WSR 97-13-093

PROPOSED RULES

SECRETARY OF STATE

(Corporations Division)

[Filed June 18, 1997, 10:56 a.m.]

Original Notice.

Preproposal statement of inquiry was filed as WSR 97-08-075.

Title of Rule: Chapter 434-120 WAC, Charitable solicitation organizations and charitable trust.

Purpose: To create a subcategory of commercial fundraisers, which are generally known as commercial coventurers.

Statutory Authority for Adoption: RCW 19.09.079, 19.09.190, and 19.09.315.

Statute Being Implemented: RCW 19.09.020, 19.09.079, 19.09.190, and 19.09.315.

Summary: There have been requests from constituents to create and define a subcategory of commercial fundraisers known as commercial coventurers.

Reasons Supporting Proposal: These rules create simplified reporting requirements and establish an exemption to the bonding requirement for commercial coventurers.

Name of Agency Personnel Responsible for Drafting: Frances Sant, 505 East Union, 1st Floor, Olympia, WA 98504, (360) 753-7120, ext. 261; Implementation and Enforcement: Coleen Kemp, 505 East Union, 1st Floor, Olympia, WA 98504, (360) 586-8465.

Name of Proponent: Office of the Secretary of State, governmental.

Rule is not necessitated by federal law, federal or state court decision.

Explanation of Rule, its Purpose, and Anticipated Effects: WAC 434-120-025, creates a definition of "commercial coventurer" and strikes definition of "cost of solicitation"; WAC 434-120-210, describes who shall register as a commercial coventurer; WAC 434-120-212, describes the content of the registration form for commercial coventurers; and WAC 434-120-250, establishes a registration and renewal fee of $20.00 for commercial coventurers.

Proposal Changes the Following Existing Rules: WAC 434-120-025, creates a definition of "commercial coventurer" and strikes definition of "cost of solicitation"; and WAC 434-120-250, establishes a registration and renewal fee of $20.00 for commercial coventurers.

No small business economic impact statement has been prepared under chapter 19.85 RCW. There is no fiscal impact being made on small business by this rule-making order.

Section 201, chapter 403, Laws of 1995, does not apply to this rule adoption.

Hearing Location: Office of the Secretary of State, 505 East Union, 2nd Floor, Olympia, WA 98504, on July 25, 1997, at 8:30 a.m.

Assistance for Persons with Disabilities: Contact Barbara Siemion by July 23, 1997, TDD (360) 586-1846.

Submit Written Comments to: Frances Sant, P.O. Box 40244, Olympia, WA 98504-0244, FAX (360) 664-4250, by July 21, 1997.

Date of Intended Adoption: July 28, 1997.

June 18, 1997

Donald F. Whiting

Assistant Secretary of State

AMENDATORY SECTION (Amending WSR 95-11-135, filed 5/24/95, effective 6/24/95)

WAC 434-120-025 Definitions. (1) "Charitable organization" means any entity that solicits or collects contributions from the general public where the contribution is or is purported to be used to support a charitable activity, but does not include any commercial fund-raiser or commercial fund-raising entity as defined in this section. "Charitable":

(a) Is not limited to its common law meaning unless the context clearly requires a narrower meaning;

(b) Does not include religious or political activities; and

(c) Includes, but is not limited to, educational, recreational, social, patriotic, legal defense, benevolent, and health causes.

(2) "Charitable trust" means any real or personal property right held by an entity or person that is intended to be used for a charitable purpose(s). The trust may be created by will, deed, articles of incorporation, or other governing instrument. It may be express or constructive.

(3) "Commercial coventurer" means a corporation, partnership, sole proprietorship, limited liability company, limited partnership, limited liability partnership, individual, or other entity that:

(a) Is regularly and primarily engaged in making sales of goods or services for profit directly to the general public; and

(b) Is not otherwise regularly or primarily engaged in making charitable solicitations in this state or otherwise raising funds in this state for one or more charitable organizations; and

(c) Represents to prospective purchasers that if they purchase a good or service from the commercial coventurer, or specified portion of the sales price or a certain sum of money or some other specified thing of value will be donated to a named charitable organization; and

(d) Does not ask purchasers to make checks or other instruments payable to a named charitable organization or any entity other than the commercial coventurer itself under its regular commercial name.

(4) "Compensation," means salaries, wages, fees, commissions, or any other remuneration or valuable consideration. Compensation shall not include reimbursement for expenses incurred and documented or noncash awards or prizes, valued at one hundred dollars or less, given annually to each volunteer.

(((4) "Revenue" means all proceeds from charitable solicitations or from similar activities which would be charitable solicitations except that they are exempt from chapter 19.09 RCW by virtue of being regulated by the gambling commission.))

