BILL ANALYSIS
C.S.S.B. 1214
By: Ellis
Jurisprudence
5-10-95
Committee Report (Substituted)
BACKGROUND
Texas is one of only seven states which has no reporting or
registration requirements for charities or charity fund raisers.
As a result, the public has no single entity which it can contact
to obtain information about organizations that claim to be
charities and their fundraising practices. The attorney general,
who is charged with representing the interest of the general public
in cases involving charitable organizations must rely solely on
complaints to learn about fraudulent and misleading practices
occurring in the guise of charity.
PURPOSE
As proposed, C.S.S.B. 1214 sets forth the requirements for the
registration and reporting by charitable organizations; provides a
civil penalty.
RULEMAKING AUTHORITY
It is the committee's opinion that rulemaking authority is granted
to the attorney general under SECTION 1 (Section 16(a), Article
9023d, V.T.C.S.) and to the attorney general's advisory committee
under SECTION 1 (Section 16(b), Article 9023d, V.T.C.S.) of this
bill.
SECTION BY SECTION ANALYSIS
SECTION 1. Amends Chapter 20, Title 132, V.T.C.S., by adding
Article 9023d, as follows:
Art. 9023d. REGISTRATION AND REPORTING BY
CHARITABLE ORGANIZATIONS
Sec. 1. SCOPE OF ACT; SHORT TITLE. (a) Applies this Act to
all charitable organizations doing business in this state.
Requires the solicitation of contributions from persons in
this state to be considered to be doing business in Texas.
(b) Short title: Charities Registration and Reporting Act.
(c) Provides that this Act does not apply to organizations
subject to Article 9023b or 9023c, V.T.C.S.
Sec. 2. CONSTRUCTION AND APPLICATION. (a) Requires this Act
to be applied to encourage contributions to legitimate
charitable organizations through public awareness and donor
education, and to prevent persons from posing as charitable
organizations and from using misleading fundraising practices.
(b) Prohibits this Act from being construed to unreasonably
burden legitimate charitable organizations.
Sec. 3. DEFINITIONS. (a) Defines "charitable organization,"
"charitable purpose," "charitable sales promotion,"
"commercial coventurer," "commercial solicitor,"
"contribution," "fund-raising counsel," "knowingly," and
"person."
(b) Sets forth circumstances under which a person is or is
not considered to have custody and control of funds of a
charitable organization.
(c) Sets forth circumstances considered to be a
solicitation.
(d) Provides that a request for a contribution by a
charitable organization made solely to its current and
former trustees, officers, directors, members, employees,
students, advisory board, or volunteers is not a
solicitation for the purpose of this Act.
Sec. 4. EXEMPTION FROM REGISTRATION. (a) Sets forth persons
that are not required to register under Section 6, except as
provided by Subsection (b).
(b) Requires a person described by Subsection (b) to
register in any year in which the person engages the
services of a commercial solicitor by filing a registration
statement and filing fee before the 10th working day
preceding the effective date of the contract with the
commercial solicitor.
Sec. 5. REGISTER TO BE MAINTAINED. (a) Requires the attorney
general to establish and maintain a register of charitable
organizations subject to this Act.
(b) Requires all filed documents to be public information
and to be available to the public, with an exception.
Sec. 6. REGISTRATION. (a) Requires the attorney general to
maintain a registry of charitable organizations that submit to
the attorney general completed registration statements that
contain certain information.
(b) Requires a charitable organization doing business in
Texas on the effective date of this Act to file initial
registration statement at least 10 working days before doing
business in this state.
(c) Provides that registration expires on the 15th day of
the fifth month following the close of a charitable
organization's fiscal year. Requires registration
statements to be filed on the same forms for initial
registration statements and to include the name and employer
identification number of the charitable organization and any
changes to the information previously submitted.
(d) Requires a filing fee of up to $75 to accompany the
initial registration statement and all renewal statements.
(e) Requires the registration statements to be submitted on
forms prescribed or approved by the attorney general.
Sec. 7. NOTIFICATION OF NONCOMPLIANCE. (a) Requires a
charitable organization that is not in compliance with this
Act to be notified of noncompliance by the attorney general.
Provides that noncompliance shall include failure to file any
documents required by this Act or the filing of incomplete or
inaccurate documents.
