Bill not drafted by TLC or Senate E&E.

      Line and page numbers may not match official copy.

      By Hartnett                                     H.B. No. 3251

                                A BILL TO BE ENTITLED

 1-1                                   AN ACT

 1-2     relating to registration and reporting by certain organizations;

 1-3     providing penalties.


 1-5           SECTION 1.  SCOPE OF ACT; SHORT TITLE.  (a)  Except as

 1-6     provided by this Act, this Act applies to all charitable

 1-7     organizations that engage in telephone solicitation in this state.

 1-8     The solicitation of contributions from persons in this state shall

 1-9     be considered to be engaging in telephone solicitation in Texas,

1-10     regardless of where the solicitation originates.

1-11           (b)  This Act may be cited as the Charitable Telephone

1-12     Solicitation  Act.

1-13           SECTION 2.  CONSTRUCTION.  This Act may not be construed to

1-14     unreasonably burden legitimate charitable organizations.

1-15           SECTION 3.  DEFINITIONS.  In this Act:

1-16                 (1)  "Charitable organization" means a person who

1-17     solicits contributions and is or holds himself, herself, or itself

1-18     out to be established or operating for a charitable purpose, except

1-19     for volunteers that have been authorized to solicit on behalf of a

1-20     charitable organization that is registered under this Act.

1-21                 (2)  "Charitable purpose" means:

1-22                       (A)  a purpose described by Section 501(c)(3) of

1-23     the Internal Revenue Code of 1986; or

1-24                       (B)  the provision of assistance to needy

 2-1     individuals.

 2-2                 (3)  "Charitable sales promotion" means any advertising

 2-3     or sale conducted by a person who represents that the purchase or

 2-4     use of goods or services offered by the person will benefit, in

 2-5     whole or in part, any charitable organization or charitable

 2-6     purpose.  The provision of advertising services to a charitable

 2-7     organization, either for compensation or as a donation, does not of

 2-8     itself constitute a charitable sales promotion.

 2-9                 (4)  "Commercial telephone solicitor" means a person

2-10     who is retained by a charitable organization to solicit

2-11     contributions by telephone, whether done individually or through

2-12     another person under the direction of the commercial telephone

2-13     solicitor.  The term does not include a bona fide employee,

2-14     officer, director, or volunteer of a charitable organization.

2-15                 (5)  "Contribution" means the promise to give or gift

2-16     of money, credit, property, financial assistance, or other thing of

2-17     any kind or value, except volunteer services.  The term does not

2-18     include bona fide fees, dues, or assessments paid by members if

2-19     membership is not conferred solely as consideration for making a

2-20     contribution in response to a telephone solicitation.

2-21                 (6)  "Knowingly" means with actual awareness, but

2-22     actual awareness may be inferred if objective manifestations

2-23     indicate that a person acted with actual awareness.

2-24                 (7)  "Person" means an individual, partnership,

2-25     corporation, association, or other legal entity.

2-26                 (8)  "Telephone solicitation" means the use of a

2-27     telephone to solicit another person to make a charitable

2-28     contribution to an organization.

2-29           SECTION 4.  EXEMPTION FROM REGISTRATION.  The following

2-30     persons are not required to register under Section 6 of this Act:

 3-1                 (1)  a charitable organization that is exempt from

 3-2     federal income tax under Section 501(c) of the Internal Revenue

 3-3     Code of 1986 and exempt from filing annual information returns with

 3-4     the Internal Revenue Service under Section 6033 of the Internal

 3-5     Revenue Code of 1986 and the treasury regulations issued under

 3-6     Section 6033;

 3-7                 (2)  an institution of higher education that has

 3-8     current accreditation from a regional accrediting association and a

 3-9     charitable organization controlled by or affiliated with and

3-10     designated by such an institution;

3-11                 (3)  a nonprofit hospital that is required by law to

3-12     file a financial report at least annually with a state and a

3-13     charitable organization controlled by or affiliated with and

3-14     designated by such a hospital; and

3-15                 (4)  a private foundation, as defined by Section 509(a)

3-16     of the Internal Revenue Code of 1986, that does not solicit.

3-17           SECTION 5.  REGISTER TO BE MAINTAINED.  (a)  The attorney

3-18     general shall establish and maintain a register of charitable

3-19     organizations subject to this Act.

3-20           (b)  All documents required to be filed with the attorney

3-21     general under this Act are public information and shall be

3-22     available to the public under the open records law, Chapter 552,

3-23     Government Code, except those documents that identify the donors of

3-24     a charitable organization, which information is confidential and is

3-25     not subject to disclosure.