(5) "Solicitation," means any oral or written request for a contribution, including the solicitor's offer or attempt to sell any property, rights, services, or other thing in connection with which:

(a) Any appeal is made for any charitable purpose; or

(b) The name of any charitable organization is used as an inducement for consummating the sale; or

(c) Any statement is made that implies that the whole or any part of the proceeds from the sale will be applied toward any charitable purpose or donated to any charitable organization; or

(d) The solicitation shall be deemed completed when made, whether or not the person making it receives any contribution or makes any sale.

(6) "Solicitation," as defined in RCW 19.09.020(15), for the purposes of these regulations, shall not include any of the following:

(a) An application or request for application for a grant, contract, or similar funding from any foundation, corporation, governmental agency or similar entity which has an established application and review procedure for reviewing such requests;

(b) The attempt to sell a service or good which constitutes the basis of the charitable organization's activities under which the federal income tax exemption was granted, or is the primary purpose for the existence of the charitable organization. This includes, but is not limited to, admission to a theatrical or other performance presented by a charitable organization that is a drama, musical, dance, or similar group and fees for services such as a hospital provides or use of the charitable organization's facilities; or

(c) Bingo activities, raffles, and amusement games conducted under chapter 9.46 RCW and applicable rules of the Washington state gambling commission.

(7) (("Cost of solicitation" means and includes all direct and indirect costs, expenditures, debts, obligations, salaries, wages, commissions, fees, or other money or thing of value paid or incurred in making a solicitation. Cost of solicitation does not include the reasonable purchase price to the charitable organization of any tangible goods or services resold by the organization as part of its fund-raising activities.

(8))) "Commercial fund-raiser" or "commercial fund-raising entity" means any entity that for compensation or other consideration within this state directly or indirectly solicits, receives or raises contributions for or on behalf of any charitable organization or charitable purpose, or that is engaged in the business of or is held out to persons in this state as independently engaged in the business of soliciting or receiving contributions for such purposes. However, the following shall not be deemed a "commercial fund-raiser" or "commercial fund-raising entity":

(a) Any entity that provides fund-raising advice or consultation to a charitable organization within this state but neither directly nor indirectly solicits or receives or raises any contribution for or on behalf of any such charitable organization; or

(b) A bona fide officer or other employee of a charitable organization.

[Statutory Authority: RCW 11.110.070 and 19.09.315. 95-11-135, 434-120-025, filed 5/24/95, effective 6/24/95. Statutory Authority: Chapters 34.05, 19.09, 11.110 and 43.07 RCW and 1993 c 471. 94-01-004, 434-120-025, filed 12/1/93, effective 1/1/94. Formerly WAC 434-19-020.]

AMENDATORY SECTION (Amending WSR 94-01-004, filed 12/1/93, effective 1/1/94)

WAC 434-120-210 Who shall register. (1) Every commercial fund raiser, as described in RCW 19.09.020(8), shall register each year, pursuant to WAC 434-120-215, except that commercial coventurers may instead register pursuant to WAC 434-120-212.

(2) ((Entities exempt from registration shall include the following:

(a))) Suppliers of goods and services((,)) to charitable organizations for fund raising purposes are exempt from registration, if they are not otherwise engaged in the business of charitable fund raising((; or

(b) Retail establishments, not otherwise engaged in the business of charitable fund raising, in which the retail business promises to contribute a portion of the regular sales price of a product or service to a named charitable organization, when:

(i) The price of the product or service is no more than the price thirty days before and thirty days after the promotion;

(ii) There is a written agreement executed before the promotion begins that is signed by an officer of the charitable organization and the person in charge of the retail establishment. This agreement must include the retail establishment's contribution to the organization as a result of this promotion and the charitable organization's permission to use its name. It must be filed with the corporations division by the party specified in the contract and each party must have a copy on file;

(iii) The retail establishment has a financial statement of the fund raising campaign on file, which, upon the attorney general's written request, it can produce within ten working days; and

(iv) The retail establishment complies with the requirements of RCW 19.09.100, which control the conditions of solicitations)).

[Statutory Authority: Chapters 34.05, 19.09, 11.110 and 43.07 RCW and 1993 c 471. 94-01-004, 434-120-210, filed 12/1/93, effective 1/1/94.]

