source: Doing Business database. Doing Business 2017 United States 100 ENFORCING CONTRACTS WHAT THE ENFORCING CONTRACTS Effective commercial dispute resolution has many benefits. Courts are essential for entrepreneurs INDICATORS MEASURE because they interpret the rules of the market and protect economic rights. Efficient and transparent Time required to enforce a contract through courts encourage new business relationships because the courts (calendar days) businesses know they can rely on the courts if a new customer fails to pay. Speedy trials are essential for Time to file and serve the case small enterprises, which may lack the resources to Time for trial and to obtain the judgment stay in business while awaiting the outcome of a long Time to enforce the judgment court dispute. Cost required to enforce a contract through What do the indicators cover? the courts (% of claim) Doing Business measures the time and cost for Attorney fees resolving a standardized commercial dispute through a local first-instance court. In addition, this year it Court fees introduces a new measure, the quality of judicial Enforcement fees processes index, evaluating whether each economy Quality of judicial processes index (0-18) has adopted a series of good practices that promote quality and efficiency in the court system. This new Court structure and proceedings (0-6) index replaces the indicator on procedures, which Case management (0-6) was eliminated this year. The ranking of economies on the ease of enforcing contracts is determined by Court automation (0-4) sorting their distance to frontier scores. These scores Alternative dispute resolution (0-3) are the simple average of the distance to frontier scores for each of the component indicators. The dispute in the case study involves the breach of a  The seller requests a pretrial attachment to secure sales contract between 2 domestic businesses. The the claim. case study assumes that the court hears an expert on  The dispute on the quality of the goods requires an the quality of the goods in dispute. This distinguishes expert opinion. the case from simple debt enforcement. To make the  The judge decides in favor of the seller; there is no data comparable across economies, Doing Business appeal. uses several assumptions about the case:  The seller enforces the judgment through a public  The dispute concerns a lawful transaction sale of the buyer’s movable assets. between two businesses (Seller and Buyer), both located in the economy’s largest business city. For 11 economies the data are also collected for the second largest business city.  The buyer orders custom-made goods, then fails to pay.  The value of the dispute is 200% of the income per capita or the equivalent in local currency of USD 5,000, whichever is greater.  The seller sues the buyer before the court with jurisdiction over commercial cases worth 200% of income per capita or $5,000. Doing Business 2017 United States 101 ENFORCING CONTRACTS Where does the economy stand today? How efficient is the process of resolving a commercial on distance to frontier and ease of doing business dispute through the courts in United States? According ranking at the end of this profile for more details. to data collected by Doing Business, contract Globally, United States stands at 20 in the ranking of 190 enforcement takes 420.0 days and costs 30.5% of the economies on the ease of enforcing contracts (figure value of the claim. Most indicator sets refer to the 10.1). The rankings for comparator economies and the largest business city of an economy, except for 11 regional average ranking provide other useful economies for which the data are a population-weighted benchmarks for assessing the efficiency of contract average of the 2 largest business cities. See the chapter enforcement in United States. Figure 10.1 How United States and comparator economies rank on the ease of enforcing contracts Source: Doing Business database. Doing Business 2017 United States 102 ENFORCING CONTRACTS What are the details? The data on time and cost reported here for United ECONOMY DETAILS States are built by following the step-by-step evolution of a commercial sale dispute within the Claim value - Los court, under the assumptions about the case USD 111,727 Angeles: described above (figure 10.2). The time and cost of resolving the standardized dispute are identified Claim value - New through study of the codes of civil procedure and USD 111,727 York City: other court regulations, as well as through questionnaires completed by local litigation lawyers Superior Court of (and, in a quarter of the economies covered by Court name - Los California, County of Los Doing Business, by judges as well). Angeles: Angeles Supreme Court of the Court name - New State of New York, Civil York City: Branch New York City, Los City: Angeles Doing Business 2017 United States 103 Figure 10.2 Time and cost of contract enforcement in United States and comparator economies Source: Doing Business database. Doing Business 2017 United States 104 Table 10.2 Details on time and cost for enforcing contracts in United States OECD high Indicator New York City Los Angeles income average Time (days) 370.0 495.0 553 Filing and service 30 30 Trial and judgment 240 365 Enforcement of judgment 100 100 Cost (% of claim) 22.9 42.0 21.3 Attorney fees 14.4 30.0 Court fees 5.0 5.0 Enforcement fees 3.5 7.0 Source: Doing Business database. Doing Business 2017 United States 105 ENFORCING CONTRACTS Quality of judicial processes index The quality of judicial processes index measures The scores reported here show which of these good whether each economy has adopted a series of good practices