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.