1-1     By:  Carona                                           S.B. No. 1581

 1-2           (In the Senate - Filed March 14, 1997; March 24, 1997, read

 1-3     first time and referred to Committee on State Affairs;

 1-4     April 7, 1997, reported favorably by the following vote:  Yeas 13,

 1-5     Nays 0; April 7, 1997, sent to printer.)

 1-6                            A BILL TO BE ENTITLED

 1-7                                   AN ACT

 1-8     relating to registration of and reporting by certain charitable

 1-9     organizations; providing penalties.

1-10           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

1-11           SECTION 1.  SCOPE OF ACT; SHORT TITLE.  (a)  Except as

1-12     provided by this Act, this Act applies to all charitable

1-13     organizations that engage in telephone solicitation in this state.

1-14     The solicitation of contributions from persons in this state shall

1-15     be considered to be engaging in telephone solicitation in Texas,

1-16     regardless of where the solicitation originates.

1-17           (b)  This Act may be cited as the Charitable Telephone

1-18     Solicitation Act.

1-19           SECTION 2.  CONSTRUCTION.  This Act may not be construed to

1-20     unreasonably burden legitimate charitable organizations.

1-21           SECTION 3.  DEFINITIONS.  In this Act:

1-22                 (1)  "Charitable organization" means a person who

1-23     solicits contributions and is or holds himself, herself, or itself

1-24     out to be established or operating for a charitable purpose, except

1-25     for volunteers that have been authorized to solicit on behalf of a

1-26     charitable organization that is registered under this Act.

1-27                 (2)  "Charitable purpose" means:

1-28                       (A)  a purpose described by Section 501(c)(3) of

1-29     the Internal Revenue Code of 1986 (26 U.S.C. Section 501(c)(3)); or

1-30                       (B)  the provision of assistance to needy

1-31     individuals.

1-32                 (3)  "Charitable sales promotion" means any advertising

1-33     or sale conducted by a person who represents that the purchase or

1-34     use of goods or services offered by the person will benefit, in

1-35     whole or in part, any charitable organization or charitable

1-36     purpose.  The provision of advertising services to a charitable

1-37     organization, either for compensation or as a donation, does not of

1-38     itself constitute a charitable sales promotion.

1-39                 (4)  "Commercial telephone solicitor" means a person

1-40     who is retained by a charitable organization to solicit

1-41     contributions by telephone, whether done individually or through

1-42     another person under the direction of the commercial telephone

1-43     solicitor.  The term does not include a bona fide employee,

1-44     officer, director, or volunteer of a charitable organization.

1-45                 (5)  "Contribution" means the promise to give or the

1-46     gift of money, credit, property, financial assistance, or other

1-47     thing of any kind or value, except volunteer services.  The term

1-48     does not include bona fide fees, dues, or assessments paid by

1-49     members if membership is not conferred solely as consideration for

1-50     making a contribution in response to a telephone solicitation.

1-51                 (6)  "Knowingly" means with actual awareness, but

1-52     actual awareness may be inferred if objective manifestations

1-53     indicate that a person acted with actual awareness.

1-54                 (7)  "Person" means an individual, partnership,

1-55     corporation, association, or other legal entity.

1-56                 (8)  "Telephone solicitation" means the use of a

1-57     telephone to solicit another person to make a charitable

1-58     contribution to an organization.

1-59           SECTION 4.  EXEMPTION FROM REGISTRATION.  The following

1-60     persons are not required to register under Section 6 of this Act:

1-61                 (1)  a charitable organization that is exempt from

1-62     federal income tax under Section 501(c), Internal Revenue Code of

1-63     1986 (26 U.S.C. Section 501(c)), and exempt from filing annual

1-64     information returns with the Internal Revenue Service under Section

 2-1     6033, Internal Revenue Code of 1986 (26 U.S.C. Section 6033), and

 2-2     the treasury regulations issued under that section;

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

 2-4     current accreditation from a regional accrediting association and a

 2-5     charitable organization controlled by or affiliated with and

 2-6     designated by such an institution;

 2-7                 (3)  a nonprofit hospital that is required by law to

 2-8     file a financial report at least annually with a state and a

 2-9     charitable organization controlled by or affiliated with and

2-10     designated by such a hospital; and

2-11                 (4)  a private foundation, as defined by Section

2-12     509(a), Internal Revenue Code of 1986 (26 U.S.C. Section 509(a)),

2-13     that does not solicit.

2-14           SECTION 5.  REGISTER TO BE MAINTAINED.  (a)  The attorney

2-15     general shall establish and maintain a register of charitable

2-16     organizations subject to this Act.

2-17           (b)  All documents required to be filed with the attorney

2-18     general under this Act are public information and shall be

2-19     available to the public under the open records law, Chapter 552,

2-20     Government Code, except those documents that identify the donors of

2-21     a charitable organization, which information is confidential and is

2-22     not subject to disclosure.