are available in United States (figure 10.3). practices in its court system in four areas: court This methodology was initially developed by Djankov and structure and proceedings, case management, court others (2003) and is adopted here with several changes. automation and alternative dispute resolution. The The quality of judicial processes index was introduced in score on the quality of judicial processes index is the Doing Business 2016. The good practices tested in this sum of the scores on these 4 sub-components. The index were developed on the basis of internationally index ranges from 0 to 18, with higher values recognized good practices promoting judicial efficiency. indicating better, more efficient judicial processes. Figure 10.3 Quality of judicial processes index in United States and comparator economies Source: Doing Business database. Doing Business 2017 United States 106 Table 10.3 Details of the quality of judicial processes index in United States Answer Answer (New Score (New Score (Los (Los York City) York City) Angeles) Angeles) Quality of judicial processes index (0-18) 15.0 12.0 Court structure and proceedings (0-5) 5.0 3.5 1. Is there a court or division of a court dedicated Yes 1.5 No 0.0 solely to hearing commercial cases? 2. Small claims court 1.5 1.5 2.a. Is there a small claims court or a fast-track Yes Yes procedure for small claims? 2.b. If yes, is self-representation allowed? Yes Yes 3. Is pretrial attachment available? Yes 1.0 Yes 1.0 Yes, Yes, 4. Are new cases assigned randomly to judges? 1.0 1.0 automatic automatic 5. Does a woman's testimony carry the same Yes 0.0 Yes 0.0 evidentiary weight in court as a man's? Case management (0-6) 4.5 5.0 1. Time standards 1.0 1.0 1.a. Are there laws setting overall time standards for Yes Yes key court events in a civil case? 1.b. If yes, are the time standards set for at least Yes Yes three court events? 1.c. Are these time standards respected in more than Yes Yes 50% of cases? 2. Adjournments 0.5 0.0 2.a. Does the law regulate the maximum number of No No adjournments that can be granted? 2.b. Are adjournments limited to unforeseen and Yes No exceptional circumstances? 2.c. If rules on adjournments exist, are they respected Yes n.a. in more than 50% of cases? 3. Can two of the following four reports be generated about the competent court: (i) time to disposition report; (ii) clearance rate report; (iii) age of No 0.0 Yes 1.0 pending cases report; and (iv) single case progress report? 4. Is a pretrial conference among the case Yes 1.0 Yes 1.0 Doing Business 2017 United States 107 Answer Answer (New Score (New Score (Los (Los York City) York City) Angeles) Angeles) management techniques used before the competent court? 5. Are there any electronic case management tools in Yes 1.0 Yes 1.0 place within the competent court for use by judges? 6. Are there any electronic case management tools in Yes 1.0 Yes 1.0 place within the competent court for use by lawyers? Court automation (0-4) 3.0 1.0 1. Can the initial complaint be filed electronically through a dedicated platform within the competent Yes 1.0 No 0.0 court? 2. Is it possible to carry out service of process electronically for claims filed before the competent No 0.0 No 0.0 court? 3. Can court fees be paid electronically within the Yes 1.0 No 0.0 competent court? 4. Publication of judgments 1.0 1.0 4.a Are judgments rendered in commercial cases at all levels made available to the general public Yes Yes through publication in official gazettes, in newspapers or on the internet or court website? 4.b. Are judgments rendered in commercial cases at the appellate and supreme court level made available to the general public through publication in official Yes Yes gazettes, in newspapers or on the internet or court website? Alternative dispute resolution (0-3) 2.5 2.5 1. Arbitration 1.5 1.5 1.a. Is domestic commercial arbitration governed by a consolidated law or consolidated chapter or section Yes Yes of the applicable code of civil procedure encompassing substantially all its aspects? 1.b. Are there any commercial disputes—aside from those that deal with public order or public policy— No No that cannot be submitted to arbitration? 1.c. Are valid arbitration clauses or agreements Yes Yes usually enforced by the courts? 2. Mediation/Conciliation 1.0 1.0 Doing Business 2017 United States 108 Answer Answer (New Score (New Score (Los (Los York City) York City) Angeles) Angeles) 2.a. Is voluntary mediation or conciliation available? Yes Yes 2.b. Are mediation, conciliation or both governed by a consolidated law or consolidated chapter or section Yes Yes of the applicable code of civil procedure encompassing substantially all their aspects? 2.c. Are there financial incentives for parties to attempt mediation or conciliation (i.e., if mediation or No No conciliation is successful, a refund of court filing fees, income tax credits or the like)? Source: Doing Business database. Doing Business 2017 United States 109 RESOLVING INSOLVENCY A robust bankruptcy system functions as a filter, WHAT THE RESOLVING INSOLVENCY ensuring the survival of economically efficient companies and reallocating the resources of INDICATORS MEASURE inefficient ones. Fast and cheap insolvency proceedings result in the speedy return of businesses Time required to recover debt (years) to normal operation and increase returns to Measured in calendar years creditors. By clarifying the expectations of creditors and debtors about the outcome of insolvency Appeals and requests for extension are proceedings, well-functioning insolvency systems can included facilitate access to finance, save more viable Cost required to recover debt (% of debtor’s businesses and sustainably grow the economy. estate) What do the indicators cover? Measured as percentage of estate value Doing Business studies the time, cost and outcome of Court fees insolvency proceedings involving domestic legal Fees of insolvency administrators entities. These variables are used to calculate the recovery rate, which is recorded as cents on the Lawyers’ fees dollar recovered by secured creditors through Assessors’ and auctioneers’ fees reorganization, liquidation or debt enforcement Other related fees (foreclosure or receivership) proceedings. To determine the present value of the amount Outcome recovered by creditors, Doing Business uses the Whether business continues operating as a lending rates from the International Monetary Fund, going concern or business assets are sold supplemented with data from central banks and the piecemeal Economist Intelligence Unit. Recovery rate for creditors To make the data on the time, cost and outcome Measures the cents on the dollar recovered comparable across economies, several assumptions by secured creditors about the business and the case are used: Outcome for the business (survival or not)  A hotel located in the largest city (or cities) has determines the maximum value that can be 201 employees and 50 suppliers. The hotel recovered experiences financial difficulties. Official costs of the insolvency proceedings  The value of the hotel is 100% of the income per are deducted capita or the equivalent in local currency of USD Depreciation of furniture is taken into 200,000, whichever is greater. account  The hotel has a loan from a domestic bank, Present value of debt recovered secured by a mortgage over the hotel’s real estate. The hotel cannot pay back the loan, but Strength of insolvency framework index (0- makes enough money to operate otherwise. 16) In addition, Doing Business evaluates the adequacy Sum of the scores of four component indices: and integrity of the existing legal framework Commencement of proceedings index (0-3) applicable to liquidation and reorganization Management of debtor’s assets index (0-6) proceedings through the strength of insolvency framework index. The index tests whether economies Reorganization proceedings index (0-3) adopted internationally accepted good practices in Creditor participation index (0-4) four areas: commencement of proceedings, management of debtor’s assets, reorganization proceedings and creditor participation. Doing Business 2017 United States 110 RESOLVING INSOLVENCY Where does the economy stand today? Globally, United States stands at 5 in the ranking of 190 framework index. The Resolving Insolvency indicator economies on the ease of resolving insolvency (figure does not measure insolvency proceedings of individuals 11.1). The ranking of economies on the ease of resolving and financial institutions. The data are derived from insolvency is determined by sorting their distance to questionnaire responses by local insolvency practitioners frontier scores for resolving insolvency. These scores are and verified through a study of laws and regulations as the simple average of the distance to frontier scores for well as public information on bankruptcy systems. the recovery rate and the strength of insolvency Figure 11.1 How United States and comparator economies rank on the ease of resolving insolvency Source: Doing Business database. Doing Business 2017 United States 111 RESOLVING INSOLVENCY Recovery of debt in insolvency Data on the time, cost and outcome refer to the most scenario in the largest business city of an economy, likely in-court insolvency procedure applicable under except for 11 economies for which the data are a specific case study assumptions. population-weighted average of the 2 largest business cities. According to data collected by Doing Business, resolving insolvency takes 1.5 years on average and costs 10.0% of the debtor’s estate. The average recovery rate is 78.6 cents on the dollar. Most indicator sets refer to a case Figure 11.2 Efficiency of proceedings - time, cost and recovery rate in United States and comparator economies. Source: Doing Business database. Note: The recovery rate is calculated based on the time, cost and outcome of insolvency proceedings involving domestic legal entities and is recorded as cents on the dollar recovered by secured creditors. The calculation takes into account the outcome: whether the business emerges from the proceedings as a going concern or the assets are sold piecemeal. Then the costs of the proceedings are deducted. Finally, the value lost as a result of the time the money remains tied up in insolvency proceedings is taken into account. The recovery rate is the present value of the remaining proceeds, based on end-2015 lending rates. Doing Business 2017 United States 112 Table 11.1 Summary of data for the strength of insolvency framework index United States Answer Explanation As a general rule, unless a debtor believes that restructuring is hopeless, a debtor will likely seek bankruptcy protection. This is particularly true in a case where the chairman or other decision- maker controls and/or owns a large portion of the debtor equity. Moreover, under U.S. bankruptcy law, absent evidence of fraud or New York gross mismanagement, existing management is permitted to Proceeding City, Los reorganization operate the debtor during the bankruptcy and has the first Angeles opportunity to file a plan. Mirage would therefore likely file for bankruptcy protection and seek and likely achieve a reorganization. However, there is a chance in the current environment that the case could end in a sale or return of the security (i.e., liquidation