SENATE BILL REPORT

SB 5683

BYSenators Smitherman, Warnke, Cantu and Lee

Requiring disclosure by nonprofit corporations of their for-profit activities.

Senate Committee on Commerce & Labor

Senate Hearing Date(s):February 19, 1987

Senate Staff:Patrick Woods (786-7430)

AS OF FEBRUARY 18, 1987

BACKGROUND:

During recent years the Legislature has received testimony from representatives of for-profit businesses stating that nonprofit corporations are unfairly competing with private sector businesses in providing certain goods and services.

SUMMARY:

The Director of the Department of Revenue is authorized to conduct audits of nonprofit corporations regarding commercial activities.  The Director may request the following information from nonprofit corporations: copies of its most recent federal income tax returns; documentation on any transfer of funds; notification on any modification to the nonprofit corporation's tax exempt status; and documentation on any commingling of assets, funds or personnel.

Nonprofit corporations with gross revenues of less than $100,000 per year or having income-generating activities conducted less than 90 continuous days per year are exempt from the chapter.

The Department of Revenue is required to consult with the Secretary of State's office, representatives of private business and nonprofit corporations in conducting the study.  The Director is required to submit a report to the Legislature by December 30, 1987, outlining the competitive advantages of nonprofit corporations over for-profit corporations; the level of commercial activity by nonprofit corporations; the current or potential loss of tax revenue due to commercial activity of nonprofit corporations; the level of compliance by nonprofit corporations with the state Nonprofit Corporations Act; the level of revenue that nonprofit corporations provide for charitable purposes; and any legislative recommendations.

Fiscal Note:      requested