SSB 3191 (LSB 5385DP (19) 83)

SENATE/HOUSE FILE _____

BY  (PROPOSED ATTORNEY GENERAL BILL)

A BILL FOR

An Act relating to charitable solicitations, by providing for registration requirements, providing for fees and appropriations, imposing penalties, and including effective date provisions.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  NEW SECTION.  13D.1  Definitions.

   1.  “Business association” means the same as defined in section 202B.102.
   2.  “Charitable organization” means a person who solicits or purports to solicit contributions for a charitable purpose and who receives contributions.
   3.  “Charitable purpose” means a benevolent, educational, philanthropic, humane, scientific, patriotic, social welfare or advocacy, public health, environmental, conservation, civic, or other charitable objective.
   4.  “Charitable sales promotion” means an advertising or sales campaign which is conducted by a commercial coventurer and which represents that the purchase or use of goods or services offered by the commercial coventurer will benefit, in whole or in part, a charitable organization or purpose.
   5.  “Commercial coventurer” means a person who, for profit, is regularly and primarily engaged in trade or commerce, other than in connection with soliciting for charitable organizations or purposes, and who conducts a charitable sales promotion.
   6.  a.  “Contribution” means the grant, promise, or pledge of money, credit, property, financial assistance, or any other thing of value provided in response to a solicitation.
   b.  “Contribution” does not include bona fide fees, dues, or assessments paid by members of a charitable organization if membership in the organization is not conferred primarily as consideration for making a contribution in response to a solicitation.
   7.  “Internal Revenue Code” means 26 U.S.C. § 1 et seq., designated as the Internal Revenue Code of 1986 by the Tax Reform Act of 1986, Pub. L. No. 99-514, including amendments.
   8.  “Internal revenue service” means the internal revenue service of the United States department of the treasury.
   9.  “Political organization” means a political party, a candidate for federal or state office, or a political action committee formed pursuant to the federal Election Campaign Act, 2 U.S.C. § 431 et seq., and required to file financial information with federal or state elections commissions.
   10.  “Professional commercial fund-raiser” means any person who for compensation solicits contributions in Iowa for a charitable organization other than the person. A person whose sole responsibility is to mail fund-raising literature is not a professional commercial fund-raiser.
   a.  “Professional commercial fund-raiser” includes any person, other than a bona fide officer or regular employee of a charitable organization, who is retained by a charitable organization for a fixed fee or rate under a written agreement to plan, manage, advise, consult, or prepare material for or with respect to the solicitation in this state of contributions for a charitable organization but who does not solicit contributions or employ, procure, or engage any compensated person to solicit contributions.
   b.  (1)  An attorney licensed to practice law, an investment adviser or investment adviser representative as defined in section 502.102, or a person engaged in banking as provided in section 554.4105, who advises a person to make a charitable contribution is not, as a result of such advice, a professional commercial fund-raiser.
   (2)  A bona fide salaried officer, employee, or volunteer of a charitable organization is not a professional commercial fund-raiser.
   (3)  A political organization is not a professional commercial fund-raiser.
   (4)  A religious organization is not a professional commercial fund-raiser.
   11.  “Record” means a book, financial statement, paper, correspondence, memorandum, agreement, or other information in a printed or electronic form that the attorney general deems relevant or material to an inquiry made under this chapter.
   12.  “Religious organization” means an organization that is exempt from filing a federal annual information return pursuant to 26 U.S.C. § 6033(a)(3)(A)(i) or (iii), 26 U.S.C. § 6033(a)(3)(C)(i), or pursuant to 26 C.F.R. § 1.6033-2(g)(1)(i) through (iv), or 26 C.F.R. § 1.6033-2(g)(1)(vii).
   13.  a.  “Solicit” or “solicitation” means a request, made directly or indirectly, for a contribution on the representation that the contribution will be used for a charitable purpose. A solicitation is deemed to have taken place whether or not the person making the solicitation receives a contribution.
   b.  “Solicitation” does not include an application for a grant from any governmental entity or private nonprofit foundation.
   14.  “Solicitation campaign” means more than one solicitation made by the same person, if the solicitations are similar in content or are based on a similar representation, and any of the following applies:
   a.  The solicitations result in or are represented to result in an event.
   b.  The solicitations occur or are intended to occur for a specific time period.
   c.  The solicitations occur for an indefinite period of time within the same calendar year.
   15.  “Volunteer” means a person who performs a service for a charitable organization or charitable purpose and who does not receive financial remuneration or who has not been expressly nor impliedly promised to be paid financial remuneration for performing such service.
    Sec. 2.  NEW SECTION.  13D.2  Charitable organizations —— registration requirements.