after a voluntary filing). New York The hotel will continue operating after reorganization. Even if the Outcome City, Los going concern hotel is sold, it will likely be sold as a going concern, because it Angeles would be worth less if it stopped operating. A Chapter 11 restructuring may take up to 18 months. Hotel management will file for voluntary reorganization under Chapter 11. At that time, all other proceedings will be automatically stayed. Hotel management will continue operating the hotel under supervision of the US Trustee and a committee of unsecured creditors (appointed by the US Trustee). Unofficial (ad hoc) committees may also be involved. The hotel management will prepare a schedule of assets and liabilities, where it will list all of the New York known claims against Mirage. The court will then issue an order Time (in years) City, Los 1.5 setting the date for all creditors to submit proof of their claims. If Angeles debtor and creditors do not agree on each other's representation of the loan, the issues will be litigated before the court. Once all claims have been confirmed, Mirage will propose a reorganization plan, which must pass "the best interest of the creditors test", so that creditors who vote against the plan receive at least as much as they would have received if the debtor were liquidation. The creditors will vote on the plan and accept it. When the plan becomes effective, the court will enter a final decree closing the case. New York Cost (% of Major expenses will include attorneys' fees (5%), fees of accountants City, Los 10.0 estate) involved in the restructuring proceedings (3%) and court fees (2%). Angeles Recovery rate: 78.6 Source: Doing Business database. Doing Business 2017 United States 113 RESOLVING INSOLVENCY Strength of resolving insolvency index The strength of insolvency framework index is the with higher values indicating insolvency legislation that is sum of the scores on the commencement of better designed for rehabilitating viable firms and proceedings index, management of debtor’s assets liquidating nonviable ones. United States scores 15.0 out index, reorganization proceedings index and creditor of 16 on the strength of resolving insolvency index. participation index. The index ranges from 0 to 16, Figure 11.3 Strength of insolvency framework index (0-16) in United States and comparator economies Source: Doing Business database. Note: Even if the economy’s legal framework includes provisions related to insolvency proceedings (liquidation or reorganization), the economy receives 0 points for the strength of insolvency framework index, if time, cost and outcome indicators are recorded as “no practice”. Doing Business 2017 United States 114 Table 11.2 Summary of data for the strength of insolvency framework index United States Answer (New Score (New Answer (Los Score (Los York City) York City) Angeles) Angeles) Strength of insolvency framework index (0-16) 15.0 15.0 Commencement of proceedings index (0-3) 3.0 3.0 (a) Debtor (a) Debtor may file for may file for both both What procedures are available to a DEBTOR when liquidation 1.0 liquidation 1.0 commencing insolvency proceedings? and and reorganizatio reorganizati n on (a) Yes, a (a) Yes, a creditor creditor may may file for file for both Does the insolvency framework allow a CREDITOR to both liquidation 1.0 1.0 file for insolvency of the debtor? liquidation and and reorganizatio reorganizati n on (a) Debtor (a) Debtor is is generally What basis for commencement of the insolvency generally unable to proceedings is allowed under the insolvency unable to pay 1.0 pay its 1.0 framework? its debts as debts as they mature they mature Management of debtor's assets index (0-6) 6.0 6.0 Does the insolvency framework allow the continuation of contracts supplying essential goods and services to Yes 1.0 Yes 1.0 the debtor? Does the insolvency framework allow the rejection by Yes 1.0 Yes 1.0 the debtor of overly burdensome contracts? Does the insolvency framework allow avoidance of Yes 1.0 Yes 1.0 preferential transactions? Does the insolvency framework allow avoidance of Yes 1.0 Yes 1.0 undervalued transactions? Does the insolvency framework provide for the possibility of the debtor obtaining credit after Yes 1.0 Yes 1.0 commencement of insolvency proceedings? Doing Business 2017 United States 115 Answer (New Score (New Answer (Los Score (Los York City) York City) Angeles) Angeles) (b) Yes over (b) Yes over ordinary ordinary unsecured unsecured Does the insolvency framework assign priority to post- creditors creditors but 1.0 1.0 commencement credit? but not not over over secured secured creditors creditors Reorganization proceedings index (0-3) 3.0 3.0 (b) Only (b) Only creditors creditors whose whose rights Which creditors vote on the proposed reorganization rights are are affected 1.0 1.0 plan? affected by by the the proposed proposed plan plan Does the insolvency framework require that dissenting creditors in reorganization receive at least as much as Yes 1.0 Yes 1.0 what they would obtain in a liquidation? Are the creditors devided into classes for the purposes of voting on the reorganization plan, does each class Yes 1.0 Yes 1.0 vote separately and are creditors in the same class treated equally? Creditor participation index (0-4) 3.0 3.0 Does the insolvency framework require approval by the creditors for selection or appointment of the insolvency Yes 1.0 Yes 1.0 representative? Does the insolvency framework require approval by the No 0.0 No 0.0 creditors for sale of substantial assets of the debtor? Does the insolvency framework provide that a creditor has the right to request information from the insolvency Yes 1.0 Yes 1.0 representative? Does the insolvency framework provide that a creditor has the right to object to decisions accepting or Yes 1.0 Yes 1.0 rejecting creditors' claims? Source: Doing Business database. Doing Business 2017 United States 116 LABOR MARKET REGULATION Doing Business studies the flexibility of regulation of  Operates a supermarket or grocery store in the employment, specifically as it relates to the areas of economy’s largest business city. For 11 hiring, working hours and redundancy. Doing Business economies the data are also collected for the also measures several aspects of job quality such as the second largest business city. availability of maternity leave, paid sick leave and the  Has 60 employees. equal treatment of men and women at the workplace.  