Bill not drafted by TLC or Senate E&E.
Line and page numbers may not match official copy.
By Coleman H.B. No. 2771
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
1-24 encourage contributions to legitimate charitable organizations
2-1 through public awareness and donor education and to prevent persons
2-2 from posing as charitable organizations and from using misleading
2-3 fund-raising practices, because those activities are harmful to
2-4 legitimate charitable organizations and to the citizens of this
2-5 state.
2-6 (b) This Act may not be construed to unreasonably burden
2-7 legitimate charitable organizations.
2-8 Sec. 3. DEFINITIONS. (a) In this Act:
2-9 (1) "Charitable organization" means:
2-10 (A) a person who is exempt or has applied for
2-11 exemption from federal income tax under Section 501(c)(3) of the
2-12 Internal Revenue Code of 1986;
2-13 (B) a person who solicits contributions and is
2-14 exempt or has applied for exemption from federal income tax under
2-15 Section 501(c)(4) or 501(c)(10) of the Internal Revenue Code of
2-16 1986; or
2-17 (C) a person who solicits contributions and is
2-18 or holds himself, herself, or itself out to be established or
2-19 operating for a charitable purpose, except for commercial
2-20 coventurers and volunteers that have been authorized to solicit on
2-21 behalf of a charitable organization that is registered under this
2-22 Act.
2-23 (2) "Charitable purpose" means:
2-24 (A) a purpose described by Section 501(c)(3) of
2-25 the Internal Revenue Code of 1986; or
2-26 (B) the provision of assistance to needy
2-27 individuals.
2-28 (3) "Charitable sales promotion" means any advertising
2-29 or sale conducted by a person who represents that the purchase or
2-30 use of goods or services offered by the person will benefit, in
3-1 whole or in part, any charitable organization or charitable
3-2 purpose. The provision of advertising services to a charitable
3-3 organization, either for compensation or as a donation, does not of
3-4 itself constitute a charitable sales promotion.
3-5 (4) "Commercial coventurer" means a person who:
3-6 (A) for profit regularly and primarily is
3-7 engaged in trade or commerce other than in connection with
3-8 soliciting for charitable organizations or charitable purposes; and
3-9 (B) conducts a charitable sales promotion.
3-10 (5) "Commercial solicitor" means a person who is
3-11 retained by a charitable organization to solicit contributions,
3-12 whether done individually or through another person under the
3-13 direction of the commercial solicitor. The term does not include a
3-14 fund-raising counsel or a bona fide employee, officer, director, or
3-15 volunteer of a charitable organization. A person who advises
3-16 another person to make a charitable contribution is not considered,
3-17 solely as the result of that advice, to be a commercial solicitor.
3-18 (6) "Contribution" means the promise to give or gift
3-19 of money, credit, property, financial assistance, or other thing of
3-20 any kind or value, except volunteer services. The term does not
3-21 include bona fide fees, dues, or assessments paid by members if
3-22 membership is not conferred solely as consideration for making a
3-23 contribution in response to a solicitation.
3-24 (7) "Fund-raising counsel" means any person who for
3-25 compensation consults with a charitable organization or who plans,
3-26 manages, advises, or assists with respect to the solicitation of
3-27 contributions for or on behalf of a charitable organization, but
3-28 who does not have custody and control over contributions or other
3-29 receipts from a solicitation or authority to pay expenses
3-30 associated with a solicitation and who does not solicit, employ,
4-1 procure, or engage any compensated person to solicit contributions.
4-2 The term does not include a bona fide officer, volunteer, or
4-3 employee of a charitable organization.
4-4 (8) "Knowingly" means with actual awareness, but
4-5 actual awareness may be inferred if objective manifestations
4-6 indicate that a person acted with actual awareness.
4-7 (9) "Person" means an individual, partnership,
4-8 corporation, association, or other legal entity.
4-9 (b) For the purposes of this Act, a person has custody and
4-10 control of funds of a charitable organization if the person has the
4-11 authority to direct the use of the funds, expend the funds,
4-12 withdraw the funds, or sign on an account of the charitable
4-13 organization. A person does not have custody and control of funds
4-14 of a charitable organization if the person simply has possession of
4-15 the funds and the person's only authority from the charitable
4-16 organization with respect to the funds is to forward the funds for
4-17 deposit by the charitable organization.
