Preproposal statement of inquiry was filed as WSR 98-07-001.

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

Purpose: To identify the jurisdiction and who must register under the Charitable Trust Act. To revise the form for charitable trust registration and establish a reporting threshold.

Statutory Authority for Adoption: RCW 11.110.051, 11.110.060, 11.110.070.

Statute Being Implemented: RCW 11.110.051, 11.110.060, 11.110.070.

Summary: There have been requests from constituents to clarify, review and revise the registration and reporting requirements for charitable trusts.

Reasons Supporting Proposal: These rules will reflect the changes enacted by the legislature to the Charitable Trust Act in 1997. They will clarify who is required to register and revise the content of the registration form.

Name of Agency Personnel Responsible for Drafting, Implementation and Enforcement: Frances Sant, 505 East Union, Street Floor, Olympia, WA 98504, (360) 664-0742.

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 434-120-300, defines what trusts are subject to Washington jurisdiction; WAC 434-120-305, defines the registration requirements and establishes a minimum financial reporting threshold; WAC 434-120-310, describes the contents of the registration form and financial reporting requirements; and WAC 434-120-320, describes the contents of the annual report for organizations, not required to file a United States tax or information return.

The following sections are being repealed: WAC 434-120-315 Exemption from annual reporting, 434-120-317 Abbreviated reporting for qualifying trusts, 434-120-335 When to file annual reports, 434-120-340 Annual reports suspended under certain conditions, and 434-120-350 Notifying attorney general of litigation.

Proposal Changes the Following Existing Rules: These rules establish a minimum registration and reporting threshold requirement. Only charitable trusts who hold assets in excess of $250,000, invested for income producing purposes are required to register. These rules further clarify and simplify the registration and reporting requirements for charitable trusts.

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

RCW 34.05.328 does not apply to this rule adoption.

Hearing Location: John L. O'Brien Building, Hearing Room C, 504 15th Avenue, Olympia, WA 98504, on July 21, 1998, at 11:00 a.m.

Assistance for Persons with Disabilities: Contact Hans Dettling by July 20, 1998, TDD (360) 753-1485.

Submit Written Comments to: Frances Sant, Charities Program Manager, Office of the Secretary of State, P.O. Box 40244, Olympia, WA 98504-0244, FAX (360) 664-0450, by July 20, 1998.

Date of Intended Adoption: August 15, 1998.

June 17, 1998

Tracy Guerin

Assistant Secretary of State

AMENDATORY SECTION (Amending WSR 96-08-049, filed 4/1/96, effective 5/2/96)

WAC 434-120-300  ((Who shall register.)) Jurisdiction. (((1) Any trustee as defined in RCW 11.110.020 of a trust subject to Washington jurisdiction holding property in trust for a public charitable purpose and any corporation formed for the administration of a charitable trust or holding assets subject to limitations permitting their use only for charitable, religious, eleemosynary, benevolent, educational, or similar purposes shall register with the office of the secretary of state, corporations division.

(2))) A trust is subject to Washington jurisdiction if:

(((a))) (1) It is created pursuant to a trust instrument that specifies that it is subject to the jurisdiction of the state of Washington or that its terms are to be construed pursuant to the laws of the state of Washington;

(((b))) (2) It is a testamentary trust, and the will was probated or recorded, or letters testamentary and of administration were granted in the state of Washington;

(((c))) (3) The trust was created pursuant to order of a Washington court or by operation of Washington law;

(((d))) (4) The trust was created by or pursuant to the articles of incorporation of a Washington corporation; or

(((e))) (5) No state, territory, or nation may assert a superior claim of jurisdiction, and:

(((i))) (a) The trust was created pursuant to an inter vivos agreement or document executed or recorded within the state of Washington but which does not expressly vest jurisdiction in another state, territory, or nation; or

(((ii))) (b) The trust corpus consists predominantly of property located in or administered from Washington; or

(((iii))) (c) A basis exists upon which to assert or concede jurisdiction in the state of Washington.