NEW SECTION

WAC 434-120-212 Registration by commercial coventurers. (1) A commercial coventurer shall register with the secretary as either a commercial fund raiser or a commercial coventurer before conducting any solicitations. If a commercial coventurer chooses to register as a commercial fund raiser, it shall comply with all registration requirements for commercial fund raisers as set forth in chapter 19.09 RCW and chapter 434-120 WAC. If a commercial coventurer chooses to register as a commercial coventurer, it shall do all of the following:

(a) Pay a registration fee as specified in WAC 434-120-250 and file the registration form required by this rule. An entity which is entitled to and does register as a commercial coventurer need not:

(i) File the form specified in WAC 434-120-215; nor

(ii) Post a bond pursuant to RCW 19.09.190; and

(b) File with the secretary a copy of its written agreement with each charitable organization for which it solicits. This agreement must state the name, address and telephone number of the commercial coventurer and the charitable organization; must be signed by an officer of the charitable organization and the person in charge of the commercial coventurer; must specify how the commercial coventurer's contribution to the organization as a result of this promotion shall be calculated, based upon an aggregate fixed dollar amount, a fixed dollar amount per sale, or a fixed percentage of gross sales revenue; and must state the charitable organization's permission to use its name; and

(c) Keep on file at its principal place of business a financial statement reflecting the results of its campaign(s) on behalf of each charitable organization for which it raises funds, which shall include at a minimum all of the information required by RCW 19.09.079(7), and shall produce this statement upon demand to the attorney general within ten business days.

(2) The registration form required by this rule shall be the same as the form described in WAC 434-120-215 except as follows:

(a) It shall omit the information required by WAC 434-120-215 (2)(e); and

(b) Instead of the solicitation report described by WAC 434-120-215 (2)(n), the form shall include a solicitation report on which the commercial coventurer must report:

(i) A brief description of the fund raising activity;

(ii) The name of each charitable organization with which it has contracted as a commercial coventurer; and

(iii) A disclosure of the planned financial contribution pursuant to contract with the named charitable organizations. A commercial coventurer shall comply with this requirement by specifying how the commercial coventurer's contribution to the organization as a result of this promotion shall be calculated, based upon an aggregate fixed dollar amount, a fixed dollar amount per sale, or a fixed percentage of gross sales revenue.

(3) Interpretive note: An entity that is regularly engaged in the business of promoting events, including but not limited to concerts, circuses, rodeos, and sporting events, by selling tickets to such events through the use of a charitable solicitation, shall be deemed to be regularly or primarily engaged in making charitable solicitations or otherwise raising funds for one or more charitable organizations, and therefore is not a commercial coventurer.

(4) Interpretive note: A transaction is not one for the purchase of a good or service, and therefore the seller is not a commercial coventurer, if the item ostensibly sold is of slight or grossly disproportionate value in relation to the price or contribution sought in exchange, or if it is described as a prize, gift, reward or award, or similar term, for contributions made or solicited.

(a) Example: A solicitor tells a prospective contributor that if he or she will contribute one hundred dollars to a named charity, the solicitor will send him or her a paper bookmark embossed with the charity's logo as a reward. The solicitor is not a commercial coventurer.

(b) Example: A solicitor offers to sell an individual a coffee mug, with a fair market value of five dollars, for one hundred dollars, with the representation that fifty percent of the purchase price would be contributed to a named charity. The solicitor is not a commercial coventurer. Caution: A person selling a good or service at fair market value is still not a commercial coventurer if he or she is regularly engaged in charitable fund raising (see WAC 434-120-025 (3)(b)), or is selling tickets to events (see WAC 434-120-212(3)), or otherwise fails to qualify.

(5) Interpretive note: An entity that acts as a commercial coventurer, and that does not engage in any commercial fund raising in this state other than as a commercial coventurer, may register as a commercial coventurer in Washington even if it acts as a commercial fund raiser in other states.

(6) Unless specifically excused by this rule, a commercial coventurer shall comply with all other terms of chapter 19.09 RCW and chapter 434-120 WAC.

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AMENDATORY SECTION (Amending WSR 94-01-004, filed 12/1/93, effective 1/1/94)

WAC 434-120-250 Fees. All commercial fund raisers shall pay an original registration fee at the time of filing and a yearly reregistration fee.

(1) The fee for original registration in this state is two hundred fifty dollars.

(2) The annual renewal fee is one hundred seventy-five dollars.

(3) The fee for filing changes in any information previously filed under RCW 19.09.075, 19.09.079, and WAC 434-120-215 or for filing a contract is ten dollars.

(4) The penalty is fifty dollars for failing to reregister within sixty days of the due date. Beginning on the sixty-sixth day or following administrative dissolution of the corporation, whichever is later, the commercial fund raiser shall pay an additional penalty of one hundred dollars for each unregistered year for up to two years or shall register as a new entity. These penalties are cumulative.

Any commercial fund raiser failing to reregister and conducting business may be subject to other penalties and remedies, which may be cumulative and not exclusive and be imposed by law.

(5) The fee for expedited in-person service is twenty dollars for any and all transactions within one commercial fund raiser file.

(6) The photocopy fee is ten dollars for copies of the annual registration form or letter.

(c) A commercial coventurer shall pay a registration fee of twenty dollars when it registers with the secretary or renews its registration.

[Statutory Authority: Chapters 34.05, 19.09, 11.110 and 43.07 RCW and 1993 c 471. 94-01-004, 434-120-250, filed 12/1/93, effective 1/1/94.]