BILL NUMBER: SB 1262 CHAPTERED
BILL TEXT
CHAPTER 919
FILED WITH SECRETARY OF STATE SEPTEMBER 30, 2004
APPROVED BY GOVERNOR SEPTEMBER 29, 2004
PASSED THE SENATE AUGUST 26, 2004
PASSED THE ASSEMBLY AUGUST 25, 2004
AMENDED IN ASSEMBLY AUGUST 23, 2004
AMENDED IN ASSEMBLY AUGUST 17, 2004
AMENDED IN ASSEMBLY AUGUST 4, 2004
AMENDED IN ASSEMBLY JUNE 30, 2004
AMENDED IN ASSEMBLY JUNE 21, 2004
AMENDED IN SENATE MAY 24, 2004
AMENDED IN SENATE MAY 4, 2004
AMENDED IN SENATE APRIL 27, 2004
AMENDED IN SENATE APRIL 14, 2004
INTRODUCED BY Senator Sher
FEBRUARY 13, 2004
An act to amend Section 17510.5 of the Business and Professions
Code, and to amend Sections 12581, 12582, 12583, 12584, 12585, 12586,
12599, and 12599.1 of, and to add Sections 12599.3, 12599.6, and
12599.7 to, the Government Code, relating to charitable
organizations.
LEGISLATIVE COUNSEL'S DIGEST
SB 1262, Sher. Charitable organizations: fundraising.
(1) Under existing law, the Supervision of Trustees and
Fundraisers for Charitable Purposes Act governs charitable
corporations, trustees, commercial fundraisers, fundraising counsel,
and commercial coventurers who hold or solicit property for
charitable purposes over which the Attorney General has enforcement
and supervisory powers. Under the act, the Attorney General is also
required to establish and maintain a register of charitable
corporations and trustees subject to the act.
Existing law also requires the solicitor or seller of any
solicitation or sales solicitation for charitable purposes to comply
with specified disclosure requirements. Existing law also provides
that any person, firm, corporation, partnership or association, or
any employee or agent thereof who violates these provisions is guilty
of a misdemeanor.
The act also requires a commercial fundraiser to register with the
Attorney General's Registry of Charitable Trusts, as specified, and
to file an annual financial report of funds solicited on behalf of
each tax-exempt organization or for each charitable purpose, and
requires every charitable corporation and trustee subject to the act
to also register and file with the Attorney General specified
periodic written reports.
This bill would revise these provisions to require a charitable
organization, including a commercial fundraiser, to include specified
disclosures in any written or oral solicitation or any other means
not involving direct personal contact, as specified, and would
provide that a charity may accept contributions only for a charitable
purpose that is expressed in the solicitation for contributions and
that conforms to the charitable purpose expressed in the articles of
incorporation or other governing instrument of the charitable
organization and to apply the contributions only in a manner
consistent with that purpose. By expanding the scope of an existing
crime, the bill would impose a state-mandated local program.
The bill would also apply the act to unincorporated associations,
except as specified, and other legal entities holding property for
charitable purposes and would require every charity, subject to the
act, to file with the Attorney General within 30 days after the
corporation, unincorporated association, or trustee initially
receives any property, except as to future interests in a charitable
trust. The bill would also require charities that receive or accrue
a gross revenue of $2,000,000 or more, as specified, in any fiscal
year, to prepare annual financial statements that are audited by an
independent certified public accountant pursuant to standards for
auditor independence, to appoint an audit committee, and make its
annual audited financial statements available to the public, as
specified.
The bill would require a commercial fundraiser who is not
registered, to agree to register prior to the commencement of
solicitation, and would require a commercial fundraiser, not less
than 10 working days prior to the commencement of each solicitation,
campaign, event, or service, or not later than commencement of
solicitation for solicitations to aid victims of emergency hardship
or disasters, to file a notice with the Attorney General's Registry
of Charitable Trusts that contains specified information on a form
prescribed by the Attorney General, and would prohibit any person
from acting as a commercial fundraiser if he or she, or any person
employed by the commercial fundraiser, has been convicted of a crime
arising from the conduct of a solicitation for a charitable
organization or purpose punishable as a misdemeanor or felony. The
bill would also prohibit a commercial fundraiser from soliciting in
this state on behalf of a charitable organization unless it is
registered in this state or is exempt from registration with the
Attorney General's Registry of Charitable Trusts.