(((3) Exempt from registration under the Trust Act are the following:

(a) Any trustee making distributions only to individuals or organizations expressly named in the governing instrument or mere titleholders, custodians, or depositaries of property held for charitable purposes who have no powers or duties to administer such property;

(b) Governmental bodies such as the United States, any state, territory, or possession of the United States, the District of Columbia, Puerto Rico, or any of their agencies or governmental subdivisions;

(c) Religious bodies incorporated as tax exempt religious organizations, and subsidiary organizations under their auspices including but not limited to:

(i) Charitable agencies or organizations affiliated with and forming an integral part of the religious body, or operated, supervised, or controlled directly by the religious body; or

(ii) Any officer of a religious body holding property for religious purposes;

To be exempt under this act, a newly formed religious body, or subsidiary organizations must be able to show that it is seeking tax exempt status from the federal Internal Revenue Service. If a written declaration granting the tax exempt status is not received within two years of formation, the organization must register the trust immediately.

(d) Nonprofit educational institutions having a course of studies equivalent to that of a public school or college operated by a Washington state school district or by Washington state.))

[Statutory Authority: RCW 11.110.070. 96-08-049, § 434-120-300, filed 4/1/96, effective 5/2/96. Statutory Authority: RCW 11.110.070 and 19.09.315. 95-11-135, § 434-120-300, 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, § 434-120-300, filed 12/1/93, effective 1/1/94.]

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

WAC 434-120-305  ((When to register.)) Registration and reporting. (((1) A trustee of a charitable or mixed purpose trust must register within two months of receiving control of the body of the trust.

(2) A trustee of a trust in which the only property held for a charitable purpose is a vested charitable remainder preceded by a life estate or other present interest must register within two months after commencement of the life estate or other present interest.

(3) A trustee of an instrument containing only contingent gifts or remainders to charitable purposes, shall register within two months of the authorization or requirement to use the trust principal or income for a charitable purpose.)) (1) The Charitable Trust Act requires those trustees described by RCW 11.110.051 to complete an initial registration with the secretary of state, and thereafter to file with the secretary copies of the trust's United States tax or information return. This section generally describes these registration and reporting requirements, with reference to the applicable statutes. These rules do not repeat all statutory requirements.

(2) Who shall register and report: The registration and reporting requirements of chapter 11.110 RCW apply to every trustee, as defined by RCW 11.110.020, who is required to register by RCW 11.110.051. The secretary of state has determined, pursuant to RCW 11.110.051 (1)(a), that no trustee shall be required to register or report unless, as to a particular charitable trust, the trustee holds assets, invested for income-producing purposes, exceeding a value of two hundred fifty thousand dollars, and otherwise meets the description of RCW 11.110.051.

(3) Initial registration: Every trustee required to register by RCW 11.110.051 shall do so, in the time and in the manner described by RCW 11.110.060. Trustees shall use the registration form described by WAC 434-120-310, and file all other documents required by RCW 11.110.060. Trustees required to register shall also file with the secretary any later amendments to the trust instrument within four months of making the amendment.

(4) Periodic reporting: After the initial registration, every trustee required to register by RCW 11.110.051 shall report annually as required by RCW 11.110.070. The annual reporting requirement is fully satisfied by filing a copy of the trust's United States tax or information return, forms 990, 990 PF, or 990 EZ, with the secretary of state at the same time as it is required to be filed with the Internal Revenue Service. Any trustee who is not required by federal law to file any of the named forms with the Internal Revenue Service shall either complete a federal return and file it with the secretary, or may instead file the form described by WAC 434-120-320 by no later than the fifteenth day of the fifth month after the end of its fiscal year.

[Statutory Authority: RCW 11.110.070 and 19.09.315. 95-11-135, § 434-120-305, 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, § 434-120-305, filed 12/1/93, effective 1/1/94.]

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

WAC 434-120-310  How to register--Form. ((Charitable trusts using the assets for charitable purposes and registering under the Trust Act shall use the charitable trust form available in the corporations division.

(1) The name, address, and telephone number of the charitable trust, foundation, corporation, or trustee and the type of instrument creating or governing the organization, corporation, or trust, the date of the governing instrument, and the location where it is filed;

(2) The names and addresses of the trustees or corporate officers and directors;

(3) The purpose of the charitable trust; the names and addresses of beneficiaries or the selected group of persons (class or classes) or activities which the charitable trust designates;

(4) Whether or not the trust has a federal Internal Revenue Service tax exempt status or Washington state real or personal property exemptions, and the basis for each exemption. Attach a copy of the application for federal tax exempt status, or the declaration of this status if granted by the Internal Revenue Service under 26 U.S.C. 501 (c)(3), and a copy of the application for exemption from the state of Washington;