   1.  A charitable organization must be registered with the attorney general prior to soliciting contributions in this state by any means, having contributions solicited in this state on its behalf by any other person, or participating in a charitable sales promotion.
   2.  In order to be registered, a charitable organization must file a registration statement with the attorney general and must comply with the annual renewal requirement as provided in this chapter.
   3.  A registration statement shall contain information required by the attorney general, including but not limited to all of the following:
   a.  The name of the charitable organization, the purpose for which it is organized, and the name or names under which it intends to solicit contributions.
   b.  The mailing address, electronic mail address, and telephone number of the principal place of business of the charitable organization and the mailing address, electronic mail address, and telephone number of each of its offices in this state. If the charitable organization does not maintain an office in this state, the registration statement shall include the name, mailing address, electronic mail address, and telephone number of the person who has custody of the charitable organization’s financial records.
   c.  The name and address of each officer, director, trustee, or executive personnel of the charitable organization.
   d.  The last day of the fiscal year of the charitable organization.
   e.  The place and date when the charitable organization was legally established, the legal form of its organization, and its tax-exempt status.
   f.  The name and address of each professional commercial fund-raiser and each commercial coventurer who is acting or has agreed to act on behalf of the charitable organization. If the professional commercial fund-raiser or commercial coventurer is a business association organized as a legal entity, the charitable organization shall list only the name and address of the business association.
   g.  Any other information determined relevant by the attorney general.
   4.  A charitable organization required to register under this chapter shall file a financial report with the attorney general. The financial report shall include information for the charitable organization’s most recent fiscal year. The charitable organization shall file the financial report on or before the fifteenth day of the fifth calendar month after the close of each fiscal year of the charitable organization. 
   a.  The charitable organization may file, in lieu of a financial report, a copy of its completed federal tax form 990 as promulgated by the internal revenue service for the charitable organization’s most recent fiscal year, including all schedules except schedules of donors, for the most recent fiscal year.
   b.  A charitable organization may apply to the attorney general requesting an extension of time to file a financial report or a copy of a federal tax form 990 as provided in paragraph “a”. The attorney general shall consider and approve or disapprove such applications under terms, conditions, and procedures that are substantially similar to the terms, conditions, and procedures established by the internal revenue service when considering and approving or disapproving an extension of time to file a federal tax form 990. During the extension period the charitable organization shall file a copy of its most recently filed federal tax form 990 or such other financial information that the attorney general may require.
   c.  A charitable organization that was first legally established within twelve months prior to being required to register and thus cannot complete a financial report or a federal tax form 990 as provided in paragraph “a”, shall file a preliminary financial report based on a good faith estimate for its first full fiscal year.
   5.  a.  A charitable organization required to register under this chapter shall file with the attorney general a statement of amendment reflecting any changes materially affecting the charitable organization’s identity or business, including but not limited to a change to its:
   (1)  Name. 
   (2)  Address.
   (3)  Officers, directors, trustees, or executive personnel.
   (4)  Form of business association.
   (5)  Tax status. 
   b.  The statement of amendment shall be filed concurrently with the next financial report required to be filed pursuant to this chapter.
   6.  Each chapter, branch, or affiliate of a charitable organization that is required to file a registration statement or statement of amendment under this section shall file a separate registration statement or statement of amendment, or shall report the necessary information to its parent charitable organization which shall file a consolidated registration statement or statement of amendment.
   7.  Each registration application, financial report, or statement of amendment required to be filed pursuant to this section shall be signed and sworn to under oath by an officer of the charitable organization, which may include but is not limited to its chief fiscal officer.
    Sec. 3.  NEW SECTION.  13D.3  Charitable organizations —— filing fees.
   1.  A charitable organization required to file a financial report or a federal tax form 990 in lieu of the financial report as provided in section 13D.2, shall pay an annual filing fee to the attorney general.
   2.  The amount of the annual filing fee shall be based on the total receipts collected by the charitable organization from all solicitations in this state during the period covered in its financial report, or its federal tax form 990, being filed.
   a.  For receipts of $50,000 or

more but less than $100,000 ............................... $25
   b.  For receipts of $100,000 or

more but less than $250,000 ............................... $50
   c.  For receipts of $250,000 or

more but less than $500,000 ............................... $75
   d.  For receipts of $500,000 or

more but less than $1,000,000 ............................ $100
   e.  For receipts of $1,000,000 or

more but less than $2,000,000 ............................ $200
   f.  For receipts of $2,000,000 or

more but less than $5,000,000 ............................ $300
   g.  For receipts of $5,000,000 or

 more ..................................................... $500
    Sec. 4.  NEW SECTION.  13D.4  Charitable organizations —— exemptions.

