FINAL BILL REPORT

SSB 5543

                              C 291 L 89

BYSenate Committee on Economic Development & Labor (originally sponsored by Senators Lee, Smitherman, Kreidler and Niemi)

Regulating annual reports of nonprofit corporations.

Senate Committee on Economic Development & Labor

House Committe on Commerce & Labor

SYNOPSIS AS ENACTED

BACKGROUND:

The issue of nonprofit corporations competing with the private sector has received legislative attention during recent years.  In testimony before legislative committees, it was reported that nonprofit corporations were "unfairly" competing with private sector businesses in providing goods and services.

During 1988 a select committee on nonprofit competition was established to provide the Legislature with a careful and comprehensive review of the issue, upon which public policy decisions could then be made.  The committee was comprised of members from the Senate, nonprofit community, business community and state agencies.  The committee published a report which included the following recommendations:  the existing annual reporting requirements of nonprofit corporations should be expanded to provide a more detailed description of the corporation's activities and any modifications to its stated purposes; and the Public Corporations Act should be amended to provide a new designation for those nonprofit corporations that hold federal tax exempt status as a charitable organization (U.S. Code 501(c)(3)) and that this new designation should be referred to as a "public benefit nonprofit corporation."

SUMMARY:

The existing annual reporting requirements of nonprofit corporations are expanded to include:  a listing of any modification in the corporation's purpose and the reason for the change; an indication that the corporation has filed an annual tax exempt form (990) with the Internal Revenue Service which, if filed, may be requested by the Secretary of State's office; the gross revenue of any unrelated business income as required to be reported under federal law; and a corporation's unified business identifier number issued by the Department of Revenue.

There is established within the nonprofit corporations act a new designation termed "public benefit nonprofit corporation."  This new designation is consistent with the existing definition of nonprofit corporation in that no part of the income of the corporation is distributable to its members, directors or officers.  In addition, the corporation is required to hold a tax exempt status as a charitable organization as provided under federal statutes U.S. Code 501(c)(3).

The Secretary of State may provide a temporary designation for those organizations that are in the process of applying for federal exempt status.  The designation is renewed annually and the secretary may provide fees for the cost of renewals.  The designation may be removed if the corporation loses its federal exempt status or fails to comply with administrative procedures.  The use of the name "public benefit nonprofit corporation" is limited to those corporations that have received the designation from the Secretary of State's office.

VOTES ON FINAL PASSAGE:

     Senate   46    0

     House 97  0 (House amended)

     Senate   42    0 (Senate concurred)

EFFECTIVE:July 23, 1989