SENATE BILL REPORT

SB 5544

BYSenators Anderson, Lee, Kreidler, Smitherman and Niemi

Regulating public benefit nonprofit corporations.

Senate Committee on Economic Development & Labor

Senate Hearing Date(s):February 9, 1989; February 14, 1989

Majority Report:  Do pass as amended and be referred to Committee on Ways & Means.

      Signed by Senators Lee, Chairman; Anderson, Vice Chairman; Matson, Murray, Saling, Smitherman, Warnke.

Senate Staff:Patrick Woods (786-7430)

                  February 14, 1989

AS REPORTED BY COMMITTEE ON ECONOMIC DEVELOPMENT & LABOR, FEBRUARY 14, 1989

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 of the Senate, nonprofit community, business community and state agencies.  The committee published a report which included a recommendation that 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:

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, it is required to hold a tax exempt status as a charitable organization as provided under federal statutes U.S.C. 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's office.

The Public Benefit Nonprofit Assistance Center is established within the Secretary of State's office to provide comprehensive referral and informational services to public benefit nonprofit corporations.  The center is authorized to:  serve as the state's lead agency and advocate for the development and conservation of "public benefit nonprofit corporations;" provide comprehensive referral services; provide informational material and work cooperatively with government agencies, private sector businesses and nonprofit corporations in the furtherance of the purposes of "public benefit nonprofit corporations."

A task force is established to assist the secretary in developing the center's work plan, goals, objectives and ongoing activities.  The center is required to report to the Governor and Legislature annually outlining its activities and recommendations on assisting "public benefit nonprofit corporations."

SUMMARY OF PROPOSED COMMITTEE AMENDMENTS:

A technical amendment clarifies provisions pertaining to public benefit nonprofit corporations.

Appropriation:    $150,000

Revenue:    none

Fiscal Note:      February 6, 1989

Senate Committee - Testified: Ben Lindekugel, United Way of King County; Larry Kenney, State Labor Council; Sharon Foster, YMCAs of Washington (pro); Dave Dougherty, BAC (pro); Michael Doctor, Sheltered Workshops (pro); D. Bohlke, ESTA (pro)