   A charitable organization is not required to be registered and is not required to file a financial report as provided in section 13D.2, if the charitable organization is any of the following:

   1.  A political organization. 
   2.  A religious organization.
   3.  a.  A charitable organization, if any of the following applies:
   (1)  It is required to furnish the internal revenue service an electronic annual notification pursuant to the Internal Revenue Code, 26 U.S.C. § 6033(i).
   (2)  It does not receive contributions from more than ten persons during the charitable organization’s fiscal year.
   b.  The exemption authorized in paragraph “a” does not apply to a charitable organization that has contracted with a professional commercial fund-raiser to solicit contributions in this state for the charitable organization.
   4.  a.  A foundation acting solely for the support of an institution governed by the state board of regents.
   b.  A foundation acting solely for the support of an institution governed by chapter 260C.
   c.  A private foundation as defined in the Internal Revenue Code, 26 U.S.C. § 509(a), organized for the support of a government body.
    Sec. 5.  NEW SECTION.  13D.5  Attorney general —— electronic filing.

   The attorney general shall take steps to cooperate with other states and the federal government to establish a joint state and federal electronic filing project for charitable organizations making solicitations as provided in this chapter. To every extent feasible, the project shall involve state government offices regulating charitable promotion and the internal revenue service to enable and promote the electronic filing of uniform multistate registration statements and federal annual information returns.
    Sec. 6.  NEW SECTION.  13D.6  Charitable organizations —— use of another organization’s name in solicitation.

   A charitable organization shall not solicit contributions for a charitable purpose in this state, where the charitable organization claims that a portion or all of the contributions received will be given to another charitable organization in this state, without permission from the other charitable organization that its name may be referred to as part of the solicitation.
    Sec. 7.  NEW SECTION.  13D.7  Professional commercial fund-raisers —— registration and filing fee.

   1.  A professional commercial fund-raiser must be registered with the attorney general prior to soliciting contributions in this state on behalf of a charitable organization.
   2.  In order to be registered, a professional commercial fund-raiser shall file a registration statement as described in this section.
   3.  A registration statement shall contain information required by the attorney general, including but not limited to all of the following:
   a.  The mailing address, electronic mail address, and telephone number of the principal place of business of the professional commercial fund-raiser, and the electronic mail address and telephone number of its principal contact person.
   b.  A listing of the professional commercial fund-raiser’s clients.
   c.  Financial disclosure information concerning contributions received and disbursements made during the previous fiscal year. Financial disclosure information shall not include an applicant’s donor lists.
   d.  Copies of contracts executed by the professional commercial fund-raiser and a charitable organization as provided in section 13D.8.
   e.  Any other information deemed relevant by the attorney general.
   4.  The attorney general may require that registration information be updated on a quarterly basis.
   5.  A professional commercial fund-raiser shall pay the attorney general a fee of one hundred dollars for each registration.
   6.  A professional commercial fund-raiser shall file with the attorney general a statement of amendment reflecting any changes to its client list or to its existing contracts within sixty days of such changes. 
   7.  The registration of a professional commercial fund-raiser with the attorney general is valid for twelve months. 
   8.  A professional commercial fund-raiser may submit an application for renewal of registration in the same manner as for initial registration.
    Sec. 8.  NEW SECTION.  13D.8  Professional commercial fund-raiser —— contracts with charitable organizations.