2-23           SECTION 6.  REGISTRATION.  (a)  The attorney general shall

2-24     maintain a registry of charitable organizations that submit to the

2-25     attorney general completed registration statements that contain:

2-26                 (1)  the legal name and each assumed name, the mailing

2-27     address and street address, and each telephone number and facsimile

2-28     number of each office, chapter, local unit, branch, and affiliate

2-29     of the charitable organization;

2-30                 (2)  the employer identification number of the

2-31     charitable organization;

2-32                 (3)  the name, title, address, and telephone number of

2-33     each officer, director, and executive director or other chief

2-34     operating officer of the charitable organization;

2-35                 (4)  the name of each officer, director, or employee

2-36     who is compensated by the charitable organization or who has

2-37     custody and control of funds of the charitable organization and who

2-38     has been convicted of or pleaded nolo contendere to a misdemeanor

2-39     involving fraud or the theft, misappropriation, misapplication, or

2-40     misuse of property of another, or any felony, including the offense

2-41     and the state, court, and date of each conviction or plea of nolo

2-42     contendere;

2-43                 (5)  the date the charitable organization was

2-44     incorporated and the state of incorporation or, if not

2-45     incorporated, the type of organization and the date established;

2-46     the day and month on which the organization's fiscal year ends; and

2-47     whether the organization is eligible to receive tax-deductible

2-48     contributions under Section 170, Internal Revenue Code of 1986 (26

2-49     U.S.C. Section 170);

2-50                 (6)  a statement as to whether the organization has

2-51     applied for or been granted tax exempt status by the Internal

2-52     Revenue Service and, if so, the date of the application, the date

2-53     the exemption was granted or denied, the Internal Revenue Code

2-54     section on which the application was based, and a statement as to

2-55     whether or when the tax exemption has ever been denied, revoked, or

2-56     modified;

2-57                 (7)  the date the organization began doing business in

2-58     this state and the name and address of the organization's

2-59     registered agent in this state;

2-60                 (8)  a statement of the charitable organization's

2-61     charitable purposes and a list of the programs for which funds are

2-62     solicited;

2-63                 (9)  a statement that includes:

2-64                       (A)  the names, addresses, and telephone numbers

2-65     of the organization's accountants and auditors and the method of

2-66     accounting used;

2-67                       (B)  a statement that the charitable organization

2-68     has attempted in good faith to comply with all Texas county and

2-69     municipal ordinances regarding telephone solicitation that have

 3-1     been filed with the attorney general or, if none apply, a statement

 3-2     to that effect;

 3-3                       (C)  for charitable organizations that engage the

 3-4     services of commercial telephone solicitors, the name and address

 3-5     of each commercial telephone solicitor engaged in the preceding 12

 3-6     months, as well as written confirmation from the commercial

 3-7     telephone solicitor that it has complied with all state and local

 3-8     registration laws;

 3-9                       (D)  the amount paid to commercial telephone

3-10     solicitors during the preceding 12 months;

3-11                       (E)  the total contributions received during the

3-12     preceding 12 months; and

3-13                       (F)  the total fund-raising costs during the

3-14     preceding 12 months, computed pursuant to generally accepted

3-15     accounting principles;

3-16                 (10)  a copy of the charitable organization's most

3-17     recently filed Internal Revenue Service Form 990 and other federal

3-18     tax returns, including all supplements, amendments, and attachments

3-19     to those returns and requests for extensions to file those returns

3-20     or, if the charitable organization does not file federal tax

3-21     returns:

3-22                       (A)  a statement as to the reason none is filed;

3-23     and

3-24                       (B)  the charitable organization's most recent

3-25     financial statements, including audited financial statements, if

3-26     any have been prepared; and

3-27                 (11)  a sworn statement verifying that the information

3-28     contained in the registration statement and all attachments to the

3-29     statement are true, correct, and complete to the best of the

3-30     affiant's knowledge.

3-31           (b)  A charitable organization shall file its initial

3-32     registration statement before the 10th working day preceding the

3-33     date on which the organization begins telephone solicitation in

3-34     this state.

3-35           (c)  Registration expires on the 15th day of the fifth month

3-36     after the last day of a charitable organization's fiscal year.

3-37     Renewal registration statements shall be filed on the same forms

3-38     required for initial registration statements and must include the

3-39     name and employer identification number of the charitable

3-40     organization and any changes to the information previously

3-41     submitted to the attorney general.  For items on which there is no

3-42     change from the previous year's registration statement, "no change"

3-43     may be indicated.

3-44           (d)  A filing fee not to exceed $50 must accompany the

3-45     initial registration statement.  A $50 filing fee must accompany

3-46     all renewal registration statements.

3-47           (e)  The registration statements shall be submitted on forms

3-48     prescribed or approved by the attorney general.

3-49           SECTION 7.  NOTIFICATION OF NONCOMPLIANCE.  (a)  A charitable

3-50     organization that is not in compliance with this Act shall be

3-51     notified of noncompliance by the attorney general by first class

3-52     mail at the organization's last reported address.  Noncompliance

3-53     includes failure to file any documents required by this Act or the

3-54     filing of incomplete or inaccurate documents.