4-18 (c) In this Act, a solicitation is the direct or indirect
4-19 request for a contribution on the plea or representation that the
4-20 contribution, or any portion of the contribution, will be used for
4-21 a charitable purpose or to benefit a charitable organization. A
4-22 solicitation is considered to have occurred regardless of whether
4-23 the person making the solicitation receives any contribution.
4-24 Without limiting the scope of this subsection, the following are
4-25 methods of requesting contributions:
4-26 (1) an oral or written request;
4-27 (2) publicizing a request in newspapers, on the radio
4-28 or television, or by any telecommunications device or other manner
4-29 of transmitting information to the public;
4-30 (3) the distribution, circulation, posting, or
5-1 publishing of a handbill, written advertisement, or other
5-2 publication;
5-3 (4) offering for sale an advertisement, book, card,
5-4 coupon, ticket, membership, merchandise, subscription, flower,
5-5 candy, or other tangible item if any appeal is made for a
5-6 charitable organization or charitable purpose, if the name of a
5-7 charitable organization is used or referred to in the appeal as an
5-8 inducement or reason for making the sale, or if a statement is made
5-9 that the whole or any part of the proceeds from the sale will be
5-10 used for any charitable purpose or to benefit any charitable
5-11 organization; or
5-12 (5) the use or employment of a canister, card,
5-13 receptacle, or similar device for the collection of money or other
5-14 things of value in connection with which an appeal is made for any
5-15 charitable organization or charitable purpose.
5-16 (d) A request for a contribution by a charitable
5-17 organization made solely to its current and former trustees,
5-18 officers, directors, members, employees, students, advisory boards,
5-19 or volunteers is not a solicitation for the purpose of this Act.
5-20 Sec. 4. EXEMPTION FROM REGISTRATION. (a) Except as
5-21 provided by Subsection (b) of this section, the following persons
5-22 are not required to register under Section 6 of this Act:
5-23 (1) a charitable organization that is exempt from
5-24 federal income tax under Section 501(c)(3) of the Internal Revenue
5-25 Code of 1986 and exempt from filing annual information returns with
5-26 the Internal Revenue Service under Section 6033 of the Internal
5-27 Revenue Code of 1986 and the treasury regulations issued under
5-28 Section 6033;
5-29 (2) an institution of higher education that has
5-30 current accreditation from a regional accrediting association and a
6-1 charitable organization controlled by or affiliated with and
6-2 designated by such an institution;
6-3 (3) a nonprofit hospital that is required by law to
6-4 file a financial report at least annually with a state and a
6-5 charitable organization controlled by or affiliated with and
6-6 designated by such a hospital; and
6-7 (4) a private foundation, as defined by Section 509(a)
6-8 of the Internal Revenue Code of 1986, that does not solicit.
6-9 (b) In any year in which a person described by Subsection
6-10 (a) of this section engages the services of a commercial solicitor,
6-11 the person shall register, by filing a registration statement and
6-12 filing fee in accordance with Section 6 of this Act, before the
6-13 10th working day preceding the effective date of the contract with
6-14 the commercial solicitor.
6-15 Sec. 5. REGISTER TO BE MAINTAINED. (a) The attorney
6-16 general shall establish and maintain a register of charitable
6-17 organizations subject to this Act.
6-18 (b) All documents required to be filed with the attorney
6-19 general under this Act are public information and shall be
6-20 available to the public under the open records law, Chapter 552,
6-21 Government Code, except those documents that identify the donors of
6-22 a charitable organization, which information is confidential and is
6-23 not subject to disclosure.
