74R11288 LJR-F
By Coleman H.B. No. 1601
Substitute the following for H.B. No. 1601:
By Brady C.S.H.B. No. 1601
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to the registration of and reporting by charitable
1-3 organizations; providing penalties.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Chapter 20, Title 132, Revised Statutes, is
1-6 amended by adding Article 9023d to read as follows:
1-7 Art. 9023d. REGISTRATION AND REPORTING BY CHARITABLE
1-8 ORGANIZATIONS
1-9 Sec. 1. SCOPE OF ACT; SHORT TITLE. (a) Except as provided
1-10 by this Act, this Act applies to all charitable organizations doing
1-11 business in this state. In addition to other acts that may
1-12 constitute doing business in this state, the solicitation of
1-13 contributions from persons in this state shall be considered to be
1-14 doing business in Texas, regardless of where the solicitation
1-15 originates.
1-16 (b) This article may be cited as the Charities Registration
1-17 and Reporting Act.
1-18 (c) This Act does not apply to organizations subject to
1-19 Article 9023b, Revised Statutes, or Chapter 920, Acts of the 73rd
1-20 Legislature, Regular Session, 1993 (Article 9023c, Vernon's Texas
1-21 Civil Statutes).
1-22 Sec. 2. CONSTRUCTION AND APPLICATION. (a) This Act shall
1-23 be applied to promote its underlying purposes, which are to
2-1 encourage contributions to legitimate charitable organizations
2-2 through public awareness and donor education and to prevent persons
2-3 from posing as charitable organizations and from using misleading
2-4 fund-raising practices, because those activities are harmful to
2-5 legitimate charitable organizations and to the citizens of this
2-6 state.
2-7 (b) This Act may not be construed to unreasonably burden
2-8 legitimate charitable organizations.
2-9 Sec. 3. DEFINITIONS. (a) In this Act:
2-10 (1) "Charitable organization" means:
2-11 (A) a person who is exempt or has applied for
2-12 exemption from federal income tax under Section 501(c)(3) of the
2-13 Internal Revenue Code of 1986;
2-14 (B) a person who solicits contributions and is
2-15 exempt or has applied for exemption from federal income tax under
2-16 Section 501(c)(4) or 501(c)(10) of the Internal Revenue Code of
2-17 1986; or
2-18 (C) a person who solicits contributions and is
2-19 or holds himself, herself, or itself out to be established or
2-20 operating for a charitable purpose, except for commercial
2-21 coventurers and volunteers that have been authorized to solicit on
2-22 behalf of a charitable organization that is registered under this
2-23 Act.
2-24 (2) "Charitable purpose" means:
2-25 (A) a purpose described by Section 501(c)(3) of
3-1 the Internal Revenue Code of 1986; or
3-2 (B) the provision of assistance to needy
3-3 individuals.
3-4 (3) "Charitable sales promotion" means any advertising
3-5 or sale conducted by a person who represents that the purchase or
3-6 use of goods or services offered by the person will benefit, in
3-7 whole or in part, any charitable organization or charitable
3-8 purpose. The provision of advertising services to a charitable
3-9 organization, either for compensation or as a donation, does not of
3-10 itself constitute a charitable sales promotion.
3-11 (4) "Commercial coventurer" means a person who:
3-12 (A) for profit regularly and primarily is
3-13 engaged in trade or commerce other than in connection with
3-14 soliciting for charitable organizations or charitable purposes; and
3-15 (B) conducts a charitable sales promotion.
3-16 (5) "Commercial solicitor" means a person who is
3-17 retained by a charitable organization to solicit contributions,
3-18 whether done individually or through another person under the
3-19 direction of the commercial solicitor. The term does not include a
3-20 fund-raising counsel or a bona fide employee, officer, director, or
3-21 volunteer of a charitable organization. A person who advises
3-22 another person to make a charitable contribution is not considered,
3-23 solely as the result of that advice, to be a commercial solicitor.
3-24 (6) "Contribution" means the promise to give or gift
3-25 of money, credit, property, financial assistance, or other thing of
4-1 any kind or value, except volunteer services. The term does not
4-2 include bona fide fees, dues, or assessments paid by members if
4-3 membership is not conferred solely as consideration for making a
4-4 contribution in response to a solicitation.
4-5 (7) "Fund-raising counsel" means any person who for
4-6 compensation consults with a charitable organization or who plans,
4-7 manages, advises, or assists with respect to the solicitation of
4-8 contributions for or on behalf of a charitable organization, but
4-9 who does not have custody and control over contributions or other
4-10 receipts from a solicitation or authority to pay expenses
4-11 associated with a solicitation and who does not solicit, employ,
4-12 procure, or engage any compensated person to solicit contributions.