   1.  A contract executed between a professional commercial fund-raiser and a charitable organization required to register as provided in section 13D.2 shall be in writing and signed by an authorized official of the charitable organization. The professional commercial fund-raiser shall provide a copy of the contract to the charitable organization prior to the performance of any material services under the contract.
   2.  A contract executed between a professional commercial fund-raiser and a charitable organization shall at least contain all of the following provisions:
   a.  A statement of the charitable purpose for which the solicitation campaign is being conducted.
   b.  A statement of the respective obligations of the professional commercial fund-raiser and the charitable organization.
   c.  Whether the professional commercial fund-raiser will at any time have custody or control of contributions.
   d.  A clear statement of the fees that will be paid to the professional commercial fund-raiser or, if the fees are to be calculated based on a percentage of contributions or other formula, a clear statement of the percentage or other formula. 
   e.  The effective and termination dates of the contract.
   3.  Prior to commencing a solicitation campaign in the state, the professional commercial fund-raiser must file with the attorney general a description of the manner in which the solicitation campaign will be conducted, including but not limited to copies of any telephone calling scripts, mail solicitations, and pledge mailing materials.
    Sec. 9.  NEW SECTION.  13D.9  Rules and forms.

   1.  The attorney general may adopt rules as necessary to administer and enforce the provisions of this chapter.
   2.  The attorney general may prescribe forms determined necessary or convenient to administer this chapter, including but not limited to forms associated with registration requirements for charitable organizations and professional commercial fund-raisers.
    Sec. 10.  NEW SECTION.  13D.10  Attorney general authority to administer this chapter.
   1.  The submission of records including but not limited to contracts, scripts, and mail solicitations to the attorney general pursuant to the filing requirements of this chapter do not constitute attorney general approval of the records submitted.
   2.  The attorney general may reject the registration of a charitable organization or professional commercial fund-raiser for failing to comply with the requirements of this chapter.
   3.  The attorney general may examine any information that the attorney general deems is or may be relevant to a filing by a charitable organization or professional commercial fund-raiser pursuant to this chapter.
    Sec. 11.  NEW SECTION.  13D.11  Enforcement —— penalty.

   1.  The attorney general shall enforce the provisions of this chapter.
   2.  A violation of this chapter is a violation of section 714.16, subsection 2, paragraph “a”. The provisions of section 714.16, including but not limited to provisions relating to investigation, injunctive relief, and penalties, shall apply to this chapter.
    Sec. 12.  NEW SECTION.  13D.12  Funds collected —— charitable solicitations administration fund —— appropriation.

   A charitable solicitations administration fund is created as a separate fund in the state treasury to be administered by the attorney general. Moneys collected by the attorney general under this chapter shall be deposited in the fund. The moneys in the fund are appropriated to the department of justice exclusively for public education relating to charitable solicitations and for enforcement of the provisions of this chapter. Notwithstanding section 8.33, any moneys in the fund shall not revert. Notwithstanding section 12C.7, subsection 2, interest or earnings on moneys deposited in the fund shall be credited to the fund.
    Sec. 13.  Section 714H.2, Code Supplement 2009, is amended by adding the following new subsections:
   NEW SUBSECTION.  7A.  “Political organization” means a political party, a candidate for office, or a political action committee required to file financial information with federal or state election or campaign commissions.  
   NEW SUBSECTION.  7B.  “Religious organization” means a religious corporation, trust, foundation, association, or organization incorporated or established for religious purposes.  
    Sec. 14.  Section 714H.3, subsection 1, Code Supplement 2009, is amended to read as follows:
   1.  A person shall not engage in a practice or act the person knows or reasonably should know is an unfair practice, deception, fraud, false pretense, or false promise, or the misrepresentation, concealment, suppression, or omission of a material fact, with the intent that others rely upon the unfair practice, deception, fraud, false pretense, false promise, misrepresentation, concealment, suppression, or omission in connection with the advertisement, sale, or lease of consumer merchandise, or the solicitation of contributions for charitable purposes. For the purposes of this chapter, a claimant alleging an unfair practice, deception, fraud, false pretense, false promise, or misrepresentation must prove that the prohibited practice related to a material fact or facts. “Solicitations of contributions for charitable purposes” does not include solicitations made on behalf of a political organization as defined in section 13C.1, solicitations made on behalf of a religious organization as defined in section 13C.1, solicitations made on behalf of a state, regionally, or nationally accredited college or university, or solicitations made on behalf of a nonprofit foundation benefiting a state, regionally, or nationally accredited college or university subject to section 509(a)(1) or 509(a)(3) of the Internal Revenue Code of 1986.
    Sec. 15.  CHARITABLE SOLICITATIONS ADMINISTRATION. 
   1.  There is appropriated from the consumer education and litigation fund created in section 714.16C to the department of justice for the fiscal year beginning July 1, 2010, and ending June 30, 2011, the following amount, or so much thereof as is necessary, to be used for the purposes designated:
  For supporting the administration and enforcement of this Act, including the registration of charitable organizations and professional fund-raisers and the collection and public dissemination of information: 