(5) An inventory with a description and value of the charitable corporation or trust assets, including a statement of the current market value of such assets, and statement of liabilities of the trust. An audited statement made according to GAAP may be submitted to comply with this section only. Include the name and address of the entity that prepares, compiles, reviews, or audits the financial statement of the charitable trust;

(6) The titles of the trust instruments or articles of incorporation, copies of which must be attached to the registration report; and

(7) All charitable solicitation trust registrations shall be signed by the responsible trustee or president, treasurer, or comparable officer of the organization.)) (1) Trustees registering under chapter 11.110 RCW shall use the registration form available in the office of the secretary of state. The secretary of state shall develop a form in compliance with this rule. The secretary's failure to affirmatively reject or return an incomplete registration or other filing that does not fully comply with these rules or chapter 11.110 RCW shall not excuse the failure to comply.

(2) A registration form is not complete unless it includes:

(a) The trustee's name;

(b) The trustee's mailing address, and physical address if different;

(c) The name of the trust to be registered, or other identifying information sufficient to distinguish the trust from other registered trusts;

(d) A brief description of the charitable purposes of the trust, which may, at the trustee's option, include the names and addresses of any charitable organizations benefitted by the trust;

(e) The market value of all trust assets invested for incoming-producing purposes as of the date on which the trustee received possession or control of the trust corpus; and

(f) The signature of the trustee, or, if the trustee is a corporation, of the corporate officer or employee responsible for the trust.

(3) A copy of the governing instrument creating the trust shall not be deemed sufficient to meet the requirements of this section.

[Statutory Authority: RCW 11.110.070 and 19.09.315. 95-11-135, § 434-120-310, 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, § 434-120-310, filed 12/1/93, effective 1/1/94.]

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

WAC 434-120-320  Content of annual reports for trusts not required to file United States tax or information returns. ((The reports shall contain the information as required by the United States Internal Revenue Service 1993 Form 990, 990PF, or 990EZ. The report shall also include the name of the trust and trustee(s) or officers. It shall specifically contain and highlight a statement of the current market value of assets of the charitable trust or organization. Information may be submitted in any of the following forms:

(1) The Form 990, Return of Organization Exempt from Income Tax, the Form 990EZ, Short Form, Return of Organization Exempt from Income Tax, or the Form 990PF, Return of Private Foundation, filed with the federal Internal Revenue Service; or

(2) A copy of the annual account filed by the trustee in any court having jurisdiction of the trust; or

(3) A copy of an audit certified as being true and correct and in accordance with generally accepted accounting principles by any certified public accountant and containing substantially the information required as an annual report; or

(4) An organization not required to file a federal tax return because its gross receipts are not more than twenty-five thousand dollars annually, and not required to have an audited annual statement shall submit a statement signed by the president, treasurer, and one other officer showing the information required by this section.

This annual report shall be filed, under oath and executed by an affidavit, by one or more trustees responsible for the trust or an officer of the corporation, association, or organization.)) (1) The secretary of state shall develop a form in compliance with this rule, for use by trustees who are not required to file a United States tax or information return. The secretary's failure to affirmatively reject or return an incomplete registration or other filing that does not fully comply with these rules or chapter 11.110 RCW shall not excuse the failure to comply.

(2) A registration form is not complete unless it includes:

(a) The trustee's name;

(b) The trustee's mailing address, and physical address if different;

(c) The name of the trust, or other identifying information sufficient to distinguish the trust from other trusts;

(d) A brief description of the charitable programs of the trust conducted during the reporting period;

(e) The market value of all trust assets invested for incoming-producing purposes as of the close of the reporting period;

(f) The total income of the trust during the reporting period;

(g) The total funds expended for charitable purposes during the reporting period;

(h) The total funds expended for purposes other than charitable; and

(i) The signature of the trustee, or, if the trustee is a corporation, of the corporate officer or employee responsible for the trust.

[Statutory Authority: Chapters 34.05, 19.09, 11.110 and 43.07 RCW and 1993 c 471. 94-01-004, § 434-120-320, filed 12/1/93, effective 1/1/94.]

REPEALER

The following sections of the Washington Administrative Code are repealed:

WAC 434-120-315 Exemption from annual reporting.

WAC 434-120-317 Abbreviated reporting for qualifying trusts.

WAC 434-120-335 When to file annual reports.

WAC 434-120-340 Annual reports suspended under certain conditions.

WAC 434-120-350 Notifying the Attorney General of litigation.