AN ACT Relating to nonprofit corporations; amending RCW 24.03.005 and 24.03.045; adding new sections to chapter 24.03 RCW; creating new sections; and making an appropriation.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION. Sec. 1. The legislature finds that nonprofit corporations competing with the private sector are a matter of considerable importance to all sectors of our community. The vitality of Washington's economy depends on a healthy business climate that does not unduly favor one business sector over another, either for-profit or nonprofit. It is also recognized that nonprofit corporations contribute to the state's economy and to the social priorities of the state and that in doing so, should receive a favored status when their activities are in the direct pursuit of their stated goals. The legislature does, however, have concerns regarding the involvement of nonprofit corporations in predominantly commercial endeavors which do not provide a measurable contribution to the organization's publicly stated social or religious purpose. It is this type of commercial competition that the legislature considers to pose the most serious policy and operational problem for state government. The growth of predominantly commercial nonprofit enterprises could dramatically affect all sectors of our economy resulting in businesses being forced to operate at a competitive disadvantage; public benefit nonprofits which rely on community support could potentially lose public credibility; and government agencies in providing nonprofit status may in turn, be challenged to justify the preferred status conferred on such commercial nonprofit enterprises. In addition, as a considerable number of state nonprofit organizations are also provided tax exempt status by the federal government, it would appear advisable to increase the appropriate level of uniformity between the two systems.

The legislature therefore considers it necessary to establish a special designation within this chapter to be named the "public benefit nonprofit corporation" and to limit the use of the name nonprofit to any like import to those corporations that have obtained that designation from the secretary of state. In addition it is the intent of the legislature to increase the level of uniformity between state and federal regulation.

Sec. 2. Section 2, chapter 235, Laws of 1967 as last amended by section 1, chapter 240, Laws of 1986 and RCW 24.03.005 are each amended to read as follows:

As used in this chapter, unless the context otherwise requires, the term:

(1) "Corporation" or "domestic corporation" means a corporation not for profit subject to the provisions of this chapter, except a foreign corporation.

(2) "Foreign corporation" means a corporation not for profit organized under laws other than the laws of this state.

(3) "Not for profit corporation" or "nonprofit corporation" means a corporation no part of the income of which is distributable to its members, directors or officers.

(4) "Articles of incorporation" and "articles" mean the original articles of incorporation and all amendments thereto, and includes articles of merger and restated articles.

(5) "Bylaws" means the code or codes of rules adopted for the regulation or management of the affairs of the corporation irrespective of the name or names by which such rules are designated.

(6) "Member" means an individual or entity having membership rights in a corporation in accordance with the provisions of its articles or incorporation or bylaws.

(7) "Board of directors" means the group of persons vested with the management of the affairs of the corporation irrespective of the name by which such group is designated in the articles or bylaws.

(8) "Insolvent" means inability of a corporation to pay debts as they become due in the usual course of its affairs.

(9) "Duplicate originals" means two copies, original or otherwise, each with original signatures, or one original with original signatures and one copy thereof.

(10) "Conforms to law" as used in connection with duties of the secretary of state in reviewing documents for filing under this chapter, means the secretary of state has determined that the document complies as to form with the applicable requirements of this chapter.

(11) "Effective date" means, in connection with a document filing made by the secretary of state, the date which is shown by affixing a "filed" stamp on the documents. When a document is received for filing by the secretary of state in a form which complies with the requirements of this chapter and which would entitle the document to be filed immediately upon receipt, but the secretary of state's approval action occurs subsequent to the date of receipt, the secretary of state's filing date shall relate back to the date on which the secretary of state first received the document in acceptable form. An applicant may request a specific effective date no more than thirty days later than the receipt date which might otherwise be applied as the effective date.

(12) "Executed by an officer of the corporation," or words of similar import, means that any document signed by such person shall be and is signed by that person under penalties of perjury and in an official and authorized capacity on behalf of the corporation or person making the document submission with the secretary of state.

(13) "An officer of the corporation" means, in connection with the execution of documents submitted for filing with the secretary of state, the president, a vice president, the secretary, or the treasurer of the corporation.

(14) "Public benefit not for profit corporation" or "public benefit nonprofit corporation" means a corporation no part of the income of which is distributable to its members, directors, or officers and that holds a current tax exempt status as provided under 26 U.S.C. Sec. 501(c)(3) or is specifically exempted from the requirement to apply for its tax exempt status under 26 U.S.C. Sec. 501(c)(3).