Is subject to collective bargaining agreements if such agreements cover more than 50% of the Doing Business 2017 presents the data for the labor food retail sector and they apply even to firms market regulation indicators in an annex. The report that are not party to them. does not present rankings of economies on these  Abides by every law and regulation but does not indicators or include the topic in the aggregate distance grant workers more benefits than those to frontier score or ranking on the ease of doing mandated by law, regulation or (if applicable) business. Detailed data collected on labor market collective bargaining agreements. regulation are available on the Doing Business website (http://www.doingbusiness.org). The data on labor market regulation are based on a detailed questionnaire on employment regulations that is completed by local lawyers and public officials. Employment laws and regulations as well as secondary sources are reviewed to ensure accuracy. To make the data comparable across economies, several assumptions about the worker and the business are used. The worker:  Is a cashier in a supermarket or grocery store, age 19, with one year of work experience.  Is a full-time employee.  Is not a member of the labor union, unless membership is mandatory. The business:  Is a limited liability company (or the equivalent in the economy). Doing Business 2017 United States 117 LABOR MARKET REGULATION What are the details? The data reported here for United States are based on a Employment laws and regulations as well as secondary detailed survey of labor market regulation that is sources are reviewed to ensure accuracy. completed by local lawyers and public officials. Hiring Data on hiring cover five areas: (i) whether fixed-term minimum wage to the average value added per worker contracts are prohibited for permanent tasks; (ii) the (the ratio of an economy’s GNI per capita to the maximum cumulative duration of fixed-term contracts; working-age population as a percentage of the total (iii) the minimum wage for a cashier, age 19, with one population). year of work experience; and (iv) the ratio of the New York City Los Angeles Hiring Data Data Fixed-term contracts prohibited for permanent tasks? No No Maximum length of a single fixed-term contract (months) No limit No limit Maximum length of fixed-term contracts, including renewals (months) No limit No limit Minimum wage applicable to the worker assumed in the case study 1519.2 1688.0 (US$/month) Ratio of minimum wage to value added per worker 0.2 0.2 Source: Doing Business database. Doing Business 2017 United States 118 LABOR MARKET REGULATION Working hours Data on working hours cover nine areas: i) the maximum and nonnursing women can work the same night hours number of working days allowed per week; (ii) the as men; (vii) whether there are restrictions on weekly premium for night work (as a percentage of hourly pay); holiday work; (viii) whether there are restrictions on (iii) the premium for work on a weekly rest day (as a overtime work; and (ix) the average paid annual leave for percentage of hourly pay); (iv) the premium for overtime workers with 1 year of tenure, 5 years of tenure, and 10 work (as a percentage of hourly pay); (v) whether there years of tenure. are restrictions on night work; (vi) whether nonpregnant New York City Los Angeles Working Hours Data Data Maximum number of working days per week 6.0 6.0 Premium for night work (% of hourly pay) 0.0 0.0 Premium for work on weekly rest day (% of hourly pay) 0.0 0.0 Premium for overtime work (% of hourly pay) 50.0 50.0 Restrictions on night work? No No Whether nonpregnant and nonnursing women can work the same Yes Yes night hours as men Restrictions on weekly holiday? No No Restrictions on overtime work? No No Paid annual leave for a worker with 1 year of tenure (working days) 0.0 0.0 Paid annual leave for a worker with 5 years of tenure (working days) 0.0 0.0 Paid annual leave for a worker with 10 years of tenure (working days) 0.0 0.0 Paid annual leave (average for workers with 1, 5 and 10 years of tenure, 0.0 0.0 in working days) Source: Doing Business database. Doing Business 2017 United States 119 LABOR MARKET REGULATION Redundancy rules Data on redundancy cover nine areas: (i) the length of whether the employer needs approval from a third party the maximum probationary period (in months) for to terminate one redundant worker; (vi) whether the permanent employees; (ii) whether redundancy is employer needs approval from a third party to terminate allowed as a basis for terminating workers; (iii) whether a group of nine redundant workers; (vii) whether the law the employer needs to notify a third party (such as a requires the employer to reassign or retrain a worker government agency) to terminate one redundant worker; before making the worker redundant; (viii) whether (iv) whether the employer