3-26           SECTION 6.  REGISTRATION.  (a)  The attorney general shall

3-27     maintain a registry of charitable organizations that submit to the

3-28     attorney general completed registration statements that contain:

3-29                 (1)  the legal name and each assumed name, the mailing

3-30     address and street address, and each telephone number and facsimile

 4-1     number of each office, chapter, local unit, branch, and affiliate

 4-2     of the charitable organization;

 4-3                 (2)  the employer identification number of the

 4-4     charitable organization;

 4-5                 (3)  the name, title, address, and telephone number of

 4-6     each officer, director, and executive director or other chief

 4-7     operating officer of the charitable organization;

 4-8                 (4)  the name of each officer, director, or employee

 4-9     who is compensated by the charitable organization or who has

4-10     custody and control of funds of the charitable organization and who

4-11     has been convicted of or pleaded nolo contendere to a misdemeanor

4-12     involving fraud or the theft, misappropriation, misapplication, or

4-13     misuse of property of another, or any felony, including the offense

4-14     and the state, court, and date of each conviction or plea of nolo

4-15     contendere;

4-16                 (5)  the date the charitable organization was

4-17     incorporated and the state of incorporation or, if not

4-18     incorporated, the type of organization and the date established;

4-19     the day and month on which the organization's fiscal year ends; and

4-20     whether the organization is eligible to receive tax-deductible

4-21     contributions under Section 170 of the Internal Revenue Code of

4-22     1986;

4-23                 (6)  a statement as to whether the organization has

4-24     applied for or been granted tax exempt status by the Internal

4-25     Revenue Service and, if so, the date of the application, the date

4-26     the exemption was granted or denied, the Internal Revenue Code

4-27     section on which the application was based, and a statement as to

4-28     whether or when the tax exemption has ever been denied, revoked, or

4-29     modified;

4-30                 (7)  the date the organization began doing business in

 5-1     this state and the name and address of the organization's

 5-2     registered agent in this state;

 5-3                 (8)  a statement of the charitable organization's

 5-4     charitable purposes and a list of the programs for which funds are

 5-5     solicited;

 5-6                 (9)  a statement that includes:

 5-7                       (A)  the names, addresses, and telephone numbers

 5-8     of the organization's accountants and auditors and the method of

 5-9     accounting used;

5-10                       (B)  a statement that the charitable organization

5-11     has attempted in good faith to comply with all Texas county and

5-12     municipal ordinances regarding telephone solicitation that have

5-13     been filed with the attorney general or, if none apply, a statement

5-14     to that effect;

5-15                       (C)  for charitable organizations that engage the

5-16     services of commercial telephone solicitors, the name and address

5-17     of each commercial telephone solicitor engaged in the preceding 12

5-18     months, as well as written confirmation from the commercial

5-19     telephone solicitor that it has complied with all state and local

5-20     registration laws;

5-21                       (D)  the amount paid to commercial telephone

5-22     solicitors during the preceding 12 months;

5-23                       (E)  the total contributions received during the

5-24     preceding 12 months; and

5-25                       (F)  the total fund-raising costs during the

5-26     preceding 12 months, computed pursuant to generally accepted

5-27     accounting principles;

5-28                 (10)  a copy of the charitable organization's most

5-29     recently filed Internal Revenue Service Form 990 and other federal

5-30     tax returns, including all supplements, amendments, and attachments

 6-1     to those returns and requests for extensions to file those returns

 6-2     or, if the charitable organization does not file federal tax

 6-3     returns:

 6-4                       (A)  a statement as to the reason none is filed;

 6-5     and

 6-6                       (B)  the charitable organization's most recent

 6-7     financial statements, including audited financial statements, if

 6-8     any have been prepared; and

 6-9                 (11)  a sworn statement verifying that the information

6-10     contained in the registration statement and all attachments to the

6-11     statement are true, correct, and complete to the best of the

6-12     affiant's knowledge.

6-13           (b)  A charitable organization shall file its initial

6-14     registration statement before the 10th working day preceding the

6-15     date on which the organization begins telephone solicitation in

6-16     this state.

6-17           (c)  Registration expires on the 15th day of the fifth month

6-18     after the last day of a charitable organization's fiscal year.

6-19     Renewal registration statements shall be filed on the same forms

6-20     required for initial registration statements and must include the

6-21     name and employer identification number of the charitable

6-22     organization and any changes to the information previously

6-23     submitted to the attorney general.  For items on which there is no

6-24     change from the previous year's registration statement, "no change"

6-25     may be indicated.

6-26           (d)  A filing fee not to exceed $50 must accompany the

6-27     initial registration statement.  A $50 filing fee must accompany

6-28     all renewal registration statements.

6-29           (e)  The registration statements shall be submitted on forms

6-30     prescribed or approved by the attorney general.