6-24 Sec. 6. REGISTRATION. (a) The attorney general shall
6-25 maintain a registry of charitable organizations that submit to the
6-26 attorney general completed registration statements that contain:
6-27 (1) the legal name and each assumed name, the mailing
6-28 address and street address, and each telephone number and facsimile
6-29 number of each office, chapter, local unit, branch, and affiliate
6-30 of the charitable organization;
7-1 (2) the employer identification number of the
7-2 charitable organization;
7-3 (3) the name, title, address, and telephone number of
7-4 each officer, director, and executive director or other chief
7-5 operating officer of the charitable organization;
7-6 (4) the name of each officer, director, or employee
7-7 who is compensated by the charitable organization or who has
7-8 custody and control of funds of the charitable organization and who
7-9 has been convicted of or pleaded nolo contendere to a misdemeanor
7-10 involving fraud or the theft, misappropriation, misapplication, or
7-11 misuse of property of another, or any felony, including the offense
7-12 and the state, court, and date of each conviction or plea of nolo
7-13 contendere;
7-14 (5) the date the charitable organization was
7-15 incorporated and the state of incorporation or, if not
7-16 incorporated, the type of organization and the date established;
7-17 the day and month on which the organization's fiscal year ends; and
7-18 whether the organization is eligible to receive tax-deductible
7-19 contributions under Section 170 of the Internal Revenue Code of
7-20 1986;
7-21 (6) a statement as to whether the organization has
7-22 applied for or been granted tax exempt status by the Internal
7-23 Revenue Service and, if so, the date of the application, the date
7-24 the exemption was granted or denied, the Internal Revenue Code
7-25 section under which the application was based, and a statement as
7-26 to whether or when the tax exemption has ever been denied, revoked,
7-27 or modified;
7-28 (7) the date the organization began doing business in
7-29 this state and the name and address of the organization's
7-30 registered agent in this state;
8-1 (8) a statement of the charitable organization's
8-2 charitable purposes and, if the organization solicits
8-3 contributions, a list of the programs for which funds are
8-4 solicited;
8-5 (9) a list of all governmental entities from which the
8-6 charitable organization received funds in the preceding 12 months
8-7 and a statement of the percentage of the total funds received in
8-8 the preceding 12 months received from individual and corporate
8-9 donors, private foundations, combined campaigns, governmental
8-10 entities, and persons who are exempt from federal income taxation
8-11 under Section 501(c)(3), 501(c)(4), or 501(c)(10) of the Internal
8-12 Revenue Code of 1986;
8-13 (10) for charitable organizations that solicit
8-14 contributions from persons other than prior donors or persons who
8-15 have used the services of the charitable organization or the direct
8-16 beneficiaries or families of direct beneficiaries of the charitable
8-17 organization, a statement that includes:
8-18 (A) whether the charitable organization or any
8-19 of its directors, officers, agents, or employees who are
8-20 compensated by the charitable organization or who have custody and
8-21 control of the funds of the charitable organization, has been
8-22 enjoined by a government agency or court from soliciting, has had a
8-23 registration denied or revoked, has been the subject of any court
8-24 or administrative proceeding regarding any solicitation or
8-25 registration, or has entered into a voluntary agreement of
8-26 compliance;
8-27 (B) a list of all states in which the charitable
8-28 organization is registered or has been registered, including dates
8-29 of registration, registration numbers, any other names under which
8-30 the charitable organization was or is registered, and the dates and
9-1 types of solicitation conducted in each state;
9-2 (C) the name and address of each individual in
9-3 the charitable organization who is responsible for custody and
9-4 control of funds, distribution of funds, fund-raising, or custody
9-5 of records or who is authorized to sign checks or make withdrawals;
9-6 information required by this paragraph is confidential and is not
9-7 subject to disclosure under the open records law, Chapter 552,
9-8 Government Code;
9-9 (D) the names, addresses, and telephone numbers
9-10 of the organization's accountants and auditors and the method of
9-11 accounting used;
9-12 (E) a statement that the charitable organization
9-13 has attempted in good faith to comply with all Texas county and
9-14 municipal ordinances regarding solicitation that have been filed
9-15 with the attorney general or, if none apply, a statement to that
9-16 effect;
9-17 (F) for charitable organizations that engage the
9-18 services of commercial solicitors, the name and address of each
9-19 commercial solicitor engaged in the preceding 12 months, as well as
9-20 written confirmation from the commercial solicitor that it has
9-21 complied with all state and local registration laws;
9-22 (G) the amount paid to commercial solicitors
9-23 during the preceding 12 months;
9-24 (H) the total contributions received during the
9-25 preceding 12 months; and
9-26 (I) the total fund-raising costs during the
9-27 preceding 12 months, calculated pursuant to generally accepted
9-28 accounting principles;
9-29 (11) a copy of the charitable organization's most
9-30 recently filed Internal Revenue Service Form 990 and other federal
10-1 tax returns, including all supplements, amendments, and attachments
10-2 to those returns and requests for extensions to file those returns
10-3 or, if the charitable organization does not file federal tax
10-4 returns:
10-5 (A) a statement as to the reason none is filed;
10-6 and
10-7 (B) the charitable organization's most recent
10-8 financial statements, including audited financial statements, if
10-9 any have been prepared; and
10-10 (12) a sworn statement verifying that the information
10-11 contained in the registration statement and all attachments to the
10-12 statement are true, correct, and complete to the best of the
10-13 affiant's knowledge.