The bill would also require that contracts for services between a
charitable organization and a fundraising counsel be in writing and
that a notice on a form prescribed by the Attorney General containing
specified information be filed by the fundraising counsel with the
Attorney General's Registry of Charitable Trusts at least 10 working
days prior to the performance of the contract and would provide that
the contract between a charitable organization and a commercial
fundraiser or fundraising counsel contain specified provisions and
are subject to cancellation requirements. The bill would also require
a fundraising counsel to register with the Attorney General's
Registry of Charitable Trusts or, if not registered, to agree to
register prior to the commencement of any solicitation, and would
require both a commercial fundraiser and fundraising counsel to
maintain specified records for 10 years and to make the records
available, including copies of their contracts with the charitable
organization, for inspection upon demand by the Attorney General.
(2) The California Constitution requires the state to reimburse
local agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
This bill would provide that no reimbursement is required by this
act for a specified reason.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 17510.5 of the Business and Professions Code is
amended to read:
17510.5. (a) The financial records of a soliciting organization
shall be maintained on the basis of generally accepted accounting
principles as defined by the American Institute of Certified Public
Accountants, the Governmental Accounting Standards Board, or the
Financial Accounting Standards Board.
(b) The disclosure requirement of paragraph (7) of subdivision (a)
of Section 17510.3 shall be based on the same accounting principles
used to maintain the soliciting organization's financial records.
SEC. 2. Section 12581 of the Government Code is amended to read:
12581. This article applies to all charitable corporations,
unincorporated associations, trustees, and other legal entities
holding property for charitable purposes, commercial fundraisers for
charitable purposes, fundraising counsel for charitable purposes, and
commercial coventurers, over which the state or the Attorney General
has enforcement or supervisory powers. The provisions of this
article shall not apply to any committee as defined in Section 82013
which is required to and does file any statement pursuant to the
provisions of Article 2 (commencing with Section 84200) of Chapter 4
of Title 9.
SEC. 3. Section 12582 of the Government Code is amended to read:
12582. "Trustee" means (a) any individual, group of individuals,
corporation, unincorporated association, or other legal entity
holding property in trust pursuant to any charitable trust, (b) any
corporation or unincorporated association which has accepted property
to be used for a particular charitable purpose as distinguished from
the general purposes of the corporation or unincorporated
association, and (c) a corporation or unincorporated association
formed for the administration of a charitable trust, pursuant to the
directions of the settlor or at the instance of the trustee.
SEC. 4. Section 12583 of the Government Code is amended to read:
12583. The filing, registration, and reporting provisions of this
article do not apply to the United States, any state, territory, or
possession of the United States, the District of Columbia, the
Commonwealth of Puerto Rico, or to any of their agencies or
governmental subdivisions, to any religious corporation sole or other
religious corporation or organization that holds property for
religious purposes, or to any officer, director, or trustee thereof
who holds property for like purposes, to a cemetery corporation
regulated under Chapter 19 (commencing with Section 9600) of Division
3 of the Business and Professions Code, or to any committee as
defined in Section 82013 that is required to and does file any
statement pursuant to Article 2 (commencing with Section 84200) of
Chapter 4 of Title 9, or to a charitable corporation or
unincorporated association organized and operated primarily as a
religious organization, educational institution, hospital, or a
health care service plan licensed pursuant to Section 1349 of the
Health and Safety Code.
SEC. 5. Section 12584 of the Government Code is amended to read:
12584. The Attorney General shall establish and maintain a
register of charitable corporations, unincorporated associations, and
trustees subject to this article and of the particular trust or
other relationship under which they hold property for charitable
purposes and, to that end, may conduct whatever investigation is
necessary, and shall obtain from public records, court officers,
taxing authorities, trustees, and other sources, whatever
information, copies of instruments, reports, and records are needed
for the establishment and maintenance of the register.