4-13 The term does not include a bona fide officer, volunteer, or
4-14 employee of a charitable organization.
4-15 (8) "Knowingly" means with actual awareness, but
4-16 actual awareness may be inferred if objective manifestations
4-17 indicate that a person acted with actual awareness.
4-18 (9) "Person" means an individual, partnership,
4-19 corporation, association, or other legal entity.
4-20 (b) For the purposes of this Act, a person has custody and
4-21 control of funds of a charitable organization if the person has the
4-22 authority to direct the use of the funds, expend the funds,
4-23 withdraw the funds, or sign on an account of the charitable
4-24 organization. A person does not have custody and control of funds
4-25 of a charitable organization if the person simply has possession of
5-1 the funds and the person's only authority from the charitable
5-2 organization with respect to the funds is to forward the funds for
5-3 deposit by the charitable organization.
5-4 (c) In this Act, a solicitation is the direct or indirect
5-5 request for a contribution on the plea or representation that the
5-6 contribution, or any portion of the contribution, will be used for
5-7 a charitable purpose or to benefit a charitable organization. A
5-8 solicitation is considered to have occurred regardless of whether
5-9 the person making the solicitation receives any contribution.
5-10 Without limiting the scope of this subsection, the following are
5-11 methods of requesting contributions:
5-12 (1) an oral or written request;
5-13 (2) publicizing a request in newspapers, on the radio
5-14 or television, or by any telecommunications device or other manner
5-15 of transmitting information to the public;
5-16 (3) the distribution, circulation, posting, or
5-17 publishing of a handbill, written advertisement, or other
5-18 publication;
5-19 (4) offering for sale an advertisement, book, card,
5-20 coupon, ticket, membership, merchandise, subscription, flower,
5-21 candy, or other tangible item if any appeal is made for a
5-22 charitable organization or charitable purpose, if the name of a
5-23 charitable organization is used or referred to in the appeal as an
5-24 inducement or reason for making the sale, or if a statement is made
5-25 that the whole or any part of the proceeds from the sale will be
6-1 used for any charitable purpose or to benefit any charitable
6-2 organization; or
6-3 (5) the use or employment of a canister, card,
6-4 receptacle, or similar device for the collection of money or other
6-5 things of value in connection with which an appeal is made for any
6-6 charitable organization or charitable purpose.
6-7 (d) A request for a contribution by a charitable
6-8 organization made solely to its current and former trustees,
6-9 officers, directors, members, employees, students, advisory boards,
6-10 or volunteers is not a solicitation for the purpose of this Act.
6-11 Sec. 4. EXEMPTION FROM REGISTRATION. (a) Except as
6-12 provided by Subsection (b) of this section, the following persons
6-13 are not required to register under Section 6 of this Act:
6-14 (1) a charitable organization that is exempt from
6-15 federal income tax under Section 501(c)(3) of the Internal Revenue
6-16 Code of 1986 and exempt from filing annual information returns with
6-17 the Internal Revenue Service under Section 6033 of the Internal
6-18 Revenue Code of 1986 and the treasury regulations issued under
6-19 Section 6033;
6-20 (2) an institution of higher education that has
6-21 current accreditation from a regional accrediting association and a
6-22 charitable organization controlled by or affiliated with and
6-23 designated by such an institution;
6-24 (3) a nonprofit hospital that is required by law to
6-25 file a financial report at least annually with a state and a
7-1 charitable organization controlled by or affiliated with and
7-2 designated by such a hospital; and
7-3 (4) a private foundation, as defined by Section 509(a)
7-4 of the Internal Revenue Code of 1986, that does not solicit.
7-5 (b) In any year in which a person described by Subsection
7-6 (a) of this section engages the services of a commercial solicitor,
7-7 the person shall register, by filing a registration statement and
7-8 filing fee in accordance with Section 6 of this Act, before the
7-9 10th working day preceding the effective date of the contract with
7-10 the commercial solicitor.
7-11 Sec. 5. REGISTER TO BE MAINTAINED. (a) The attorney
7-12 general shall establish and maintain a register of charitable
7-13 organizations subject to this Act.
7-14 (b) All documents required to be filed with the attorney
7-15 general under this Act are public information and shall be
7-16 available to the public under the open records law, Chapter 552,
7-17 Government Code, except those documents that identify the donors of
7-18 a charitable organization, which information is confidential and is
7-19 not subject to disclosure.
