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U.S. State Issues -- June/July 2004 Public Policy Update

Alaska

Alaska House Bill No. 15, summarized in the May 2004 Public Policy Update, was enacted into law on June 16, 2004. As a result, Alaska law relating to the fair trade practices and consumer protection, telephone solicitations and charitable solicitations now holds an individual in violation of the statute for engaging in the telephone solicitation of certain individuals. Certain individuals include those (a) identified in the telephone directory as not wishing to receive telephone solicitations, (b) registered with the national do not call registry for the minimum amount of time required by the national do not call registry before the date of the call, and (c) who previously communicated to the telephone solicitor or the organization on whose behalf the solicitor called that they do not wish to receive telephone solicitations.

An individual who violates this statute may not be liable if that individual (i) adopted and implemented written procedures and policies to comply with, (ii) trained personnel in those procedures and policies, and (iii) made the call contrary to those policies and procedures, (iv) as a result of a good faith error. The individual will also not be liable by establishing the individual did not intend to make a call violating the statute and did not recklessly disregard information or policies and procedures. Note that it continues to be unlawful to originate a telephone call using an automated or recorded message as a telephone solicitation. There is no defense to this infraction.

California

California Senate Bill No. 1262, summarized in the May 2004 Public Policy Update, was passed by the Senate and is now being considered by the State Assembly. Most of AFP's major concerns with the legislation have been addressed. Under the bill, charitable organizations and fundraisers would be required to (i) include specified disclosures in any written or oral solicitation or any other means not involving direct personal contact, (ii) make sure that a charity accepts contributions only for a charitable purpose that is expressly stated in the solicitation for contributions and which conforms to the charitable purposes expressed in the articles of incorporation, and (iii) apply the contributions only in a manner consistent with those purposes.

Every charity would be required to disclose to the Attorney General receipt of charitable property within 30 days after the entity receives charitable property. In addition, charities that receive or accrue gross revenue of $2,000,000 or more in any fiscal year would be required to prepare annual audit financial statements. All persons required to register in California would also be required to maintain records (including electronic records) for at least 10 years after the end of the registration period to which the records relate and make those records available for inspection upon demand by the Attorney General.

For more information on California Senate Bill No. 1262, go to: /Audiences/PublicPolicyIssueDetail.cfm?ItemNumber=1205

Hawaii

Hawaii Senate Bill No. 3049 was enacted into law on July 6, 2004 and relates to charitable annuities. The law in Hawaii regulating life insurance now excludes charitable annuities, specifically charitable gift annuity agreements, if the nonprofit educational foundation or nonprofit organization issuing charitable annuities: (1) conducted business in the State continuously for at least 10 years, (2) maintains a net worth in the State of no less than $200,000 in cash, cash equivalents or publicly traded securities, not including the assets funding the annuity, and (3) filed an annual statement certifying compliance on forms which may be prescribed by the attorney general.

In addition, the foundation or nonprofit organization issuing the charitable gift annuity must (4) maintain segregated assets in financial institutions which equal at least the sum of the reserves on its outstanding charitable gift annuity agreements and either a surplus of 10% of the reserves or the amount of $100,000, whichever is higher. These segregated assets must (a) be independent, (b) not be used for other purposes, and (c) not be considered part of the organizations' net worth. Assets must be (5) invested and managed as would a prudent investor thereby exercising reasonable care, skill, and caution. Note that (6) on the first page of the charitable gift annuity agreement, it must prominently state the agreement is not insurance under the laws of the State.

Michigan

Michigan Senate Bill No. 1115 would amend statutes related to charitable organizations and solicitations. The bill would further define terms under the statute, such as who would or would not be considered a professional fundraiser. An individual would not be a professional fundraiser if (i) all materials are subject to review and accepted or rejected by the organization; (ii) all grants are submitted to the grantor by the organization; (iii) the person does not directly solicit any donors; and (iv) the person's compensation is not directly or indirectly based or computed on the amount of money the person raises or is expected to raise. This is an interesting defiinition of professional fundraiser different from other states, and AFP is analyzing the ramifications of such a definition.

In addition, to register with the state, the charitable organization must disclose the methods by which solicitation would be made, the names and address of all professional fundraisers with whom the organization has contracted, and whether any officer, director, or employee of the organization owns a 10% or greater interest in a professional fund-raiser. In addition, correct copies of contracts between the organization and professional fundraisers must be filed and kept with the attorney general.

New York

New York Assembly Bill No. 11466 would amend the executive and the estates, powers and trusts law, in relation to fraudulent solicitation and collection of funds for charitable purposes. The bill deals with entities and individuals that are exempt from regulation and would redefine 'fund raising counsel' to specify persons hired by contract, including but not limited to subcontract, letter or other agreement or other engagement on any basis. The bill would also prevent the attorney general's office from making professional fundraising contracts public if they are exempt from disclosure by any state or federal law.

Under the bill, if a professional fund raiser or fund raising counsel is employed by a religious agency or organization, that agency or organization will not be exempt from regulation. However, persons requesting contributions for the relief of any individual would be exempt if certain requirements are met. One such requirement is a form to be filed with the attorney general, a sample of which is attached in the bill and includes: (1) the name and address of the principal person requesting contributions; (2) purpose of the solicitation; (3) name and address of the primary individual beneficiary; (4) name and address of secondary beneficiary. Even if an entity is exempt under the executive law, if an administrative agency or court finds it violates Section 8-1.4 of the Estates, Powers, and Trusts Law, then it is subject to the registration and reporting requirements for up to 5 years.

New York Assembly Bill No. 10415 would amend Section 173 of the Executive Law by adding a section that requires professional fund raisers to complete a course of instruction in the law and ethics of fund raising and philanthropy before engaging in fundraising activities. The course would be a 4-hour introduction to the law and ethics of fundraising and philanthropy taught by universities and colleges statewide, either by classroom training or distance learning, including: (a) the history of philanthropy in the United States; (b) a study of federal and state laws and a discussion of the work of the charities bureau in New York relating to fundraising and philanthropy; (c) a discussion of ethics and how they differ from laws; and (d) recent cases relating to ethics violations in fundraising.

The bill would apply to any salaried employee working full-time for a professional fundraiser whose primary responsibility is dedicated to fundraising activities. The course would have to be completed within 1 year of the effective date of bill or within 1 year of the date such individual is employed, whichever is later, before a professional fundraiser would be registered with the State. The bill would require each professional fundraiser to maintain, and provide to the attorney general upon request, adequate documentation of their completion of the required coursework.

This is an entirely new requirement not seen in other states before.  AFP, while supportive of training for professional fundraisers, is considering the ramifications of these requirements upon the profession.

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