SEC. 6. Section 12585 of the Government Code is amended to read:
12585. Every charitable corporation, unincorporated association,
and trustee subject to this article shall file with the Attorney
General a copy of the articles of incorporation, or other instrument
that governs the operation of the corporation, unincorporated
association, or trust, within 30 days after the corporation,
unincorporated association, or trustee initially receives property.
A trustee is not required to register as long as the charitable
interest in a trust is a future interest, but shall do so within 30
days after any charitable interest in a trust becomes a present
interest.
SEC. 7. Section 12586 of the Government Code is amended to read:
12586. (a) Except as otherwise provided and except corporate
trustees which are subject to the jurisdiction of the Commissioner of
Financial Institutions of the State of California under Division 1
(commencing with Section 99) of the Financial Code or to the
Comptroller of the Currency of the United States, every charitable
corporation, unincorporated association, and trustee subject to this
article shall, in addition to filing copies of the instruments
previously required, file with the Attorney General periodic written
reports, under oath, setting forth information as to the nature of
the assets held for charitable purposes and the administration
thereof by the corporation, unincorporated association, or trustee,
in accordance with rules and regulations of the Attorney General.
(b) The Attorney General shall make rules and regulations as to
the time for filing reports, the contents thereof, and the manner of
executing and filing them. The Attorney General may classify trusts
and other relationships concerning property held for a charitable
purpose as to purpose, nature of assets, duration of the trust or
other relationship, amount of assets, amounts to be devoted to
charitable purposes, nature of trustee, or otherwise, and may
establish different rules for the different classes as to time and
nature of the reports required to the ends (1) that he or she shall
receive reasonably current, periodic reports as to all charitable
trusts or other relationships of a similar nature, which will enable
him or her to ascertain whether they are being properly administered,
and (2) that periodic reports shall not unreasonably add to the
expense of the administration of charitable trusts and similar
relationships. The Attorney General may suspend the filing of
reports as to a particular charitable trust or relationship for a
reasonable, specifically designated time upon written application of
the trustee filed with the Attorney General and after the Attorney
General has filed in the register of charitable trusts a written
statement that the interests of the beneficiaries will not be
prejudiced thereby and that periodic reports are not required for
proper supervision by his or her office.
(c) A copy of an account filed by the trustee in any court having
jurisdiction of the trust or other relationship, if the account
substantially complies with the rules and regulations of the Attorney
General, may be filed as a report required by this section.
(d) The first periodic written report, unless the filing thereof
is suspended as herein provided, shall be filed not later than four
months and 15 days following the close of the first calendar or
fiscal year in which property is initially received. If any part of
the income or principal of a trust previously established is
authorized or required to be applied to a charitable purpose at the
time this article takes effect, the first report shall be filed at
the close of the calendar or fiscal year in which it was registered
with the Attorney General or not later than four months and 15 days
following the close of the calendar or fiscal period.
(e) Every charitable corporation, unincorporated association, and
trustee required to file reports with the Attorney General pursuant
to this section that receives or accrues in any fiscal year gross
revenue of two million dollars ($2,000,000) or more, exclusive of
grants from, and contracts for services with, governmental entities
for which the governmental entity requires an accounting of the funds
received, shall do the following:
(1) Prepare annual financial statements using generally accepted
accounting principles that are audited by an independent certified
public accountant in conformity with generally accepted auditing
standards. For any nonaudit services performed by the firm
conducting the audit, the firm and its individual auditors shall
adhere to the standards for auditor independence set forth in the
latest revision of the Government Auditing Standards, issued by the
Comptroller General of the United States (the Yellow Book). The
Attorney General may, by regulation, prescribe standards for auditor
independence in the performance of nonaudit services, including
standards different from those set forth in the Yellow Book. If a
charitable corporation or unincorporated association that is required
to prepare an annual financial statement pursuant to this
subdivision is under the control of another organization, the
controlling organization may prepare a consolidated financial
statement. The audited financial statements shall be available for
inspection by the Attorney General and by members of the public no
later than nine months after the close of the fiscal year to which
the statements relate. A charity shall make its annual audited
financial statements available to the public in the same manner that
is prescribed for IRS Form 990 by the latest revision of Section 6104
(d) of the Internal Revenue Code and associated regulations.