 7-1           SECTION 7.  NOTIFICATION OF NONCOMPLIANCE.  (a)  A charitable

 7-2     organization that is not in compliance with  this Act shall be

 7-3     notified of noncompliance by the attorney general by first class

 7-4     mail at the organization's last reported address.  Noncompliance

 7-5     includes failure to file any documents required by this Act or the

 7-6     filing of incomplete or inaccurate documents.

 7-7           (b)  A charitable organization violates this Act if the

 7-8     organization:

 7-9                 (1)  fails to file complete documents within 30 days

7-10     after the date the notice required by Subsection (a) of this

7-11     section has been mailed; or

7-12                 (2)  knowingly files materially inaccurate documents.


7-14     (a)  Each charitable organization required to file a registration

7-15     statement shall keep true books and records as to its activities

7-16     within this state in a form to enable it to accurately provide the

7-17     information required by this Act.  The books and records shall be

7-18     retained for a period of at least three years after the end of the

7-19     period to which the registration statement relates.  All books and

7-20     records of a charitable organization shall be made available for

7-21     inspection and copying by authorized personnel of the attorney

7-22     general on written request by authorized personnel of the attorney

7-23     general.

7-24           (b)  A charitable organization shall make available the

7-25     information requested by authorized personnel of the attorney

7-26     general at the organization's principal place of business within 10

7-27     working days of the date of the request, or at a time and place as

7-28     may be agreed.

7-29           (c)  The authority established by this section is in addition

7-30     to other statutory or common law audit or investigative authority

 8-1     of the attorney general.

 8-2           SECTION 9.  USE OF FEES.  All fees collected by the attorney

 8-3     general under this Act are dedicated for use by the attorney

 8-4     general during the biennium of receipt to administer this Act, to

 8-5     enforce this Act, and to educate the public about this Act and

 8-6     charitable organizations and solicitations generally.


 8-8     Registration under this Act does not imply endorsement by this

 8-9     state or the attorney general, and charitable organizations are

8-10     prohibited from stating or implying to the contrary.

8-11           SECTION 11.  REMEDIES.  (a)  The attorney general may

8-12     institute an action for failure to fully and accurately comply with

8-13     this Act and may obtain injunctive relief to restrain a person from

8-14     continuing a violation, cancellation or suspension of the

8-15     registration, an order restraining the person from doing business

8-16     in this state while violating this Act, a civil penalty of not more

8-17     than $25,000 per violation, or injunctive relief and a civil

8-18     penalty.  A person who violates an injunction issued under this

8-19     section is liable to the state for a civil penalty of not less than

8-20     $100,000.

8-21           (b)  The remedies authorized by this Act are not exclusive

8-22     but are in addition to any other procedure or remedy provided for

8-23     by other statutory or common law.

8-24           (c)  In any proceeding successfully prosecuted by the

8-25     attorney general under this Act, the court may allow the attorney

8-26     general to recover civil penalties and the reasonable costs,

8-27     expenses, and attorney's fees incurred in bringing the suit.


8-29     addition to other money, all fees assessed under this Act and all

8-30     recovered expenses incurred in obtaining injunctive relief and

 9-1     administrative and civil penalties authorized by this Act are

 9-2     dedicated for use by the attorney general in enforcing and

 9-3     administering this Act.  Recovered expenses include investigative

 9-4     costs, witness fees, attorney's fees, and deposition expenses.

 9-5           SECTION 13.  VENUE.  An action under this Act shall be

 9-6     brought in a court of competent jurisdiction in Travis County, in

 9-7     the county in which the charitable organization has its principal

 9-8     place of business or has a fixed and established place of business

 9-9     at the time the suit is brought, or in the county in which

9-10     solicitation occurred.

9-11           SECTION 14.  RULES; ADVISORY COMMITTEE.  The attorney general

9-12     may adopt rules, procedures, and forms that are consistent with and

9-13     necessary for the proper administration and enforcement of this

9-14     Act.

9-15           SECTION 15.  TRANSITION.  (a)  The changes in law made by

9-16     this Act apply only to a solicitation that takes place on or after

9-17     the effective date of this Act.  A solicitation that takes place

9-18     before the effective date of this Act is governed by the law in

9-19     effect on the date of the solicitation, and the former law is

9-20     continued in effect for that purpose.

9-21           (b)  A charitable organization engaging in telephone

9-22     solicitation in this state on the effective date of this Act that

9-23     is required to register under Section 6 of this Act shall file the

9-24     organization's initial registration statement required under that

9-25     section before January 1, 1998.

9-26           SECTION 16.  EFFECTIVE DATE.  This Act takes effect September

9-27     1, 1997.

9-28           SECTION 17.  EMERGENCY.  The importance of this legislation

9-29     and the crowded condition of the calendars in both houses create an

9-30     emergency and an imperative public necessity that the

 10-1    constitutional rule requiring bills to be read on three several

 10-2    days in each house be suspended, and this rule is hereby suspended.