NEW SECTION. Sec. 3. There is hereby established the special designation "public benefit not for profit corporation" or "public benefit nonprofit corporation." A corporation may be designated as a public benefit nonprofit corporation if it meets the following requirements:

(1) The corporation complies with the provisions of this chapter; and

(2) The corporation holds a current tax exempt status as provided under 26 U.S.C. Sec. 501 (c)(3) or is not required to apply for its tax exempt status under 26 U.S.C. Sec. 501(c)(3).

NEW SECTION. Sec. 4. A temporary designation as a public benefit nonprofit corporation may be provided to a corporation that has applied for tax exempt status under 26 U.S.C. Sec. 501 (c)(3). The temporary designation is valid for up to one year and may be renewed at the discretion of the secretary.

NEW SECTION. Sec. 5. The secretary shall develop an application process for new and existing corporations to apply for public benefit nonprofit corporation status.

NEW SECTION. Sec. 6. The designation "public benefit nonprofit corporation" shall be renewed annually. The secretary may schedule renewals in conjunction with existing corporate renewals.

NEW SECTION. Sec. 7. The secretary may establish fees to cover the cost of renewals.

NEW SECTION. Sec. 8. The secretary may remove a corporation's public benefit nonprofit corporation designation if it does not comply with the provisions of this chapter or does not maintain its exempt status under 26 U.S.C. Sec. 501 (c)(3). The secretary in removing a corporation's public benefit nonprofit corporation status shall comply with administrative procedures provided by this chapter.

Sec. 9. Section 10, chapter 235, Laws of 1967 as last amended by section 39, chapter 55, Laws of 1987 and RCW 24.03.045 are each amended to read as follows:

The corporate name:

(1) Shall not contain any word or phrase which indicates or implies that it is organized for any purpose other than one or more of the purposes contained in its articles of incorporation.

(2) Shall not be the same as, or deceptively similar to, the name of any corporation, whether for profit or not for profit, existing under any act of this state, or any foreign corporation, whether for profit or not for profit, authorized to transact business or conduct affairs in this state, any domestic or foreign limited partnership on file with the secretary, or a limited partnership existing under chapter 25.10 RCW, or a corporate name reserved or registered as permitted by the laws of this state. This subsection shall not apply if the applicant files with the secretary of state either of the following: (a) The written consent of the other corporation, limited partnership, or holder of a reserved name to use the same or deceptively similar name and one or more words are added or deleted to make the name distinguishable from the other name as determined by the secretary of state, or (b) a certified copy of a final decree of a court of competent jurisdiction establishing the prior right of the applicant to the use of the name in this state.

(3) Shall be transliterated into letters of the English alphabet, if it is not in English.

(4) Shall not include or end with "incorporated," "company," "corporation," "partnership," "limited partnership," or "Ltd.," or any abbreviation thereof, but may use "club," "league," "association," "services," "committee," "fund," "society," "foundation," " .......... , a nonprofit corporation," or any name of like import.

(5) May only include the term "public benefit" or names of like import if the corporation has been designated as a public benefit nonprofit corporation by the secretary in accordance with this chapter.

NEW SECTION. Sec. 10. 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.

NEW SECTION. Sec. 11. The public benefit nonprofit assistance center is authorized to:

(1) Serve as the state's lead agency and advocate for the development and conservation of public benefit nonprofit corporations;

(2) Provide comprehensive referral services to public benefit nonprofit corporations seeking government assistance;

(3) Promote awareness of the government and other programs available to public benefit nonprofit corporations;

(4) Provide informational material to public benefit nonprofit corporations to aid in their incorporation process or ongoing administration;

(5) Work cooperatively with government agencies, private sector businesses, and nonprofit corporations in the furtherance of the purposes for which public benefit nonprofit corporations were established.

NEW SECTION. Sec. 12. (1) The public benefit nonprofit assistance center coordinating task force is established. The members of the task force shall be appointed by the secretary of state. The task force shall assist and advise the secretary in developing the center's work plan, goals, objectives, and ongoing activities.

(2) The task force shall not receive any compensation for its activities.

NEW SECTION. Sec. 13. The public benefit nonprofit assistance center shall report to the governor and the legislature annually outlining the center's activities, effectiveness, accomplishments, and recommendations on assisting public nonprofit corporations in the state of Washington.

NEW SECTION. Sec. 14. If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected.

NEW SECTION. Sec. 15. The sum of one hundred fifty thousand dollars, or as much thereof as may be necessary, is appropriated for the biennium ending June 30, 1991, from the general fund to the secretary of state for the purposes of sections 10 through 13 of this act.

NEW SECTION. Sec. 16. Sections 3 through 8 of this act are each added to chapter 24.03 RCW.