needs to notify a third party to priority rules apply for redundancies; and (ix) whether terminate a group of nine redundant workers; (v) priority rules apply for reemployment. New York City Los Angeles Difficulty of redundancy index Data Data Maximum length of probationary period (months) n.a. n.a. Dismissal due to redundancy allowed by law? Yes Yes Third-party notification if one worker is dismissed? No No Third-party approval if one worker is dismissed? No No Third-party notification if nine workers are dismissed? No No Third-party approval if nine workers are dismissed? No No Retraining or reassignment obligation before redundancy? No No Priority rules for redundancies? No No Priority rules for reemployment? No No Source: Doing Business database. Doing Business 2017 United States 120 LABOR MARKET REGULATION Redundancy cost Redundancy cost measures the cost of advance notice severance payments applicable to a worker with 1 year requirements and severance payments due when of tenure, a worker with 5 years and a worker with 10 terminating a redundant worker, expressed in weeks of years is considered. One month is recorded as 4 and salary. The average value of notice requirements and 1/3 weeks. New York City Los Angeles Redundancy cost indicator (in salary weeks) Data Data Notice period for redundancy dismissal for a worker with 1 year of 0.0 0.0 tenure Notice period for redundancy dismissal for a worker with 5 years of 0.0 0.0 tenure Notice period for redundancy dismissal for a worker with 10 years of 0.0 0.0 tenure Notice period for redundancy dismissal (average for workers with 1, 5 0.0 0.0 and 10 years of tenure) Severance pay for redundancy dismissal for a worker with 1 year of 0.0 0.0 tenure Severance pay for redundancy dismissal for a worker with 5 years of 0.0 0.0 tenure Severance pay for redundancy dismissal for a worker with 10 years of 0.0 0.0 tenure Severance pay for redundancy dismissal (average for workers with 1, 5 0.0 0.0 and 10 years of tenure) Source: Doing Business database. Doing Business 2017 United States 121 LABOR MARKET REGULATION Job quality Doing Business introduced new data on job quality in 2015. Doing Business 2017 covers eight questions on job quality (i) whether the law mandates equal remuneration for work of equal value; (ii) whether the law mandates nondiscrimination based on gender in hiring; (iii) whether the law mandates paid or unpaid maternity leave; (iv) the minimum length of paid maternity leave (in calendar days); (v) whether employees on maternity leave receive 100% of wages; (vi) the availability of five fully paid days of sick leave a year; (vii) whether a worker is eligible for an unemployment protection scheme after one year of service; and (viii) the minimum duration of the contribution period (in months) required for unemployment. New York City Los Angeles Job Quality Data Data No. Several legislative acts promote gender equality in labor relations including the Fair Labor Standards Act of 1938 and the California Labor Code Section 1197.5, which prohibits employers "to pay any employees at wage rates less than the rates paid to employees of the Equal remuneration for work of equal value? No opposite sex for substantially similar work, when viewed as a composite of skill, effort, and responsibility, and performed under similar working conditions". However the definitions used in these legislative acts do not comply with the ILO's definition of "equal pay for work of equal value" Doing Business 2017 United States 122 New York City Los Angeles Job Quality Data Data Gender nondiscrimination in hiring? Yes Yes Paid or unpaid maternity leave mandated by law? Yes Yes Minimum length of maternity leave (calendar days)? 0.0 0.0 Receive 100% of wages on maternity leave? n.a. n.a. Five fully paid days of sick leave a year? Yes No Unemployment protection after one year of employment? Yes Yes Minimum contribution period for unemployment protection (months)? 6.0 12.0 Source: Doing Business database. Doing Business 2017 United States 123 DISTANCE TO FRONTIER AND EASE OF DOING BUSINESS RANKING Doing Business presents results for two aggregate even though it is no longer at the frontier in a measures: the distance to frontier score and the ease of subsequent year. doing business ranking, which is based on the distance For scores such as those on the strength of legal rights to frontier score. The ease of doing business ranking index or the quality of land administration index, the compares economies with one another; the distance to frontier is set at the highest possible value. For the total frontier score benchmarks economies with respect to tax rate, consistent with the use of a threshold in regulatory best practice, showing the absolute distance calculating the rankings on this indicator, the frontier is to the best performance on each Doing Business defined as the total tax rate at the 15th percentile of the indicator. When compared across years, the distance to overall distribution for all years included in the analysis frontier score shows how much the regulatory up to and including Doing Business 2015. For the time to environment for local entrepreneurs in an economy has pay taxes the frontier is defined as the lowest time changed over time in absolute terms, while the ease of recorded among all economies that levy the three major doing business ranking can show only how much the taxes: profit tax, labor taxes and mandatory regulatory environment has changed relative to that in contributions, and value added tax (VAT) or sales tax. For other economies. the different times to trade across borders, the frontier is defined as 1 hour even though in many economies the