Don’t be surprised if you are asked for a photo ID the next time you apply for a business license.

H.B. 2102, which was passed during the Arizona legislature’s 2011 session, requires photo ID with proof of U.S. citizenship or legal alien status in order to obtain a business license or perform a service if a license is necessary to perform that service. In particular, the law affects business owners and people working in service industries (e.g., restaurant workers, teachers, barbers, cosmetologists, real estate agents, etc.).

The new law goes into effect July 20, 2011. Its stated purpose is to combat illegal immigration and identity theft. Whether the new statute will have a real effect on either of these issues remains to be seen.

There are several exceptions to the licensing requirement, including these:

• The applicant lives in a foreign country and the benefits provided by the license do not require the applicant to live in Arizona.

• The applicant (i) lives in another state, (ii) holds an equivalent license in another state and (iii) seeks the license only to comply with Arizona laws and not to establish residency.

The reach of the law is likely to be extensive. Tens of thousands of food service workers in restaurants, schools and cafeterias must be prepared to show photo ID to obtain their food service cards. This is a requirement for new workers and for current workers who must renew their cards every three years.

Questions. There are several significant questions about the new law’s ability to achieve the desired results, such as:

• What happens if the licensee’s business purpose changes after the license is issued? For example, if an out-of-state applicant applies for a license to start a real estate investment business, which is legal and does not require the applicant to live in Arizona, the applicant will arguably obtain the license under the first exception listed above. Who will subsequently check to make sure that the license is not ultimately used for some other purpose? Can a non-resident open “XYZ Management, LLC” as a purported real estate investment business, obtain the necessary licenses, and then use the LLC to operate a service-oriented business that is subject to stricter licensing requirements?

• Likewise, who is going to check to make sure that a resident of another state is really licensed in that state?

What is the effect on existing Arizona businesses? One thing that we know for sure is that Arizona citizens and businesses will pay for the extra time to check these details … to the extent that state and local governments decide to enforce the law. In the short term, be prepared for your employees to take more time to get their licenses.