By: Ellis S.B. No. 1214
A BILL TO BE ENTITLED
AN ACT
1-1 relating to the registration and reporting by charitable
1-2 organizations.
1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-4 SECTION 1. Title 9, Property Code, is amended by adding
1-5 Chapter 124 to read as follows:
1-6 CHAPTER 124. REGISTRATION AND REPORTING BY CHARITABLE
1-7 ORGANIZATIONS.
1-8 Sec. 124.001. SCOPE OF ACT; SHORT TITLE. (a) Except as
1-9 provided by this chapter, this chapter applies to all charitable
1-10 organizations doing business in Texas. In addition to other acts
1-11 that may constitute doing business in Texas, the solicitation of
1-12 contributions from persons in Texas shall be considered to be doing
1-13 business in Texas, regardless of where the solicitation originates.
1-14 (b) This chapter may be cited as the Charities Registration
1-15 and Reporting Act.
1-16 (c) This chapter does not apply to organizations subject to
1-17 Article 9023b or Article 9023c, Revised Statutes.
1-18 Sec. 124.002. CONSTRUCTION AND APPLICATION. (a) This
1-19 chapter shall be applied to promote its underlying purposes, which
1-20 are to encourage contributions to legitimate charitable
1-21 organizations through public awareness and donor education, and to
1-22 prevent persons from posing as charitable organizations and from
1-23 using misleading fund raising practices, because such activities
2-1 are harmful to legitimate charitable organizations and to the
2-2 citizens of this state.
2-3 (b) This chapter may not be construed to unreasonably burden
2-4 legitimate charitable organizations.
2-5 Sec. 124.003. DEFINITIONS. In this chapter and for purposes
2-6 of this chapter only:
2-7 (a) "Charitable organization" means
2-8 (1) a person who is exempt or has applied for
2-9 exemption from federal income tax under Section 501(c)(3) of the
2-10 Internal Revenue Code of 1986; or
2-11 (2) a person who solicits contributions and is exempt
2-12 or has applied for exemption from federal income tax under Sections
2-13 501(c)(4) or 501(c)(10) of the Internal Revenue Code of 1986; or
2-14 (3) any other person who solicits contributions and is
2-15 or holds himself, herself or itself out to be established or
2-16 operating for a charitable purpose, except for commercial
2-17 coventurers and volunteers that have been authorized to solicit on
2-18 behalf of a charitable organization which has registered in
2-19 accordance with the provisions of this Act.
2-20 (b) "Charitable purpose" means (1) any purpose described in
2-21 Section 501(c)(3) of the Internal Revenue Code of 1986; or (2) the
2-22 provision of assistance to needy individuals.
2-23 (c) "Commercial Solicitor" means any person who is retained
2-24 by a charitable organization to solicit contributions, whether such
2-25 solicitation is done individually or through other persons under
3-1 the direction of the commercial solicitor. No fund raising counsel
3-2 shall be deemed to be a commercial solicitor. No bona fide
3-3 employee, officer, director or volunteer of a charitable
3-4 organization shall be deemed to be a commercial solicitor. No
3-5 person who advises another person to make a charitable contribution
3-6 shall be deemed, as the result of such advice, to be a commercial
3-7 solicitor.
3-8 (d) "Contribution" means the promise to give or gift of
3-9 money, credit, property, financial assistance, or other thing of
3-10 any kind or value, except for volunteer services. It does not
3-11 include bona fide fees, dues or assessments paid by members,
3-12 provided that membership is not conferred solely as consideration
3-13 for making a contribution in response to a solicitation.
3-14 (e) "Person" means an individual, partnership, corporation,
3-15 association, or other entity, however organized.