.................................................. $    125,000

   2.  The department of justice shall repay the amount appropriated in subsection 1 to the consumer education and litigation fund from the charitable solicitations administration fund, as created in this Act, not later than June 30, 2012.
    Sec. 16.  REPEAL.  Chapter 13C, Code 2009, is repealed.
    Sec. 17.  EFFECTIVE DATE.  This Act takes effect January 1, 2011.
EXPLANATION
   GENERAL. This bill provides for solicitations for contributions by or on behalf of a charitable organization. The bill eliminates Code chapter 13C referring to the same subject and rewrites those provisions in proposed new Code chapter 13D.
   The bill regulates charitable organizations that solicit contributions for a charitable purpose associated with a benevolent, educational, philanthropic, humane, scientific, patriotic, social welfare or advocacy, public health, environmental, conservation, civic, or other charitable objective.
   CHARITABLE ORGANIZATIONS. The bill contains a number of new provisions regulating a charitable organization. According to the bill, a charitable organization must be registered with the attorney general prior to soliciting contributions in this state. The registration statement must include information regarding its business and fund-raising activities. The charitable organization must also file amendment statements that reflect material changes to the organization. The charitable organization must file a financial report which includes information for the charitable organization’s most recent fiscal year as provided by the attorney general or, in the discretion of the attorney general, a copy of a completed federal tax form 990 filed by nonprofit organizations. A charitable organization must also pay filing fees with the fee based on the amount of receipts collected by the charitable organization.
   The bill provides for a number of exceptions from the registration requirements, which apply to religious organizations; political parties, political candidates, and political action committees; organizations that receive contributions from 10 persons or less; and foundations including those associated with the state board of regents and community colleges. 
   The bill authorizes the attorney general to cooperate with the federal government and state government to establish a state electronic filing project.
   PROFESSIONAL COMMERCIAL FUND-RAISERS. The bill provides for the registration of professional commercial fund-raisers who for compensation solicit contributions in Iowa for a charitable organization (but does not include attorneys, investment advisers, or investment adviser representatives regulated under Code chapter 502, persons engaged in banking, political organizations, or religious organizations). The bill rewrites provisions contained in Code section 13C.2. It retains requirements that prohibit a person from soliciting contributions for charitable purposes in this state unless the professional commercial fund-raiser registers with the attorney general. It eliminates a number of requirements in Code section 13C.2, including (1) the option to forgo registration by promising to provide financial disclosure information to a person or government entity requesting the information and (2) a provision requiring the confidentiality of client lists owned by a professional commercial fund-raiser. The bill increases the fee required for registering from $10 to $100.
   USE OF A CHARITABLE ORGANIZATION’S NAME. The bill retains other provisions from Code chapter 13C, including provisions in Code section 13C.3, which prohibit a charitable organization from soliciting contributions for a charitable purpose where the organization claims that a portion of or all of the contributions received will be given to another charitable organization in this state, without permission from the other charitable organization.
   ADMINISTRATION. The bill retains a provision that delegates rule making authority to the attorney general, and authorizes the attorney general to promulgate forms. 
   FUNDING. The bill establishes a charitable solicitations administration fund under the control of the attorney general. Moneys collected by the attorney general under the bill are deposited in the fund, and are appropriated from the fund for the use by the attorney general in administering and enforcing its provisions. 
   PENALTIES. The bill also retains language from Code section 13C.8 which provides the attorney general with enforcement authority, and makes a violation of the Code chapter a fraudulent practice under Code section 714.16(2)(a). A fraudulent practice is an offense that is punishable by a range of penalties depending upon the amount of money or value of property taken (see Code sections 714.9 through 714.13), from fraudulent practice in the fifth degree punishable as a simple misdemeanor to fraudulent practice in the first degree punishable as a class “C” felony. A simple misdemeanor is punishable by confinement for no more than 30 days or a fine of at least $65 but not more than $625 or by both. A class “C” felony is punishable by confinement for no more than 10 years and a fine of at least $1,000 but not more than $10,000.
   EFFECTIVE DATE. The bill takes effect on January 1, 2011.