HOUSE OF REPRESENTATIVES	H.B. NO.	2321
TWENTY-NINTH LEGISLATURE, 2018		H.D. 1
STATE OF HAWAII

A BILL FOR AN ACT

relating to charitable organizations.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

SECTION 1. Section 467B-1, Hawaii Revised Statutes, is amended by amending the definitions of "gross receipts" and "gross revenue" to read as follows:

""[Gross] Total receipts" means the total amount of money, contributions, and revenue of any kind received by the charitable organization from all sources, without subtracting any costs or expenses.

"[Gross] Total revenue" means income of any kind from all sources, including all amounts received as the result of any solicitation by a professional solicitor."

SECTION 2. Section 467B-2.5, Hawaii Revised Statutes, is amended to read as follows:

"§467B-2.5 Professional solicitor financial reports; contribution account. (a) [Within ninety days after a solicitation campaign or event has been completed or within ninety days of the anniversary of the commencement of a solicitation campaign lasting more than one year, a] A professional solicitor shall file with the attorney general a financial report for [the] any charitable solicitation campaign, including [gross] total revenue from Hawaii donors and national [gross] total revenue and an itemization of all expenses incurred on a form prescribed by the attorney general[.] as follows:

(1) Within ninety days after a solicitation campaign or event has been completed; and

(2) For any solicitation campaign lasting more than one year, within ninety days after the anniversary of the commencement of the solicitation campaign.

The attorney general may require the financial report to be submitted electronically and may require the use of electronic signatures. This report shall be signed by the professional solicitor or by an authorized officer or agent of the professional solicitor who shall certify that the statements therein are true and correct to the best of the solicitor's, officer's, or agent's knowledge subject to penalties imposed by section 710-1063. If a financial report required under this section is not filed in a timely manner, taking into account any extension of time for filing, unless it is shown that the failure is due to reasonable cause, an initial late filing fee of $100 shall be imposed, and an additional late filing fee of $20 per day shall be imposed, for each day during which the violation continues; provided that the total fee amount imposed under this subsection shall not exceed $1,000. The attorney general may waive all or part of the late filing fee imposed by this subsection if there is a reasonable cause for the failure to timely file. The professional solicitor shall provide a copy of the financial report to the charitable organization to which the financial report pertains within ten days of its submission of the report to the attorney general.

(b) A professional solicitor shall maintain during each solicitation campaign and for not less than three years after the completion of that campaign the following records, which shall be available for inspection upon demand by the attorney general:

(1) The date and amount of each contribution received and the name and address of each contributor;

(2) The name and residence of each employee, agent, or other person involved in the solicitation;

(3) Records of all revenue received and expenses incurred in the course of the solicitation campaign; and

(4) The location and account number of each bank or other financial institution account in which the professional solicitor has deposited revenue from the solicitation campaign.

[(b)] (c) Any material change in any information filed with the attorney general pursuant to this section shall be reported in writing by the professional solicitor to the attorney general not more than seven days after the change occurs.

[(c)] (d) Each contribution in the control or custody of the professional solicitor, in its entirety and within five days of its receipt, shall be deposited in an account at a bank or other federally insured financial institution, which shall be in the name of the charitable organization. The charitable organization shall maintain and administer the account and shall have sole control of all withdrawals."

SECTION 3. Section 467B-5.5, Hawaii Revised Statutes, is amended by amending subsections (b) and (c) to read as follows:

"(b) Prior to the commencement of any charitable sales promotion in this State conducted by a commercial co-venturer using the name of a charitable organization, the commercial co‑venturer shall obtain the written consent of the charitable organization whose name will be used during the charitable sales promotion. The commercial co-venturer shall file a copy of the written consent with the department not less than ten days prior to the commencement of the charitable sales promotion within this State. An authorized representative of the charitable organization and the commercial co-venturer shall sign the written consent, and the terms of the written consent shall include the following:

(1) The goods or services to be offered to the public;

(2) The geographic area where, and the starting and final date when, the offering is to be made;

(3) The manner in which the name of the charitable organization is to be used, including any representation to be made to the public as to the amount or per cent per unit of goods or services purchased or used that is to benefit the charitable organization;

(4) A provision for [a final] an accounting on a per unit basis, which shall be prepared by the commercial co‑venturer and [to be] given [by the commercial co-venturer] to the charitable organization, and the date when it is to be made, which date shall be no more than ninety days after the end of the charitable sales promotion[;] and, for promotions lasting more than one year, shall be within ninety days after the anniversary of the commencement of the charitable sales promotion and within ninety days after the end of the charitable sales promotion; and

(5) The date when and the manner in which the benefit is to be conferred on the charitable organization[.], which date shall be within ninety days after the end of the charitable sales promotion and, for charitable sales promotions lasting more than one year, shall be within ninety days after the anniversary of the commencement of the promotion and within ninety days after the end of the charitable sales promotion.