7-20 Sec. 6. REGISTRATION. (a) The attorney general shall
7-21 maintain a registry of charitable organizations that submit to the
7-22 attorney general completed registration statements that contain:
7-23 (1) the legal name and each assumed name, the mailing
7-24 address and street address, and each telephone number and facsimile
7-25 number of each office, chapter, local unit, branch, and affiliate
8-1 of the charitable organization;
8-2 (2) the employer identification number of the
8-3 charitable organization;
8-4 (3) the name, title, address, and telephone number of
8-5 each officer, director, and executive director or other chief
8-6 operating officer of the charitable organization;
8-7 (4) the name of each officer, director, or employee
8-8 who is compensated by the charitable organization or who has
8-9 custody and control of funds of the charitable organization and who
8-10 has been convicted of or pleaded nolo contendere to a misdemeanor
8-11 involving fraud or the theft, misappropriation, misapplication, or
8-12 misuse of property of another, or any felony, including the offense
8-13 and the state, court, and date of each conviction or plea of nolo
8-14 contendere;
8-15 (5) the date the charitable organization was
8-16 incorporated and the state of incorporation or, if not
8-17 incorporated, the type of organization and the date established;
8-18 the day and month on which the organization's fiscal year ends; and
8-19 whether the organization is eligible to receive tax-deductible
8-20 contributions under Section 170 of the Internal Revenue Code of
8-21 1986;
8-22 (6) a statement as to whether the organization has
8-23 applied for or been granted tax exempt status by the Internal
8-24 Revenue Service and, if so, the date of the application, the date
8-25 the exemption was granted or denied, the Internal Revenue Code
9-1 section under which the application was based, and a statement as
9-2 to whether or when the tax exemption has ever been denied, revoked,
9-3 or modified;
9-4 (7) the date the organization began doing business in
9-5 this state and the name and address of the organization's
9-6 registered agent in this state;
9-7 (8) a statement of the charitable organization's
9-8 charitable purposes and, if the organization solicits
9-9 contributions, a list of the programs for which funds are
9-10 solicited;
9-11 (9) a list of all governmental entities from which the
9-12 charitable organization received funds in the preceding 12 months
9-13 and a statement of the percentage of the total funds received in
9-14 the preceding 12 months received from individual and corporate
9-15 donors, private foundations, combined campaigns, governmental
9-16 entities, and persons who are exempt from federal income taxation
9-17 under Section 501(c)(3), 501(c)(4), or 501(c)(10) of the Internal
9-18 Revenue Code of 1986;
9-19 (10) for charitable organizations that solicit
9-20 contributions from persons other than prior donors or persons who
9-21 have used the services of the charitable organization or the direct
9-22 beneficiaries or families of direct beneficiaries of the charitable
9-23 organization, a statement that includes:
9-24 (A) whether the charitable organization or any
9-25 of its directors, officers, agents, or employees who are
10-1 compensated by the charitable organization or who have custody and
10-2 control of the funds of the charitable organization, has been
10-3 enjoined by a government agency or court from soliciting, has had a
10-4 registration denied or revoked, has been the subject of any court
10-5 or administrative proceeding regarding any solicitation or
10-6 registration, or has entered into a voluntary agreement of
10-7 compliance;
10-8 (B) a list of all states in which the charitable
10-9 organization is registered or has been registered, including dates
10-10 of registration, registration numbers, any other names under which
10-11 the charitable organization was or is registered, and the dates and
10-12 types of solicitation conducted in each state;
10-13 (C) the name and address of each individual in
10-14 the charitable organization who is responsible for custody and
10-15 control of funds, distribution of funds, fund-raising, or custody
10-16 of records or who is authorized to sign checks or make withdrawals;
10-17 information required by this paragraph is confidential and is not
10-18 subject to disclosure under the open records law, Chapter 552,
10-19 Government Code;
10-20 (D) the names, addresses, and telephone numbers
10-21 of the organization's accountants and auditors and the method of
10-22 accounting used;
10-23 (E) a statement that the charitable organization
10-24 has attempted in good faith to comply with all Texas county and
10-25 municipal ordinances regarding solicitation that have been filed
11-1 with the attorney general or, if none apply, a statement to that
11-2 effect;
11-3 (F) for charitable organizations that engage the
11-4 services of commercial solicitors, the name and address of each
11-5 commercial solicitor engaged in the preceding 12 months, as well as
11-6 written confirmation from the commercial solicitor that it has
11-7 complied with all state and local registration laws;
11-8 (G) the amount paid to commercial solicitors
11-9 during the preceding 12 months;
11-10 (H) the total contributions received during the
11-11 preceding 12 months; and
11-12 (I) the total fund-raising costs during the
11-13 preceding 12 months, calculated pursuant to generally accepted
11-14 accounting principles;
11-15 (11) a copy of the charitable organization's most
11-16 recently filed Internal Revenue Service Form 990 and other federal
11-17 tax returns, including all supplements, amendments, and attachments
11-18 to those returns and requests for extensions to file those returns
11-19 or, if the charitable organization does not file federal tax
11-20 returns:
11-21 (A) a statement as to the reason none is filed;
11-22 and
11-23 (B) the charitable organization's most recent
11-24 financial statements, including audited financial statements, if
11-25 any have been prepared; and
12-1 (12) a sworn statement verifying that the information
12-2 contained in the registration statement and all attachments to the
12-3 statement are true, correct, and complete to the best of the
12-4 affiant's knowledge.
