BILL ANALYSIS
C.S.H.B. 1601
By: Coleman
04-28-95
Committee Report (Substituted)
BACKGROUND
Texas is one of only ten states, and the only large state which has
no reporting of registration requirements for charities or their
paid fund-raisers. As a result, the public of Texas has no single
entity which it can contact to obtain information about charities
(and those holding themselves out as charities) and their
fundraising practices, and the Attorney General, who is charged
with representing the interest of the general public in charities,
must rely solely on complaints to learn about fraudulent and
misleading practices occurring in the guise of charity.
PURPOSE
To obtain sufficient information about those operating as charities
to be able to determine which organizations may be violating
existing law, so the Attorney General can stop such practices; to
provide other civil penalties, such as injunctive relief; and to
provide a source of information to the public about charities and
their fundraising practices.
RULEMAKING AUTHORITY
This bill confers rulemaking authority on the Office of the
Attorney General, but only to allow the Office to prescribe rules,
procedures and forms which are consistent with and necessary to
administer the Act which can be found under Section 16 of this
bill.
SECTION BY SECTION ANALYSIS
SECTION 1. Amends Chapter 20, Title 132, Revised Statutes, by
adding Article 9023d.
Article. 9023d. REGISTRATION AND REPORTING BY CHARITABLE
ORGANIZATIONS.
Sec. 1. SCOPE OF ACT; SHORT TITLE. Describes the scope
of the Act and short title, the Charities Registration and
Reporting Act. States that the Act does not apply to organizations
subject to articles 9023b or 9023c (veterans' and public safety
groups).
Sec. 2. CONSTRUCTION AND APPLICATION. Sets out the
purposes of the Act and relates to construction and application.
Sec. 3. DEFINITIONS. Lists the definitions to be used
in the Act.
Sec. 4. EXEMPTION FROM REGISTRATION. Identifies
exemptions to the registration requirements, for those entities
exempt from filing 990 tax returns; colleges and universities and
their supporting foundations; nonprofit hospitals and their
supporting foundations; and private foundations.
Sec. 5. REGISTER TO BE MAINTAINED. Requires the
Attorney General to maintain a register of charitable
organizations. Makes the information public, with limited
exceptions.
Sec. 6. REGISTRATION. Details the information that must
be included in the registration statements filed by charitable
organization and provides for additional information from charities
that solicit from the public. It also sets deadlines for
registration and renewal and sets a registration fee not to exceed
$75.
Sec. 7. NOTIFICATION OF NONCOMPLIANCE. Requires the
Attorney General to notify organizations which are not in
compliance and allows 30 days to comply, unless the violation was
a knowing violation.
Sec. 8. RECORD KEEPING; AUDIT POWERS OF ATTORNEY
GENERAL. Gives the Attorney General audit powers and establishes
a three year period during which records must be kept by charitable
organizations.
Sec. 9. USE OF FEES. Provides that fees collected
pursuant to the Act will be used to administer and enforce the Act
and provide public education. Requires reports by the Attorney
General to the Legislative Budget Board on the amount of fees
collected and the uses of such fees.
Sec. 10. TOLL-FREE TELEPHONE LINE establishes a toll-free information and complaint line.
Sec. 11. REGISTRATION DOES NOT IMPLY ENDORSEMENT.
Prohibits registrants form stating or implying that registration
implies endorsement by the state or Attorney General.
Sec. 12. REMEDIES. Sets out remedies, including
injunctions, cancellation or suspension of registration, and civil
penalties. Allows the recovery of costs, attorney's fees and
expenses of bringing suit.
Sec. 13. DEDICATION OF FEES AND CIVIL PENALTIES.
Dedicates fees, expenses and civil penalties recovered for the
purposes of enforcing and administering the Act.
Sec. 14. SERVICE ON SECRETARY OF STATE. Allows service
of process on the Secretary of State when there is no resident
agent for process or the agent cannot be found to be served.
Sec. 15. VENUE. Provides for alternative mandatory
venue.
Sec. 16. RULES; ADVISORY COMMITTEE. Allows the
Attorney General to prescribe rules, procedures and forms
consistent with and necessary for the proper administration of the
Act. Requires the Attorney General to appoint an advisory
committee, consisting of representatives of charities subject to
the Act to assist with the rules, forms, procedures and public
education.
SECTION 2. The Act applies only to acts or violation that
take place on or after its effective date.
SECTION 3. Sets the deadline before January 1, 1996 for
initial registration statements for those doing business on the
effective date of the Act.
SECTION 4. Establishes the effective date as September 1,
1995.
SECTION 5. Emergency clause.
COMPARISON OF ORIGINAL TO SUBSTITUTE
The major points of difference between H.B. 1601, as
introduced and the committee substitute are as follows:
Section 3(b), the explanation of custody and control was added to
clarify that a certain level of authority is required to have
custody and control of funds.
Section 4(a)(2) and (3), exemption were added for supporting
foundations for colleges, universities and nonprofit hospitals.
Section 4(a)(4), the exemption for private foundations was
clarified to include only private foundations which do not solicit.
Sections 6(a)(4), 6(a)(9), 6(a)(10)(A), three of the items on the
registration statement were altered to require slightly less
information.
Section 6(a)(12), item (a)(12) on the registration statement was
amended to require verification of all attachments to the
registration statement.
Section 6(d), the filing has been changed from $75 to a fee "not to
exceed $75".
Section 9(b), a provision to require the Attorney General to file
reports with the Legislative Budget Board was added.
Section 16(b), an advisory committee, consisting of appointed
representatives of charitable organizations, was added.
SUMMARY OF COMMITTEE ACTION
H.B. 1601 was considered by the Committee on Business and Industry
in a public hearing on April 25, 1995. Testifying in support of
the bill were John W. Holtermann, representing Texas Silver-Haired
Legislature; Ann Heiligenstein, representing conference of Catholic
Health Facilities and the Texas Catholic Conference; Kurt Senske,
representing Lutheran Social Services of the South; Lisa Hyde,
representing Texas Scottish Rite Hospital for Children; Susan Darr,
representing The Better Business Bureau, Ellen Eisenlohr,
representing Baptist Foundation of Texas; Cindy Antolik,
representing American Cancer Society; Carol L. McDonald,
representing Independent Colleges and Universities of Texas, Inc.;
Henry L. Naizer, representing Seton Medical Center and Volunteer-National Society of Fund Raising Executives; Mike Bright,
representing The ARC of Texas; Phill Parmer, representing Texas
Silver-Haired Legislature; Dietlind Smith-Hernandez, representing
National Society of Fund Raising Executives. Testifying against
the bill were A.H. Snyder, Jr., representing Lims Sight and Tissue
Foundation, Donor Awareness Coalition, District 2-XI Lions Clubs
International, Eye Bank Association of Texas, Texas Lims Camp for
Cripple Children, Presbyterian Children's Services; Bess Beliveaux,
representing Lions Eye Bank; Thomas J. Brorby, representing Lion
Jaworski Foundation. Testifying on the bill was Jan Soifer,
representing the Office of the Attorney General. The committee
considered a complete committee substitute. The substitute was
withdrawn without objection. H.B. 1601 was left pending before the
committee. H.B. 1601 was reconsidered by the committee on pending
business in a formal meeting on April 28, 1995. The committee
considered a complete committee substitute to the bill. The
substitute was adopted without objection. H.B. 1601 was reported
favorably, as substituted with the recommendation that it do pass
and be printed, by a record vote of 9 (nine) ayes, 0 (zero) nays,
0 (zero) present-not-voting, 0 (zero) absent.