(c) [A final accounting for each charitable sales promotion shall be prepared by the commercial co-venturer following the completion of the promotion.] A copy of [the final] an accounting shall be provided to the attorney general not more than twenty days after the copy is requested by the attorney general. [The final] An accounting shall be kept by the commercial co-venturer for a period of three years, unless the commercial co-venturer and the charitable organization mutually agree that the accounting should be kept by the charitable organization instead of the commercial co-venturer."

SECTION 4. Section 467B-6.5, Hawaii Revised Statutes, is amended by amending subsections (b) and (c) to read as follows:

"(b) A charitable organization [with contributions in excess of $500,000 in the year covered by the annual financial report and a charitable organization] required to obtain an audit report by a governmental authority or a third party shall include with its annual financial report, an audit report, prepared in accordance with generally accepted accounting principles, by a certified public accountant.

(c) Each charitable organization filing a report required by this section shall pay a filing fee to the department based on the total amount of its [gross revenues] total revenue during the time covered by the report at the close of the calendar or fiscal year adopted by the charitable organization as follows:

(1) $0, if [gross] total revenue is less than $25,000;

(2) $25, if [gross] total revenue is at least $25,000 but less than $50,000;

(3) $50, if [gross] total revenue is at least $50,000 but less than $100,000;

(4) $100, if [gross] total revenue is at least $100,000 but less than $250,000;

(5) $150, if [gross] total revenue is at least $250,000 but less than $500,000;

(6) $200, if [gross] total revenue is at least $500,000 but less than $1,000,000;

(7) $250, if [gross] total revenue is at least $1,000,000 but less than $2,000,000;

(8) $350, if [gross] total revenue is at least $2,000,000 but less than $5,000,000; or

(9) $600, if [gross] total revenue is $5,000,000 or more."

SECTION 5. Section 467B-8, Hawaii Revised Statutes, is amended to read as follows:

"§467B-8 Information filed to become public records. Statements, reports, professional fundraising counsel contracts or professional solicitor contracts, commercial co-venturer consents, and all other documents and information required to be filed under this chapter or by the attorney general shall become government records in the department and be open to the general public for inspection pursuant to chapter 92F; provided that information in any registration statement concerning the residential addresses of any officer or director or that identifies a charitable organization's financial or banking accounts and audited financial statements submitted by registered [charities] charitable organizations shall be confidential under chapter 92F."

SECTION 6. Section 467B-11.5, Hawaii Revised Statutes, is amended to read as follows:

"§467B-11.5 Charitable organizations exempted from registration and financial disclosure requirements. The following charitable organizations shall not be subject to sections 467B-2.1 and 467B-6.5, if the organization submits an application for an exemption to the department and the department approves the organization's application:

(1) Any duly organized religious corporation, institution, or society that is exempt from filing Form 990 with the Internal Revenue Service pursuant to section 6033(a)(3)(A)(i) and (iii) and (C)(i) of the Internal Revenue Code, as amended;

(2) Parent-teacher associations;

(3) Any educational institution that is licensed or accredited by any of the following licensing or accrediting organizations or their successor organizations:

(A) Hawaii Association of Independent Schools;

(B) Hawaii Council of Private Schools;

[(B)] (C) Western Association of Schools and Colleges;

[(C)] (D) Middle States Association of Colleges and Schools;

[(D)] (E) New England Association of Schools and Colleges;

[(E)] (F) Higher Learning Commission;

[(F)] (G) Northwest Commission on Colleges and Universities;

[(G)] (H) Southern Association of Colleges and Schools;

[(H)] (I) The National Association for the Education of Young Children; or

[(I)] (J) AdvancED;

