[cabf_validation] [EXTERNAL]Re: Proposed draft Ballot 225 to strengthen EVGL 11.6 - Operational Existence

[Kirk Hall]

Peter – here’s a response to your excellent comments below about Business Entities.
The EVGL Definitions gives these examples of what Business Entities are “Examples include, but are not limited to, general partnerships, unincorporated associations, sole proprietorships, etc.”
I can tell you from my time practicing law that general partnerships and sole proprietorships do file tax returns, and do have bank accounts, so no problem there.
I was less sure about unincorporated associations, but the two links below (one for California, one for the UK) indicate that unincorporated associations can own land, etc. (which is one of the hardest things to do), and the UK link talks about the need to file tax returns if there are profits.  I also believe I’ve seen unincorporated associations have bank accounts, so I think we are ok there as well.
https://nextlegal.org/blog/setting-unincorporated-association-california-risks-and-practices
https://www.gov.uk/unincorporated-associations
You also raise the question of what to do in other countries where these new rules might not work.  I’d suggest this:  Let CAs who operate in other countries propose future amendments to EVGL 11.6 on a country-by-country basis, with reasons (e.g., “we can’t do those checks here because…”) and with a proposal for an alternative method for verifying an Applicant’s “operational existence” in that country, with facts and evidence.  The Forum can then review adopt those proposals on a country-by-country basis – limited to Applicants in those countries only – and add them in an Appendix to the EVGL.  This can grow over time as needed.
If we try to draft a single universal rule for EVGL 11.6 that will work in every jurisdiction, we obviously won’t succeed (we don’t even have enough information to do that), and the language may be so general and vague that CAs won’t have enough guidance on what is permitted and what is not – and some CAs may then make mistakes.

From: Validation [mailto:validation-bounces at cabforum.org] On Behalf Of Peter Bowen via Validation
Sent: Monday, May 21, 2018 5:23 PM
To: Chris Bailey <Chris.Bailey at entrustdatacard.com>; CA/Browser Forum Validation WG List <validation at cabforum.org>
Subject: [EXTERNAL]Re: [cabf_validation] Proposed draft Ballot 225 to strengthen EVGL 11.6 - Operational Existence

Chris,

I’ve got a few comments.

I assume that not all national taxing authorities will release tax returns to third parties, even if the taxpayer authorizes the release.  There also appear to be a handful of countries with no corporate tax[1].  For places with no corporate tax or which do not provide copies of tax returns, is the only option for companies to show the demand deposit account?

What drives the 18 month requirement?  How do you handle an existing company expanding to a new country and setting up a new subsidiary for the country?  What about spin-outs?  When HP split into HP Inc and HP Enterprise, would one of the companies been precluded from getting EV certs?

How do you handle Business Entities that are sole proprietorships and only have a bank account in the name of the proprietor?

Thanks,
Peter


[1] https://taxfoundation.org/corporate-income-tax-rates-around-world-2015/



On May 21, 2018, at 3:22 PM, Chris Bailey via Validation <validation at cabforum.org<mailto:validation at cabforum.org>> wrote:

All,

To help strengthen EVGL tests to verify an Applicant’s “operational existence” under EVGL 11.6, we have drafted the attached pre-ballot for Ballot 225 – Improvements to EV Guidelines Sec. 11.6.  We’d like comments from others.

We are also looking for endorsers.

Tim – can you add this to the Validation Working Group’s Agenda for this Thursday’s call?

Thanks.  Chris

*****

Ballot 225: Improvements to EV Guidelines Sec. 11.6 – Operational Existence

The following motion has been proposed by Chris Bailey of Entrust Datacard and endorsed by XXX of XXX and YYY of YYY.

Purpose of Ballot: This ballot will strengthen the EV authentication process to verify an Applicant’s operational existence.

Existing EVGL Section 11.6.2(2) allows CAs to validate an applicant for an EV cert that was incorporated less than 3 years ago by finding the Applicant in a QIIS.  This ballot will no longer allow use of a QIIS to verify that an Applicant less than 3 years old has “operational existence” under EVGL Section 11.6, as it appears some QIISs are not strong enough to be used for this purpose.  This ballot also makes other changes to EVGL Section 16.2 to strengthen the verification of an applicant’s operational existence.

— MOTION BEGINS –

This ballot modifies the Baseline Requirements and Extended Validation Guidelines as follows:

1. Amend Section 4 – Definitions as follows:

Qualified Government Tax Information Source: A national taxing authority which provides a confirmed copy of an Applicant’s tax return directly to a CA with the written consent of an Applicant.  An example is the United Stated Internal Revenue Service which will provide a confirmed copy of a taxpayer’s tax return directly to a third party if the taxpayer signs IRS Form 4506.  See https://www.irs.gov/pub/irs-pdf/f4506.pdf

A Qualified Governmental Information Source that specifically contains tax information relating to Private Organizations, Business Entities, or Individuals.


2. Amend EV Guideline Section 11.6 as shown below.



11.6.2. Acceptable Methods of Verification



Applicants that have been in existence (as measured by the date of incorporation or formation) for less than 18 months are not eligible for EV certificates.



To verify the Applicant’s ability to engage in business, the CA MUST verify the operational existence of the Applicant, or its Affiliate/Parent/Subsidiary Company, by:



(1) Verifying that the Applicant, Affiliate, Parent Company, or Subsidiary Company has been in existence for at least three years (as measured by the date of incorporation or formation), as indicated by the records of an Incorporating Agency or Registration Agency.  If the Applicant has changed its name in the records of the Incorporation Agency or Registration Agency during the prior three years, the CA must verify the Applicant’s operational existence by following the procedures of (2) or (3) below;



(2) Obtaining the most recent tax return filed by the Applicant with a national taxing authority from a QTIS; or



Verifying that the Applicant, Affiliate, Parent Company, or Subsidiary Company is listed in either a current QIIS or QTIS;



(3) Verifying that the Applicant, Affiliate, Parent Company, or Subsidiary Company has an active current Demand Deposit Account in the Applicant’s own name with a Regulated Financial Institution by receiving authenticated documentation of the Applicant's, Affiliate's, Parent Company's, or Subsidiary Company's Demand Deposit Account directly from a Regulated Financial Institution.; or


(4) Relying on a Verified Professional Letter to the effect that the Applicant has an active current Demand Deposit Account with a Regulated Financial Institution.

— MOTION ENDS –

The procedure for approval of this ballot is as follows:

Discussion (7+ days)

Start Time: 2018-06-xx at 15:00:00 EDT

End Time: 2018-06-xx at 15:00:00 EDT

Vote for approval (7 days)

Start Time: 2018-06-xx at 15:00:00 EDT

End Time: 2018-06-xx at 15:00:00 EDT


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