3-16 (f) "Solicit" and "solicitation" mean:
3-17 (1) The direct or indirect request for a contribution
3-18 on the plea or representation that the contribution, or any portion
3-19 thereof, will be used for a charitable purpose or to benefit a
3-20 charitable organization. A solicitation shall be deemed to have
3-21 taken place whether or not the person making the solicitation
3-22 receives any contribution. Without limiting the scope of the
3-23 foregoing, these words shall include the following method of
3-24 requesting contributions:
3-25 (A) any oral or written request;
4-1 (B) publicizing a request in newspapers, on the
4-2 radio or television, or by any telecommunications device or other
4-3 manner of transmitting information to the public;
4-4 (C) the distribution, circulation, posting or
4-5 publishing of any handbill, written advertisement or other
4-6 publications;
4-7 (D) offering for sale any advertisement, book,
4-8 card, coupon, ticket, membership, merchandise, subscription,
4-9 flower, candy or other tangible item if any appeal is made for any
4-10 charitable organization or charitable purpose, or if the name of
4-11 any charitable organization is used or referred to in the appeal as
4-12 an inducement or reason for making the sale, or where any statement
4-13 is made that the whole or any part of the proceeds from the sale
4-14 will be used for any charitable purpose or to benefit any
4-15 charitable organization; or
4-16 (E) the use or employment of canisters, cards,
4-17 receptacles or similar devices for the collection of money or other
4-18 things of value in connection with which any appeal is made for any
4-19 charitable organization or charitable purpose.
4-20 (2) The words "solicit" and "solicitation" shall not
4-21 include a request for contributions by a charitable organization
4-22 made solely to its current and former trustees, officers,
4-23 directors, members, employees, students, advisory boards, or
4-24 volunteers.
4-25 (g) "Knowingly" means with actual awareness, but actual
5-1 awareness may be inferred where objective manifestations indicate
5-2 that a person acted with actual awareness.
5-3 (h) "Commercial coventurer" means any person who for profit
5-4 regularly and primarily is engaged in trade or commerce other than
5-5 in connection with soliciting for charitable organizations or
5-6 charitable purposes and who conducts a charitable sales promotion.
5-7 (i) "Charitable sales promotion" means any advertising or
5-8 sale conducted by a person who represents that the purchase or use
5-9 of goods or services offered by the person will benefit, in whole
5-10 or in part, any charitable organization or charitable purpose. The
5-11 provision of advertising services to a charitable organization,
5-12 either for compensation or as a donation, does not of itself
5-13 constitute a charitable sales promotion.
5-14 (j) "Fund raising counsel" means any person who for
5-15 compensation consults with a charitable organization or who plans,
5-16 manages, advises or assists with respect to the solicitation of
5-17 contributions for or on behalf of a charitable organization, but
5-18 who does not have custody and control over contributions or other
5-19 receipts from a solicitation or authority to pay expenses
5-20 associated with a solicitation and who does not solicit or employ,
5-21 procure or engage any compensated person to solicit contributions.
5-22 A bona fide officer, volunteer, or employee of a charitable
5-23 organization shall not be deemed a fund raising counsel.
5-24 Sec. 124.004. EXEMPTIONS. (a) Subject to the exception in
5-25 Subsection (b), the following persons shall not be required to
6-1 register under Section 124.005:
6-2 (1) Charitable organizations that are exempt from
6-3 federal income tax under Section 501(c)(3) of the Internal Revenue
6-4 Code of 1986 and exempt from filing annual information returns with
6-5 the Internal Revenue Service under Section 6033 of the Internal
6-6 Revenue Code of 1986 and the Treasury Regulations issued pursuant
6-7 to Section 6033;
6-8 (2) institutions of higher education which have
6-9 current accreditation from a regional accrediting association;
6-10 (3) nonprofit hospitals which are required by law to
6-11 file financial reports at least annually with a state; and
6-12 (4) private foundations, as defined by Section 509(a)
6-13 of the Internal Revenue Code of 1986.
6-14 (b) A person described in Subsection (a) shall register, by
6-15 filing a registration statement and filing fee in accordance with
6-16 Sec. 124.006, in any year in which it engages the services of a
6-17 commercial solicitor, at least 10 working days prior to the
6-18 effective date of the contract with the commercial solicitor.
6-19 Sec. 124.005. REGISTER TO BE MAINTAINED. (a) The attorney
6-20 general shall establish and maintain a register of charitable
6-21 organizations subject to this chapter.
6-22 (b) Except as otherwise provided herein, all documents
6-23 required to be filed with the attorney general under this chapter
6-24 shall be public information and shall be available to the public
6-25 pursuant to the Open Records Act, Chapter 552, Government Code,
7-1 except those documents which identify the donors of a charitable
7-2 organization, which information is confidential and shall not be
7-3 subject to disclosure.