Distance to Frontier time is less than that. The distance to frontier score captures the gap between In the same formulation, to mitigate the effects of an economy’s performance and a measure of best extreme outliers in the distributions of the rescaled data practice across the entire sample of 36 indicators for 10 for most component indicators (very few economies Doing Business topics (the labor market regulation need 700 days to complete the procedures to start a indicators are excluded). For starting a business, for business, but many need 9 days), the worst performance example, the former Yugoslav Republic of Macedonia is calculated after the removal of outliers. The definition and New Zealand have the smallest number of of outliers is based on the distribution for each procedures required (1), and New Zealand the shortest component indicator. To simplify the process two rules time to fulfill them (0.5 days). Slovenia has the lowest were defined: the 95th percentile is used for the cost (0.0), and Australia, Colombia and 103 other indicators with the most dispersed distributions economies have no paid-in minimum capital (including minimum capital, number of payments to pay requirement (table 14.1 in the Doing Business 2016 taxes, and the time and cost indicators), and the 99th report). percentile is used for number of procedures. No outlier is removed for component indicators bound by definition Calculation of the distance to frontier score or construction, including legal index scores (such as the Calculating the distance to frontier score for each depth of credit information index, extent of conflict of economy involves two main steps. In the first step interest regulation index and strength of insolvency individual component indicators are normalized to a framework index) and the recovery rate. common unit where each of the 36 component In the second step for calculating the distance to frontier indicators y (except for the total tax rate) is rescaled score, the scores obtained for individual indicators for using the linear transformation (worst − y)/(worst − each economy are aggregated through simple averaging frontier). In this formulation the frontier represents the into one distance to frontier score, first for each topic best performance on the indicator across all economies and then across all 10 topics: starting a business, dealing since 2005 or the third year in which data for the with construction permits, getting electricity, registering indicator were collected. Both the best performance and property, getting credit, protecting minority investors, the worst performance are established every five years paying taxes, trading across borders, enforcing contracts based on the Doing Business data for the year in which and resolving insolvency. More complex aggregation they are established, and remain at that level for the five methods—such as principal components and years regardless of any changes in data in interim years. unobserved components—yield a ranking nearly Thus an economy may set the frontier for an indicator Doing Business 2017 United States 124 identical to the simple average used by Doing Business2. The nonlinear transformation is not based on any Thus Doing Business uses the simplest method: economic theory of an “optimal tax rate” that minimizes weighting all topics equally and, within each topic, giving distortions or maximizes efficiency in an economy’s equal weight to each of the topic components3. overall tax system. Instead, it is mainly empirical in nature. The nonlinear transformation along with the An economy’s distance to frontier score is indicated on a threshold reduces the bias in the indicator toward scale from 0 to 100, where 0 represents the worst economies that do not need to levy significant taxes on performance and 100 the frontier. All distance to frontier companies like the Doing Business standardized case calculations are based on a maximum of five decimals. study company because they raise public revenue in However, indicator ranking calculations and the ease of other ways—for example, through taxes on foreign doing business ranking calculations are based on two companies, through taxes on sectors other than decimals. manufacturing or from natural resources (all of which are The difference between an economy’s distance to outside the scope of the methodology). In addition, it frontier score in any previous year and its score in 2015 acknowledges the need of economies to collect taxes illustrates the extent to which the economy has closed from firms. the gap to the regulatory frontier over time. And in any Calculation of scores for economies with 2 cities given year the score measures how far an economy is covered from the best performance at that time. For each of the 11 economies in which Doing Business Treatment of the total tax rate collects data for the second largest business city as well The total tax rate component of the paying taxes as the largest one, the distance to frontier score is indicator set enters the distance to frontier calculation in calculated as the population-weighted average of the a different way than any other indicator. The distance to distance to frontier scores for these two cities (table frontier score obtained for the total tax rate is 13.1). This is done for the aggregate score, the scores for transformed in a nonlinear fashion before it enters the each topic and the scores for all the component distance to frontier score for paying taxes. As a result of indicators for each topic. the nonlinear transformation, an increase in the total tax rate has a smaller impact on the distance to frontier score for the total tax rate—and therefore on the distance to frontier score for paying taxes—for economies with a below-average total tax rate than it would have had before this approach was adopted in Doing Business 2015 (line B is smaller than line A in figure 14.2 in the Doing Business 2016 report). And for economies with an extreme total tax rate (a rate that is very high relative to the average), an increase has a greater impact on both these distance to frontier scores than it would have had before (line D is bigger than line C in figure 14.2 in the Doing Business 2016 report). 