(2) If it is a corporation, have an audit committee appointed by
the board of directors. The audit committee may include persons who
are not members of the board of directors, but the member or members
of the audit committee shall not include any members of the staff,
including the president or chief executive officer and the treasurer
or chief financial officer. If the corporation has a finance
committee, it must be separate from the audit committee. Members of
the finance committee may serve on the audit committee; however, the
chairperson of the audit committee may not be a member of the finance
committee and members of the finance committee shall constitute less
than one-half of the membership of the audit committee. Members of
the audit committee shall not receive any compensation from the
corporation in excess of the compensation, if any, received by
members of the board of directors for service on the board and shall
not have a material financial interest in any entity doing business
with the corporation. Subject to the supervision of the board of
directors, the audit committee shall be responsible for recommending
to the board of directors the retention and termination of the
independent auditor and may negotiate the independent auditor's
compensation, on behalf of the board of directors. The audit
committee shall confer with the auditor to satisfy its members that
the financial affairs of the corporation are in order, shall review
and determine whether to accept the audit, shall assure that any
nonaudit services performed by the auditing firm conform with
standards for auditor independence referred to in paragraph (1), and
shall approve performance of nonaudit services by the auditing firm.
If the charitable corporation that is required to have an audit
committee pursuant to this subdivision is under the control of
another corporation, the audit committee may be part of the board of
directors of the controlling corporation.
(f) If, independent of the audit requirement set forth in
paragraph (1) of subdivision (e), a charitable corporation,
unincorporated association, or trustee required to file reports with
the Attorney General pursuant to this section prepares financial
statements that are audited by a certified public accountant, the
audited financial statements shall be available for inspection by the
Attorney General and shall be made available to members of the
public in conformity with paragraph (1) of subdivision (e).
(g) The board of directors of a charitable corporation or
unincorporated association, or an authorized committee of the board,
and the trustee or trustees of a charitable trust shall review and
approve the compensation, including benefits, of the president or
chief executive officer and the treasurer or chief financial officer
to assure that it is just and reasonable. This review and approval
shall occur initially upon the hiring of the officer, whenever the
term of employment, if any, of the officer is renewed or extended,
and whenever the officer's compensation is modified. Separate review
and approval shall not be required if a modification of compensation
extends to substantially all employees. If a charitable corporation
is affiliated with other charitable corporations, the requirements
of this section shall be satisfied if review and approval is obtained
from the board, or an authorized committee of the board, of the
charitable corporation that makes retention and compensation
decisions regarding a particular individual.
SEC. 8. Section 12599 of the Government Code is amended to read:
12599. (a) "Commercial fundraiser for charitable purposes" is
defined as any individual, corporation, unincorporated association,
or other legal entity who for compensation does any of the following:
(1) Solicits funds, assets, or property in this state for
charitable purposes.
(2) As a result of a solicitation of funds, assets, or property in
this state for charitable purposes, receives or controls the funds,
assets, or property solicited for charitable purposes.
(3) Employs, procures, or engages any compensated person to
solicit, receive, or control funds, assets, or property for
charitable purposes.
A commercial fundraiser for charitable purposes shall include any
person, association of persons, corporation, or other entity that
obtains a majority of its inventory for sale by the purchase,
receipt, or control for resale to the general public, of salvageable
personal property solicited by an organization qualified to solicit
donations pursuant to Section 148.3 of the Welfare and Institutions
Code.
A commercial fundraiser for charitable purposes shall not include
a "trustee" as defined in Section 12582 or 12583, a "charitable
corporation" as defined in Section 12582.1, or any employee thereof.
A commercial fundraiser for charitable purposes shall not include an
individual who is employed by or under the control of a commercial
fundraiser for charitable purposes registered with the Attorney
General. A commercial fundraiser for charitable purposes shall not
include any federally insured financial institution which holds as a
depository funds received as a result of a solicitation for
charitable purposes.