(4) Any organization exempt from taxation under section 501(c)(3) of the Internal Revenue Code expressly authorized by, and having an established identity with, an education institution accredited by one of the accrediting agencies as provided in paragraph (3); provided that the organization's solicitation of contributions is primarily directed to the students, alumni, faculty, and trustees of the institutions and their respective families;

(5) Any nonprofit hospital licensed by the State or any similar provision of the laws of any other state;

(6) Any corporation established by an act of the United States Congress that is required by federal law to submit to Congress annual reports, fully audited by the United States Department of Defense, of its activities including itemized accounts of all receipts and expenditures;

(7) Any agency of this State, another state, or the federal government; and

(8) Any charitable organization that normally receives less than $25,000 in contributions annually, if the organization does not employ or compensate a professional solicitor or professional fundraising counsel. For purposes of this paragraph, an organization normally receives less than $25,000 in contributions annually if, during the immediately preceding three fiscal years, it received, on average, less than $25,000 in contributions.

The attorney general may require the application for exemption to be filed electronically with the department and may require the use of electronic signatures."

SECTION 7. Section 467B-12.5, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) There shall be a written contract between a charitable organization and a professional fundraising counsel or professional solicitor that shall be filed by the professional fundraising counsel or professional solicitor with the attorney general at least ten business days prior to the performance by the professional fundraising counsel or professional solicitor of any service. No solicitation or service pursuant to the contract shall begin before the contract is filed with the attorney general. The contract shall be signed by two authorized officials of the charitable organization, one of whom shall be a member of the organization's governing body, and the authorized contracting officer for the professional fundraising counsel or professional solicitor. The contract shall contain all of the following provisions:

(1) The legal name and address of the charitable organization;

(2) A statement of the charitable purpose for which the solicitation campaign is being conducted;

(3) A statement of the respective obligations of the professional fundraising counsel or professional solicitor and the charitable organization;

(4) A statement of the guaranteed minimum percentage of the [gross] total receipts from contributions that will be remitted to or retained by the charitable organization, if any, or, if the solicitation involves the sale of goods, services, or tickets to a fundraising event, the percentage of the purchase price that will be remitted to the charitable organization, if any. The stated percentage shall exclude any amount that the charitable organization is to pay as fundraising costs;

(5) Information concerning the compensation of the professional solicitor and fundraising counsel as follows:

(A) If the compensation of the professional fundraising counsel or professional solicitor is contingent upon the number of contributions or the amount of revenue received, a statement shall be included specifying the percentage of the [gross] total revenue that is the basis for that compensation. The stated percentage shall include any amount that the professional fundraising counsel or professional solicitor is to be reimbursed for fundraising costs;

(B) If the compensation of the professional solicitor is not contingent upon the number of contributions or amount of revenue received from the solicitation campaign, the compensation shall be expressed as a reasonable estimate of the percentage of the [gross] total revenue, and the contract shall clearly disclose the assumptions upon which the estimate is based. The stated assumptions shall be based upon all of the relevant facts known to the professional solicitor regarding the solicitation to be conducted by the professional solicitor; or

(C) If the compensation of the fundraising counsel is not contingent on the number of contributions or amount of revenue received from the solicitation campaign, the compensation shall be stated in a dollar amount;

(6) The effective and termination dates of the contract or, if the contract does not have a set termination date, a clause allowing either party a reasonable period to terminate the contract or notify the other party if either party chooses not to renew. The contract shall also contain the date services will commence with respect to solicitation in this State of contributions for a charitable organization;

(7) In the case of a professional fundraising counsel, a statement that the professional fundraising counsel will not at any time have custody or control of contributions;

(8) A statement that the charitable organization exercises control and approval over the content and volume of any solicitation; and

(9) Any other information required by the rules of the attorney general."

SECTION 8. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 9. This Act shall take effect on July 1, 2050.

Report Title:

Charitable Organizations

Description:

Replaces the terms "gross receipts" and "gross revenue" with "total receipts" and "total revenue," respectively, to conform with IRS Form 990. Clarifies when professional solicitors must file financial reports and when commercial co-ventures must provide a charitable organization with an accounting and the benefit. Eliminates the requirement for certain charitable organizations to submit an audit report. Makes other housekeeping amendments. (HB2321 HD1)

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.