2 See Djankov, Manraj and others (2005). Principal components and unobserved components methods yield a ranking nearly identical to that from the simple average method because both these methods assign roughly equal weights to the topics, since the pairwise correlations among indicators do not differ much. An alternative to the simple average method is to give different weights to the topics, depending on which are considered of more or less importance in the context of a specific economy. 3 For getting credit, indicators are weighted proportionally, according to their contribution to the total score, with a weight of 60% assigned to the strength of legal rights index and 40% to the depth of credit information index. Indicators for all other topics are assigned equal weights Doing Business 2017 United States 125 Table 13.1 Weights used in calculating the distance to implemented regulatory reforms making it easier to do frontier scores for economies with 2 cities covered business in 3 or more of the 10 topics included in this year’s aggregate distance to frontier score. Changes Economy City Weight (%) making it more difficult to do business are subtracted Dhaka 78 Bangladesh from the total number of those making it easier to do Chittagong 22 São Paulo 61 business. Twenty-four economies meet this criterion: Brazil Armenia; Azerbaijan; Benin; Costa Rica; Côte d’Ivoire; Rio de Janeiro 39 Shanghai 55 Cyprus; Hong Kong SAR, China; Indonesia; Jamaica; China Beijing 45 Kazakhstan; Kenya; Lithuania; Madagascar; Mauritania; Mumbai 47 Morocco; Romania; the Russian Federation; Rwanda; India Delhi 53 Senegal; Togo; Uganda; the United Arab Emirates; Jakarta 78 Uzbekistan; and Vietnam. Second, Doing Business sorts Indonesia Surabaya 22 these economies on the increase in their distance to Tokyo 65 Japan frontier score from the previous year using comparable Osaka 35 data. Mexico City 83 Mexico Monterrey 17 Selecting the economies that implemented regulatory Lagos 77 reforms in at least three topics and had the biggest Nigeria Kano 23 improvements in their distance to frontier scores is Karachi 65 intended to highlight economies with ongoing, broad- Pakistan Lahore 35 based reform programs. The improvement in the Moscow 70 Russian Federation distance to frontier score is used to identify the top St. Petersburg 30 New York 60 improvers because this allows a focus on the absolute United States improvement—in contrast with the relative improvement Los Angeles 40 Source: United Nations, Department of Economic and Social shown by a change in rankings—that economies have Affairs, Population Division, World Urbanization Prospects, made in their regulatory environment for business. 2014 Revision. http://esa.un.org/unpd/wup/CD- ROM/Default.aspx. Ease of Doing Business ranking Economies that improved the most across 3 or more Doing Business topics in 2014/15 The ease of doing business ranking ranges from 1 to 190. The ranking of economies is determined by sorting the Doing Business 2016 uses a simple method to calculate aggregate distance to frontier scores, rounded to 2 which economies improved the ease of doing business decimals. the most. First, it selects the economies that in 2014/15 Doing Business 2017 United States 126 RESOURCES ON THE DOING BUSINESS WEBSITE Current features Law library News on the Doing Business project Online collection of business laws and regulations http://www.doingbusiness.org relating to business http://www.doingbusiness.org/law-library Rankings How economies rank—from 1 to 190 Contributors http://www.doingbusiness.org/rankings More than 11,400 specialists in 190 economies who participate in Doing Business Data http://www.doingbusiness.org/contributors/doing- All the data for 190 economies—topic rankings, business indicator values, lists of regulatory procedures and details underlying indicators Entrepreneurship data http://www.doingbusiness.org/data Data on business density (number of newly registered companies per 1,000 working-age Reports people) for 136 economies Access to Doing Business reports as well as http://www.doingbusiness.org/data/exploretopics/ent subnational and regional reports, case studies and repreneurship customized economy and regional profiles http://www.doingbusiness.org/reports Distance to frontier Data benchmarking 190 economies to the frontier Methodology in regulatory practice and a distance to frontier The methodologies and research papers underlying calculator Doing Business http://www.doingbusiness.org/data/distance-to- http://www.doingbusiness.org/methodology frontier Research Information on good practices Abstracts of papers on Doing Business topics and Showing where the many good practices identified related policy issues by Doing Business have been adopted http://www.doingbusiness.org/research http://www.doingbusiness.org/data/good-practice Doing Business reforms Short summaries of DB2017 business regulation reforms and lists of reforms since DB2008 http://www.doingbusiness.org/reforms Historical data Customized data sets since DB2004 http://www.doingbusiness.org/custom-query Doing Business 2017 United States 127