10-14 (b) A charitable organization shall file its initial
10-15 registration statement before the 10th working day preceding the
10-16 date on which the organization begins doing business in this state.
10-17 (c) Registration expires on the 15th day of the fifth month
10-18 following the close of a charitable organization's fiscal year.
10-19 Renewal registration statements shall be filed on the same forms
10-20 required for initial registration statements and must include the
10-21 name and employer identification number of the charitable
10-22 organization and any changes to the information previously
10-23 submitted to the attorney general. For items on which there is no
10-24 change from the previous year's registration statement, "no change"
10-25 may be indicated.
10-26 (d) A filing fee not to exceed $75 shall accompany the
10-27 initial registration statement. A $75 filing fee shall accompany
10-28 all renewal registration statements.
10-29 (e) The registration statements shall be submitted on forms
10-30 prescribed or approved by the attorney general.
11-1 Sec. 7. NOTIFICATION OF NONCOMPLIANCE. (a) A charitable
11-2 organization that is not in compliance with this Act shall be
11-3 notified of noncompliance by the attorney general by first class
11-4 mail at the organization's last reported address. Noncompliance
11-5 includes failure to file any documents required by this Act or the
11-6 filing of incomplete or inaccurate documents.
11-7 (b) A charitable organization violates this Act if it fails
11-8 to file complete documents within 30 days of the date the notice
11-9 required by Subsection (a) of this section has been mailed or if it
11-10 knowingly files materially inaccurate documents.
11-11 Sec. 8. RECORD KEEPING; AUDIT POWERS OF ATTORNEY GENERAL.
11-12 (a) Each charitable organization required to file a registration
11-13 statement shall keep true books and records as to its activities
11-14 within this state in a form to enable it to accurately provide the
11-15 information required by this Act. The books and records shall be
11-16 retained for a period of at least three years after the end of the
11-17 period to which the registration statement relates. All books and
11-18 records of a charitable organization shall be made available for
11-19 inspection and copying by authorized personnel of the attorney
11-20 general on written request by authorized personnel of the attorney
11-21 general.
11-22 (b) A charitable organization shall make available the
11-23 information requested by authorized personnel of the attorney
11-24 general at the organization's principal place of business within 10
11-25 working days of the date of the request, or at a time and place as
11-26 may be agreed.
11-27 (c) The authority established by this section is in addition
11-28 to other statutory or common law audit or investigative authority
11-29 of the attorney general.
11-30 Sec. 9. USE OF FEES. (a) All fees collected by the
12-1 attorney general under this Act are dedicated for use by the
12-2 attorney general during the biennium of receipt to administer this
12-3 Act, to enforce this Act, and to educate the public about this Act
12-4 and charitable organizations and solicitations generally.
12-5 (b) At the end of each biennium, the attorney general shall
12-6 file with the Legislative Budget Board a report that shows the
12-7 amounts of fees collected by the attorney general under this Act
12-8 and the uses for which the collected fees were expended.
12-9 Sec. 10. TOLL-FREE TELEPHONE LINE. The attorney general
12-10 shall establish and operate a toll-free telephone line. The public
12-11 may use the toll-free number to:
12-12 (1) obtain information concerning a charitable
12-13 organization that has registered under this Act; or
12-14 (2) report an alleged violation of this Act.
12-15 Sec. 11. REGISTRATION DOES NOT IMPLY ENDORSEMENT.
12-16 Registration under this Act does not imply endorsement by this
12-17 state or the attorney general, and charitable organizations are
12-18 prohibited from stating or implying to the contrary.
12-19 Sec. 12. REMEDIES. (a) The attorney general may institute
12-20 an action for failure to fully and accurately comply with any
12-21 provision of this Act and may obtain injunctive relief to restrain
12-22 a person from continuing a violation, cancellation or suspension of
12-23 the registration, an order restraining the person from doing
12-24 business in this state while violating this Act, a civil penalty of
12-25 not more than $25,000 per violation, or injunctive relief and a
12-26 civil penalty. A person who violates an injunction issued under
12-27 this section is liable to the state for a civil penalty of not less
12-28 than $100,000.