7-4 Sec. 124.006. REGISTRATION. (a) The attorney general shall
7-5 maintain a registry of charitable organizations that submit to the
7-6 attorney general completed registration statements that contain the
7-7 following information:
7-8 (1) The legal name, assumed name(s), mailing address,
7-9 street address, telephone numbers and facsimile number(s) of all
7-10 offices, chapters, local units, branches and/or affiliates of the
7-11 charitable organization;
7-12 (2) the employer identification number of the
7-13 charitable organization;
7-14 (3) the name, title, addresses and telephone numbers
7-15 of the charitable organization's officers, directors and executive
7-16 director or other chief operating officer;
7-17 (4) the name of any officer, director or employee who
7-18 has been convicted of or pleaded nolo contendere to a misdemeanor
7-19 involving fraud or the theft, misappropriation, misapplication, or
7-20 misuse of property of another, or of any felony, the offense, and
7-21 the state, court and date of each conviction or plea of nolo
7-22 contendere;
7-23 (5) the date the charitable organization was
7-24 incorporated, the state of incorporation, or, if not incorporated,
7-25 type of organization and date established; the day and month on
8-1 which the organization's fiscal year ends; and whether the
8-2 organization is eligible to receive tax-deductible contributions
8-3 under Section 170 of the Internal Revenue Code of 1986;
8-4 (6) whether the organization has applied for or been
8-5 granted IRS tax exempt status, and if so, the date of the
8-6 application, the date the exemption was granted or denied, the
8-7 Internal Revenue Code section under which the application was
8-8 based, and a statement as to whether and when the tax exemption has
8-9 ever been denied, revoked or modified;
8-10 (7) the date the organization began doing business in
8-11 Texas and the name and address of the organization's registered
8-12 agent in the State of Texas;
8-13 (8) a statement of the charitable organization's
8-14 charitable purposes and, if the organization solicits
8-15 contributions, a list of the programs for which funds are
8-16 solicited;
8-17 (9) a list of all foundations, combined campaigns,
8-18 governmental entities, and persons who are exempt from federal
8-19 income taxation under Sections 501(c)(3), 501(c)(4) or 501(c)(10)
8-20 of the Internal Revenue Code of 1986, from which the charitable
8-21 organization received funds in the previous 12 months;
8-22 (10) for charitable organizations that solicit
8-23 contributions from any persons other than prior donors or persons
8-24 who have used the services of the charitable organization or the
8-25 direct beneficiaries or families of direct beneficiaries of the
9-1 charitable organization, a statement including the following
9-2 information:
9-3 (A) whether the charitable organization or any
9-4 of its directors, officers, agents, or employees has been enjoined
9-5 by a government agency or court from soliciting, has had its
9-6 registration denied or revoked, has been the subject of any court
9-7 or administrative proceeding regarding any solicitation or
9-8 registration, and/or has entered into a voluntary agreement of
9-9 compliance;
9-10 (B) a list of all states where the charitable
9-11 organization is registered or has been registered including dates
9-12 of registration, registration numbers, any other names under which
9-13 the charitable organization was or is registered and the dates and
9-14 types of solicitation conducted in each state;
9-15 (C) the names and addresses of each individual
9-16 in the charitable organization responsible for custody and control
9-17 of funds, distribution of funds, fund raising, custody of records
9-18 or authorized to sign checks and/or make withdrawals. This
9-19 information is confidential and shall not be subject to disclosure
9-20 pursuant to the Open Records Act, Chapter 552, Government Code;
9-21 (D) the names, addresses and telephone numbers
9-22 of the organization's accountants and auditors and the method of
9-23 accounting used;
9-24 (E) a statement that the charitable organization
9-25 has attempted in good faith to comply with and to the best of the
10-1 knowledge of all its officers and directors, is in compliance with
10-2 all applicable Texas county and municipal ordinances regarding
10-3 solicitation or, if none apply, a statement to that effect;
10-4 (F) for charitable organizations that engage the
10-5 services of commercial solicitors, the name and address of all
10-6 commercial solicitors so engaged in the previous twelve months, as
10-7 well as written confirmation from the commercial solicitor that it
10-8 has complied with any state and/or local registration laws;
10-9 (G) the amount paid to commercial solicitors
10-10 during the previous twelve months;
10-11 (H) the total contributions received in the
10-12 previous twelve months; and
10-13 (I) the total fund raising costs in the previous
10-14 twelve months, calculated pursuant to generally accepted accounting
10-15 principles;
10-16 (11) a copy of the charitable organization's most
10-17 recently filed IRS Form 990 and other federal tax returns,
10-18 including all supplements, amendments and attachments to these
10-19 returns and requests for extensions to file such returns, or, if
10-20 the charitable organization does not file federal tax returns,
10-21 (1) a statement as to the reason none is filed; and (2) the
10-22 charitable organization's most recent financial statements,
10-23 including audited financial statements, if any have been prepared;
10-24 and
10-25 (12) a sworn statement verifying that the information
11-1 contained in the registration statement is true, correct and
11-2 complete to the best of the affiant's knowledge.
