SENATE BILL REPORT

SB 5717

BYSenators Cantu and Rasmussen

Requiring disclosure by nonprofit corporations of their financial activities.

Senate Committee on Governmental Operations

Senate Hearing Date(s):February 25, 1987; March 4, 1987

Majority Report:  That Substitute Senate Bill No. 5717 be substituted therefor, and the substitute bill do pass.

      Signed by Senators Halsan, Chairman; Garrett, Vice Chairman; DeJarnatt, Talmadge, Zimmerman.

Senate Staff:Sam Thompson (786-7754); Walt Corneille (786-7452)

                  March 5, 1987

AS REPORTED BY COMMITTEE ON GOVERNMENTAL OPERATIONS, MARCH 4, 1987

BACKGROUND:

A nonprofit corporation conducting affairs in Washington must be registered with the Secretary of State.  Each year it must file an annual report with the Secretary of State specifying:

      1.The name of the corporation, and the state or country under the laws of which it is organized;

      2.The addresses of the registered office of the corporation, the registered agent, and its principal office outside of Washington;

      3.A statement of the character of the affairs the corporation is conducting; and

      4.The names and addresses of the directors and officers of the corporation.

It has been suggested that some nonprofit corporations compete with private businesses, and have an unfair advantage because they may be exempt from taxation. Additional information is sought on the activities of these nonprofit corporations.

Therefore, it has been further suggested that additional information be required in the annual reports of nonprofit corporations to reveal their financial activities.  If these entities have tax exempt status with the federal Internal Revenue Service, much of this financial information must currently be reported in a yearly form 990 filing.

SUMMARY:

The annual report of nonprofit corporations shall include total revenues of the corporation by source, salaries of all corporate officers, disbursement of funds by category, corporate assets, and a copy of the most recently submitted federal income tax return.

EFFECT OF PROPOSED SUBSTITUTE:

The substitute bill does not require additional information concerning the financial activities of nonprofit corporations to be included in the annual report.  Rather, it mandates a study to be conducted to correlate nonprofit corporations and charities on file with the Secretary of State's office with those Washington entities that file Internal Revenue Service form 990, for organizations exempt from income tax. The study will assist the Legislature in determining whether to amend annual reporting requirements. 

An appropriation of $24,000 is made to the Secretary of State's office to conduct the study.

An emergency provision provides that the bill will take effect June 1, 1987.

The Secretary of State may contract with the Internal Revenue Service for necessary services.  The Secretary will report results of the study to the Legislature by December 31, 1987.

Fiscal Note:      none requested

Senate Committee - Testified: Phil Prettyman, United Way of King County; Duke Schaub, Associated General Contractors; Laura Eckert, Secretary of State's office