(b) Provides that a charitable organization violates this
Act if it fails to file complete documents within 30 days of
the date the notice required by Subsection (a) has been
mailed or if it knowingly files inaccurate documents.
Sec. 8. RECORD KEEPING; AUDIT POWERS OF THE ATTORNEY GENERAL.
(a) Requires each charitable organization required to file
registration to keep true books and records as to its
activities. Requires the books and records to be retained for
a period of at least three years after the end of the period
to which the statement relates. Requires all books and
records to be made available for inspection by authorized
personnel of the attorney general upon request.
(b) Requires a charitable organization to make available the
information requested by authorized personnel of the
attorney general at the organization's principal place.
(c) Provides that the authority established is in addition
to other statutory or common law audit or investigative
authority of the attorney general.
Sec. 9. USE OF FEES. (a) Dedicates all fees collected by the
attorney general to the attorney general during the biennium
of receipt to administer and enforce this Act and to educate
the public about this Act and charitable organizations and
solicitations generally.
(b) Requires the attorney general to file with the
Legislative Budget Board at the end of each biennium a
report that shows the amounts of fees collected by the
attorney general and the uses for which the fees were
expended.
Sec. 10. TOLL-FREE TELEPHONE LINE. Requires the attorney
general to establish and operate a toll-free telephone line.
Authorizes the public to telephone the number to obtain
information about a registered organization or to report an
alleged violation.
Sec. 11. REGISTRATION DOES NOT IMPLY ENDORSEMENT. Provides
that registration does not imply endorsement by the state or
the attorney general.
Sec. 12. REMEDIES. (a) Authorizes the attorney general to
institute an action for failure to comply with this statute
and to obtain injunctive relief to restrain the person from
continuing the violation, cancellation or suspension of the
registration, an order restraining the person from doing
business in this state while violating this Act, civil
penalties of not less than $25,000 per violation, or
injunctive relief and a civil penalty. Provides that a person
who violates an injunction issued under this Act is liable to
the state for a civil penalty of not less than $100,000.
(b) Provides that the remedies authorized by this Act are
not exclusive, but are in addition to other remedies
provided for by statutory or common law.
(c) Authorizes the court to allow the attorney general to
recover civil penalties and costs incurred in bringing the
suit in any proceeding successfully prosecuted by the
attorney general.
Sec. 13. DEDICATION OF FEES AND CIVIL PENALTIES.
Appropriates all fees assessed and recovered expenses incurred
in obtaining injunctive relief or penalties to the attorney
general. Sets forth some expenses included in recovered
expenses. Authorizes appropriated moneys to be expended for
purposes of enforcing and administering this Act.
Sec. 14. SERVICE ON SECRETARY OF STATE. (a) Provides that
the secretary of state is an agent for service of process or
complaint on a charitable organization which meets certain
criteria.
(b) Authorizes service on the secretary of state to be made
by the clerk of the court in which the case is pending, by
the party or representative of the party, or by any other
authorized method.
(c) Requires the secretary of state, if served with process
for a charitable organization, to require a statement of the
name and address of the charitable organization and to mail
a copy of the process to the charitable organization.
Sec. 15. VENUE. Requires an action under this Act to be
brought in a court of competent jurisdiction in Travis County,
in the county in which the charitable organization has its
principal place of business, or has a fixed and established
place of business at the time the suit is brought, or in the
county in which the solicitation occurred.
Sec. 16. RULES; ADVISORY COMMITTEE. (a) Authorizes the
attorney general to prescribe any rules, procedures, and forms
which are consistent with and necessary for the administration
and enforcement of this Act.
(b) Requires the attorney general to annually appoint an
advisory committee, consisting of certain members,
authorized to assist the attorney general in preparing
rules, procedures, and forms authorized by this Act.
Authorizes the advisory committee to assist the attorney
general in developing a public education program.
SECTION 2. Makes application of this Act prospective.
SECTION 3. Requires a charitable organization doing business in
this state on the effective date that is required to register under
Section 6, Article 9023d, V.T.C.S. to file the organization's
initial registration statement required under that section before
January 1, 1996.
SECTION 4. Effective date: September 1, 1995.
SECTION 5. Emergency clause.