12-29 (b) The remedies authorized by this Act are not exclusive
12-30 but are in addition to any other procedure or remedy provided for
13-1 by other statutory or common law.
13-2 (c) In any proceeding successfully prosecuted by the
13-3 attorney general under this Act, the court may allow the attorney
13-4 general to recover civil penalties and the reasonable costs,
13-5 expenses, and attorney's fees incurred in bringing the suit.
13-6 Sec. 13. DEDICATION OF FEES AND CIVIL PENALTIES. In
13-7 addition to other money, all fees assessed under this Act and all
13-8 recovered expenses incurred in obtaining injunctive relief and
13-9 administrative and civil penalties authorized by this Act are
13-10 dedicated for use by the attorney general. Recovered expenses
13-11 include, but are not limited to, investigative costs, witness fees,
13-12 attorney's fees, and deposition expenses. That money may be
13-13 expended only for purposes of enforcing and administering this Act
13-14 and may not be appropriated for any other purpose.
13-15 Sec. 14. SERVICE ON SECRETARY OF STATE. (a) The secretary
13-16 of state is an agent for service of process or complaint on a
13-17 charitable organization that:
13-18 (1) is required by this state to designate or maintain
13-19 a resident agent but has not designated or maintained a resident
13-20 agent for service of process;
13-21 (2) has one or more resident agents for service of
13-22 process, but two unsuccessful attempts have been made on different
13-23 business days to serve each agent; or
13-24 (3) is not required to designate an agent for service
13-25 in this state.
13-26 (b) Service on the secretary of state may be made by
13-27 certified mail, return receipt requested, by the clerk of the court
13-28 in which the case is pending, by the party or representative of the
13-29 party, or by any other method authorized by statute or the Texas
13-30 Rules of Civil Procedure for service on the secretary of state.
14-1 (c) If the secretary of state is served with process for a
14-2 charitable organization, the secretary of state shall require a
14-3 statement of the name and last known address of the charitable
14-4 organization and shall immediately mail a copy of the process to
14-5 the charitable organization by registered mail or by certified
14-6 mail, return receipt requested.
14-7 Sec. 15. VENUE. An action under this Act shall be brought
14-8 in a court of competent jurisdiction in Travis County, in the
14-9 county in which the charitable organization has its principal place
14-10 of business or has a fixed and established place of business at the
14-11 time the suit is brought, or in the county in which solicitation
14-12 occurred.
14-13 Sec. 16. RULES; ADVISORY COMMITTEE. (a) The attorney
14-14 general may adopt rules, procedures, and forms that are consistent
14-15 with and necessary for the proper administration and enforcement of
14-16 this Act.
14-17 (b) The attorney general shall annually appoint an advisory
14-18 committee, consisting of representatives of charitable
14-19 organizations and including at least one representative from a
14-20 charitable organization in each of the following categories of
14-21 charitable organizations that are subject to the requirements of
14-22 this chapter: religious charities, educational charities, the
14-23 United Way, health-related charities, and charitable organizations
14-24 that are exempt from federal income taxation under Section
14-25 501(c)(4) or 501(c)(10) of the Internal Revenue Code of 1986. The
14-26 advisory committee may assist the attorney general in preparing
14-27 rules, procedures, and forms authorized by this Act. The advisory
14-28 committee may also assist the attorney general in developing a
14-29 public education program.
14-30 SECTION 2. The changes in law made by this Act apply only to
15-1 a solicitation that takes place on or after the effective date of
15-2 this Act. A solicitation that takes place before the effective
15-3 date of this Act is governed by the law in effect on the date of
15-4 the solicitation, and the former law is continued for that purpose.
15-5 SECTION 3. A charitable organization doing business in this
15-6 state on the effective date of this Act that is required to
15-7 register under Section 6, Article 9023d, Revised Statutes, as added
15-8 by this Act, shall file the organization's initial registration
15-9 statement required under that section before January 1, 1998.
15-10 SECTION 4. This Act takes effect September 1, 1997.
15-11 SECTION 5. The importance of this legislation and the
15-12 crowded condition of the calendars in both houses create an
15-13 emergency and an imperative public necessity that the
15-14 constitutional rule requiring bills to be read on three several
15-15 days in each house be suspended, and this rule is hereby suspended.