11-3 (b) All charitable organizations doing business in Texas on
11-4 the effective date of this Act shall file initial registration
11-5 statements by January 1, 1996. All charitable organizations that
11-6 begin doing business in Texas after the effective date of this Act
11-7 shall file initial registration statements at least 10 working days
11-8 before doing business in Texas.
11-9 (c) Registration expires on the 15th day of the fifth month
11-10 following the close of a charitable organization's fiscal year.
11-11 Renewal registration statements shall be filed on the same forms
11-12 required for initial registration statements and shall include the
11-13 name and employer identification number of the charitable
11-14 organization and any changes to the information previously
11-15 submitted to the attorney general. For items on which there is no
11-16 change from the previous year's registration statement, "no change"
11-17 may be indicated.
11-18 (d) A $75 filing fee shall accompany the initial
11-19 registration statement; a $75 filing fee shall accompany all
11-20 renewal registration statements.
11-21 (e) The registration statements shall be submitted on forms
11-22 prescribed or approved by the attorney general.
11-23 Sec. 124.007. NOTIFICATION OF NONCOMPLIANCE.
11-24 (a) Charitable organizations that are not in compliance with the
11-25 provisions of this chapter shall be notified of noncompliance by
12-1 the attorney general by first class mail at the organization's last
12-2 reported address. Noncompliance shall include failure to file any
12-3 documents required by this chapter or the filing of incomplete or
12-4 inaccurate documents.
12-5 (b) A charitable organization shall be deemed to be in
12-6 violation of this chapter if it fails to file complete documents
12-7 within 30 days of the date the notice required by Section
12-8 124.006(a) has been mailed, or if it knowingly files materially
12-9 inaccurate documents.
12-10 Sec. 124.008. RECORD KEEPING; AUDIT POWERS OF THE ATTORNEY
12-11 GENERAL. (a) Every charitable organization required to file
12-12 registration statements shall keep true books and records as to its
12-13 activities within the state in such form as to enable it to
12-14 accurately provide the information required by this chapter. Such
12-15 books and records shall be retained for a period of at least three
12-16 years after the end of the period to which the registration
12-17 statement relates. All books and records of a charitable
12-18 organization shall be made available for inspection and copying by
12-19 authorized personnel of the attorney general upon written request
12-20 by authorized personnel of the attorney general.
12-21 (b) A charitable organization shall make available the
12-22 information requested by authorized personnel of the attorney
12-23 general at the organization's principal place of business within
12-24 ten working days of the date of the request, or at such time and
12-25 place as may be agreed.
13-1 (c) The authority established in this section is in addition
13-2 to other statutory or common law audit or investigative authority
13-3 of the attorney general.
13-4 Sec. 124.009. USE OF FEES. All fees collected by the
13-5 attorney general under this chapter are appropriated to the
13-6 attorney general during the biennium of receipt to administer the
13-7 provisions of this chapter, to enforce this chapter, and to
13-8 educate the public about this chapter and charitable organizations
13-9 and solicitations generally.
13-10 Sec. 124.010. TOLL-FREE TELEPHONE LINE. The attorney
13-11 general shall establish and operate a toll-free telephone line.
13-12 The public may telephone the toll-free number to:
13-13 (a) obtain information concerning a charitable organization
13-14 that has registered pursuant to this chapter; or
13-15 (b) report an alleged violation of this chapter.
13-16 Sec. 124.011. REGISTRATION DOES NOT IMPLY ENDORSEMENT.
13-17 Registration pursuant to this chapter does not imply endorsement by
13-18 the state or the attorney general, and charitable organizations are
13-19 prohibited from stating or implying to the contrary.