12-5 (b) A charitable organization shall file its initial
12-6 registration statement before the 10th working day preceding the
12-7 date on which the organization begins doing business in this state.
12-8 (c) Registration expires on the 15th day of the fifth month
12-9 following the close of a charitable organization's fiscal year.
12-10 Renewal registration statements shall be filed on the same forms
12-11 required for initial registration statements and must include the
12-12 name and employer identification number of the charitable
12-13 organization and any changes to the information previously
12-14 submitted to the attorney general. For items on which there is no
12-15 change from the previous year's registration statement, "no change"
12-16 may be indicated.
12-17 (d) A filing fee not to exceed $75 shall accompany the
12-18 initial registration statement. A $75 filing fee shall accompany
12-19 all renewal registration statements.
12-20 (e) The registration statements shall be submitted on forms
12-21 prescribed or approved by the attorney general.
12-22 Sec. 7. NOTIFICATION OF NONCOMPLIANCE. (a) A charitable
12-23 organization that is not in compliance with this Act shall be
12-24 notified of noncompliance by the attorney general by first class
12-25 mail at the organization's last reported address. Noncompliance
13-1 includes failure to file any documents required by this Act or the
13-2 filing of incomplete or inaccurate documents.
13-3 (b) A charitable organization violates this Act if it fails
13-4 to file complete documents within 30 days of the date the notice
13-5 required by Subsection (a) of this section has been mailed or if it
13-6 knowingly files materially inaccurate documents.
13-7 Sec. 8. RECORD KEEPING; AUDIT POWERS OF ATTORNEY GENERAL.
13-8 (a) Each charitable organization required to file a registration
13-9 statement shall keep true books and records as to its activities
13-10 within this state in a form to enable it to accurately provide the
13-11 information required by this Act. The books and records shall be
13-12 retained for a period of at least three years after the end of the
13-13 period to which the registration statement relates. All books and
13-14 records of a charitable organization shall be made available for
13-15 inspection and copying by authorized personnel of the attorney
13-16 general on written request by authorized personnel of the attorney
13-17 general.
13-18 (b) A charitable organization shall make available the
13-19 information requested by authorized personnel of the attorney
13-20 general at the organization's principal place of business within 10
13-21 working days of the date of the request, or at a time and place as
13-22 may be agreed.
13-23 (c) The authority established by this section is in addition
13-24 to other statutory or common law audit or investigative authority
13-25 of the attorney general.
14-1 Sec. 9. USE OF FEES. (a) All fees collected by the
14-2 attorney general under this Act are dedicated for use by the
14-3 attorney general during the biennium of receipt to administer this
14-4 Act, to enforce this Act, and to educate the public about this Act
14-5 and charitable organizations and solicitations generally.
14-6 (b) At the end of each biennium, the attorney general shall
14-7 file with the Legislative Budget Board a report that shows the
14-8 amounts of fees collected by the attorney general under this Act
14-9 and the uses for which the collected fees were expended.
14-10 Sec. 10. TOLL-FREE TELEPHONE LINE. The attorney general
14-11 shall establish and operate a toll-free telephone line. The public
14-12 may use the toll-free number to:
14-13 (1) obtain information concerning a charitable
14-14 organization that has registered under this Act; or
14-15 (2) report an alleged violation of this Act.
14-16 Sec. 11. REGISTRATION DOES NOT IMPLY ENDORSEMENT.
14-17 Registration under this Act does not imply endorsement by this
14-18 state or the attorney general, and charitable organizations are
14-19 prohibited from stating or implying to the contrary.