3-55           (b)  A charitable organization violates this Act if the

3-56     organization:

3-57                 (1)  fails to file complete documents within 30 days

3-58     after the date the notice required by Subsection (a) of this

3-59     section has been mailed; or

3-60                 (2)  knowingly files materially inaccurate documents.

3-61           SECTION 8.  RECORDKEEPING; AUDIT POWERS OF ATTORNEY GENERAL.

3-62     (a)  Each charitable organization required to file a registration

3-63     statement shall keep true books and records as to its activities

3-64     within this state in a form to enable it to accurately provide the

3-65     information required by this Act.  The books and records shall be

3-66     retained for a period of at least three years after the end of the

3-67     period to which the registration statement relates.  All books and

3-68     records of a charitable organization shall be made available for

3-69     inspection and copying by authorized personnel of the attorney

 4-1     general on written request by authorized personnel of the attorney

 4-2     general.

 4-3           (b)  A charitable organization shall make available the

 4-4     information requested by authorized personnel of the attorney

 4-5     general at the organization's principal place of business within 10

 4-6     working days of the date of the request, or at a time and place as

 4-7     may be agreed.

 4-8           (c)  The authority established by this section is in addition

 4-9     to other statutory or common law audit or investigative authority

4-10     of the attorney general.

4-11           SECTION 9.  USE OF FEES.  All fees collected by the attorney

4-12     general under this Act are dedicated for use by the attorney

4-13     general during the biennium of receipt to administer this Act, to

4-14     enforce this Act, and to educate the public about this Act and

4-15     charitable organizations and solicitations generally.

4-16           SECTION 10.  REGISTRATION DOES NOT IMPLY ENDORSEMENT.

4-17     Registration under this Act does not imply endorsement by this

4-18     state or the attorney general, and charitable organizations are

4-19     prohibited from stating or implying to the contrary.

4-20           SECTION 11.  REMEDIES.  (a)  The attorney general may

4-21     institute an action for failure to fully and accurately comply with

4-22     this Act and may obtain injunctive relief to restrain a person from

4-23     continuing a violation, cancellation or suspension of the

4-24     registration, an order restraining the person from doing business

4-25     in this state while violating this Act, a civil penalty of not more

4-26     than $25,000 per violation, or injunctive relief and a civil

4-27     penalty.  A person who violates an injunction issued under this

4-28     section is liable to the state for a civil penalty of not less than

4-29     $100,000.

4-30           (b)  The remedies authorized by this Act are not exclusive

4-31     but are in addition to any other procedure or remedy provided for

4-32     by other statutory or common law.

4-33           (c)  In any proceeding successfully prosecuted by the

4-34     attorney general under this Act, the court may allow the attorney

4-35     general to recover civil penalties and the reasonable costs,

4-36     expenses, and attorney's fees incurred in bringing the suit.

4-37           SECTION 12.  DEDICATION OF FEES AND CIVIL PENALTIES.  In

4-38     addition to other money, all fees assessed under this Act and all

4-39     recovered expenses incurred in obtaining injunctive relief and

4-40     administrative and civil penalties authorized by this Act are

4-41     dedicated for use by the attorney general in enforcing and

4-42     administering this Act.  Recovered expenses include investigative

4-43     costs, witness fees, attorney's fees, and deposition expenses.

4-44           SECTION 13.  VENUE.  An action under this Act shall be

4-45     brought in a court of competent jurisdiction in Travis County, in

4-46     the county in which the charitable organization has its principal

4-47     place of business or has a fixed and established place of business

4-48     at the time the suit is brought, or in the county in which

4-49     solicitation occurred.

4-50           SECTION 14.  RULES.  The attorney general may adopt rules,

4-51     procedures, and forms that are consistent with and necessary for

4-52     the proper administration and enforcement of this Act.

4-53           SECTION 15.  TRANSITION.  (a)  The changes in law made by

4-54     this Act apply only to a solicitation that takes place on or after

4-55     the effective date of this Act.  A solicitation that takes place

4-56     before the effective date of this Act is governed by the law in

4-57     effect on the date of the solicitation, and the former law is

4-58     continued in effect for that purpose.

4-59           (b)  A charitable organization engaging in telephone

4-60     solicitation in this state on the effective date of this Act that

4-61     is required to register under Section 6 of this Act shall file the

4-62     organization's initial registration statement required under that

4-63     section before January 1, 1998.

4-64           SECTION 16.  EFFECTIVE DATE.  This Act takes effect September

4-65     1, 1997.

4-66           SECTION 17.  EMERGENCY.  The importance of this legislation

4-67     and the crowded condition of the calendars in both houses create an

4-68     emergency and an imperative public necessity that the

4-69     constitutional rule requiring bills to be read on three several

 5-1     days in each house be suspended, and this rule is hereby suspended.

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