13-20 Sec. 124.012. REMEDIES. (a) The attorney general may
13-21 institute an action for failure to fully and accurately comply with
13-22 any provision of this statute, and may obtain injunctive relief to
13-23 restrain the person from continuing the violation or violations,
13-24 cancellation or suspension of the registration, an order
13-25 restraining the person from doing business in this state while
14-1 violating this chapter, and/or civil penalties of not more than
14-2 $25,000 per violation. A person who violates an injunction issued
14-3 under this chapter is liable to the state for a civil penalty of
14-4 not less than $100,000.
14-5 (b) The remedies authorized by this chapter are not
14-6 exclusive, but are in addition to any other procedure or remedies
14-7 provided for by any other statutory or common law.
14-8 (c) In any proceeding successfully prosecuted by the
14-9 attorney general under this chapter, the court may allow the
14-10 attorney general to recover civil penalties and the reasonable
14-11 costs, expenses, and attorney's fees incurred in bringing the suit.
14-12 Sec. 124.013. APPROPRIATION OF FEES AND CIVIL PENALTIES. In
14-13 addition to moneys appropriated elsewhere, the attorney general is
14-14 hereby appropriated all fees assessed pursuant to and all recovered
14-15 expenses incurred in obtaining injunctive relief, administrative
14-16 and/or civil penalties authorized by Chapter 124, Property Code.
14-17 Recovered expenses include, but are not limited to, investigative
14-18 costs, witness fees, attorneys' fees, and deposition expenses.
14-19 Moneys hereby appropriated may be expended only for purposes of
14-20 enforcing and administering the provisions of Chapter 124, Property
14-21 Code and may not be appropriated for any other purpose.
14-22 Sec. 124.014. SERVICE ON SECRETARY OF STATE.
14-23 (a) The secretary of state is an agent for service of
14-24 process or complaint on a charitable organization which:
14-25 (1) is required by the state to designate or maintain
15-1 a resident agent but has not designated or maintained a resident
15-2 agent for service of process;
15-3 (2) has one or more resident agents for service of
15-4 process, but two unsuccessful attempts have been made on different
15-5 business days to serve each agent; or
15-6 (3) is not required to designate an agent for service
15-7 in this state.
15-8 (b) Service on the secretary of state may be made by
15-9 certified mail, return receipt requested, by the clerk of the court
15-10 in which the case is pending, by the party or representative of the
15-11 party or by any other method authorized by statute or the Texas
15-12 Rules of Civil Procedure for service on the secretary of state.
15-13 (c) If the secretary of state is served with process for a
15-14 charitable organization, he shall require a statement of the name
15-15 and last known address of the charitable organization and shall
15-16 immediately mail a copy of the process to the charitable
15-17 organization by registered mail or by certified mail, return
15-18 receipt requested.
15-19 Sec. 124.015. VENUE. In any proceeding under this chapter,
15-20 venue shall be in a court of competent jurisdiction in Travis
15-21 County, in the county in which the charitable organization has its
15-22 principal place of business, or has a fixed and established place
15-23 of business at the time the suit is brought, or in the county in
15-24 which solicitation occurred.
15-25 Sec. 124.016. RULES. The attorney general may prescribe any
16-1 rules, procedures and forms which are consistent with and necessary
16-2 for the proper administration and enforcement of this chapter.
16-3 SECTION 2. The changes in law made by this Act apply only to
16-4 a solicitation that takes place on or after the effective date of
16-5 this Act. A solicitation that takes place before the effective
16-6 date of this Act is governed by the law in effect on the date of
16-7 the solicitation, and the former law is continued for this purpose.
16-8 SECTION 3. This Act takes effect September 1, 1995.
16-9 SECTION 4. SEVERABILITY. If any section, sentence, clause,
16-10 or part of this Act shall, for any reason, be held invalid, such
16-11 invalidity shall not affect the remaining portions of the Act and
16-12 it is hereby to be the intention of this legislature to have passed
16-13 each section, sentence, clause, or part irrespective of the fact
16-14 that any other section, sentence, clause, or part may be declared
16-15 invalid.
16-16 SECTION 5. EMERGENCY. The importance of this legislation
16-17 and the crowded condition of the calendars in both houses create an
16-18 emergency and an imperative public necessity that the
16-19 constitutional rule requiring bills to be read on three several
16-20 days in each house be suspended, and this rule is hereby suspended.