14-20 Sec. 12. REMEDIES. (a) The attorney general may institute
14-21 an action for failure to fully and accurately comply with any
14-22 provision of this Act and may obtain injunctive relief to restrain
14-23 a person from continuing a violation, cancellation or suspension of
14-24 the registration, an order restraining the person from doing
14-25 business in this state while violating this Act, a civil penalty of
15-1 not more than $25,000 per violation, or injunctive relief and a
15-2 civil penalty. A person who violates an injunction issued under
15-3 this section is liable to the state for a civil penalty of not less
15-4 than $100,000.
15-5 (b) The remedies authorized by this Act are not exclusive
15-6 but are in addition to any other procedure or remedy provided for
15-7 by other statutory or common law.
15-8 (c) In any proceeding successfully prosecuted by the
15-9 attorney general under this Act, the court may allow the attorney
15-10 general to recover civil penalties and the reasonable costs,
15-11 expenses, and attorney's fees incurred in bringing the suit.
15-12 Sec. 13. DEDICATION OF FEES AND CIVIL PENALTIES. In
15-13 addition to other money, all fees assessed under this Act and all
15-14 recovered expenses incurred in obtaining injunctive relief and
15-15 administrative and civil penalties authorized by this Act are
15-16 dedicated for use by the attorney general. Recovered expenses
15-17 include, but are not limited to, investigative costs, witness fees,
15-18 attorney's fees, and deposition expenses. That money may be
15-19 expended only for purposes of enforcing and administering this Act
15-20 and may not be appropriated for any other purpose.
15-21 Sec. 14. SERVICE ON SECRETARY OF STATE. (a) The secretary
15-22 of state is an agent for service of process or complaint on a
15-23 charitable organization that:
15-24 (1) is required by this state to designate or maintain
15-25 a resident agent but has not designated or maintained a resident
16-1 agent for service of process;
16-2 (2) has one or more resident agents for service of
16-3 process, but two unsuccessful attempts have been made on different
16-4 business days to serve each agent; or
16-5 (3) is not required to designate an agent for service
16-6 in this state.
16-7 (b) Service on the secretary of state may be made by
16-8 certified mail, return receipt requested, by the clerk of the court
16-9 in which the case is pending, by the party or representative of the
16-10 party, or by any other method authorized by statute or the Texas
16-11 Rules of Civil Procedure for service on the secretary of state.
16-12 (c) If the secretary of state is served with process for a
16-13 charitable organization, the secretary of state shall require a
16-14 statement of the name and last known address of the charitable
16-15 organization and shall immediately mail a copy of the process to
16-16 the charitable organization by registered mail or by certified
16-17 mail, return receipt requested.
16-18 Sec. 15. VENUE. An action under this Act shall be brought
16-19 in a court of competent jurisdiction in Travis County, in the
16-20 county in which the charitable organization has its principal place
16-21 of business or has a fixed and established place of business at the
16-22 time the suit is brought, or in the county in which solicitation
16-23 occurred.
16-24 Sec. 16. RULES; ADVISORY COMMITTEE. (a) The attorney
16-25 general may adopt rules, procedures, and forms that are consistent
17-1 with and necessary for the proper administration and enforcement of
17-2 this Act.
17-3 (b) The attorney general shall annually appoint an advisory
17-4 committee, consisting of representatives of charitable
17-5 organizations and including at least one representative from a
17-6 charitable organization in each of the following categories of
17-7 charitable organizations that are subject to the requirements of
17-8 this chapter: religious charities, educational charities, the
17-9 United Way, health-related charities, and charitable organizations
17-10 that are exempt from federal income taxation under Section
17-11 501(c)(4) or 501(c)(10) of the Internal Revenue Code of 1986. The
17-12 advisory committee may assist the attorney general in preparing
17-13 rules, procedures, and forms authorized by this Act. The advisory
17-14 committee may also assist the attorney general in developing a
17-15 public education program.
17-16 SECTION 2. The changes in law made by this Act apply only to
17-17 a solicitation that takes place on or after the effective date of
17-18 this Act. A solicitation that takes place before the effective
17-19 date of this Act is governed by the law in effect on the date of
17-20 the solicitation, and the former law is continued for that purpose.
17-21 SECTION 3. A charitable organization doing business in this
17-22 state on the effective date of this Act that is required to
17-23 register under Section 6, Article 9023d, Revised Statutes, as added
17-24 by this Act, shall file the organization's initial registration
17-25 statement required under that section before January 1, 1996.
18-1 SECTION 4. This Act takes effect September 1, 1995.
18-2 SECTION 5. The importance of this legislation and the
18-3 crowded condition of the calendars in both houses create an
18-4 emergency and an imperative public necessity that the
18-5 constitutional rule requiring bills to be read on three several
18-6 days in each house be suspended, and this rule is hereby suspended.