As used in this section, "charitable purposes" includes any
solicitation in which the name of any organization of law enforcement
personnel, firefighters, or other persons who protect the public
safety is used or referred to as an inducement for transferring any
funds, assets, or property, unless the only expressed or implied
purpose of the solicitation is for the sole benefit of the actual
active membership of the organization.
(b) A commercial fundraiser for charitable purposes shall, prior
to soliciting any funds, assets, or property, including salvageable
personal property, in California for charitable purposes, or prior to
receiving and controlling any funds, assets, or property, including
salvageable personal property, as a result of a solicitation in this
state for charitable purposes, register with the Attorney General's
Registry of Charitable Trusts on a registration form provided by the
Attorney General. Renewals of registration shall be filed with the
Registry of Charitable Trusts by January 15 of each calendar year in
which the commercial fundraiser for charitable purposes does business
and shall be effective for one year. A registration or renewal fee
of two hundred dollars ($200) shall be required for registration of a
commercial fundraiser for charitable purposes, and shall be payable
by certified or cashier's check to the Attorney General's Registry of
Charitable Trusts at the time of registration or renewal. The
Attorney General may adjust the annual registration or renewal fee as
needed pursuant to this section. The Attorney General's Registry of
Charitable Trusts may grant extensions of time to file annual
registration as required, pursuant to subdivision (b) of Section
12586.
(c) A commercial fundraiser for charitable purposes shall file
with the Attorney General's Registry of Charitable Trusts an annual
financial report on a form provided by the Attorney General,
accounting for all funds collected pursuant to any solicitation for
charitable purposes during the preceding calendar year. The annual
financial report shall be filed with the Attorney General's Registry
of Charitable Trusts no later than 30 days after the close of the
preceding calendar year.
(d) The contents of the forms for annual registration and annual
financial reporting by commercial fundraisers for charitable purposes
shall be established by the Attorney General in a manner consistent
with the procedures set forth in subdivisions (a) and (b) of Section
12586. The annual financial report shall require a detailed,
itemized accounting of funds, assets, or property, solicited for
charitable purposes on behalf of each charitable organization exempt
from taxation under Section 501(c)(3) of the Internal Revenue Code or
for each charitable purpose during the accounting period, and shall
include, among other data, the following information for funds,
assets, or property, solicited by the commercial fundraiser for
charitable purposes:
(1) Total revenue.
(2) The fee or commission charged by the commercial fundraiser for
charitable purposes.
(3) Salaries paid by the commercial fundraiser for charitable
purposes to its officers and employees.
(4) Fundraising expenses.
(5) Distributions to the identified charitable organization or
purpose.
(6) The names and addresses of any director, officer, or employee
of the commercial fundraiser for charitable purposes who is a
director, officer, or employee of any charitable organization listed
in the annual financial report.
(e) A commercial fundraiser for charitable purposes that obtains a
majority of its inventory for sale by the purchase, receipt, or
control for resale to the general public, of salvageable personal
property solicited by an organization qualified to solicit donations
pursuant to Section 148.3 of the Welfare and Institutions Code shall
file with the Attorney General's Registry of Charitable Trusts, and
not with the sheriff of any county, an annual financial report on a
form provided by the Attorney General that is separate and distinct
from forms filed by other commercial fundraisers for charitable
purposes pursuant to subdivisions (c) and (d).
(f) It shall be unlawful for any commercial fundraiser for
charitable purposes to solicit funds in this state for charitable
purposes unless the commercial fundraiser for charitable purposes has
complied with the registration or annual renewal and financial
reporting requirements of this article. Failure to comply with these
registration or annual renewal and financial reporting requirements
shall be grounds for injunction against solicitation in this state
for charitable purposes and other civil remedies provided by law.
(g) A commercial fundraiser for charitable purposes is a
constructive trustee for charitable purposes as to all funds
collected pursuant to solicitation for charitable purposes and shall
account to the Attorney General for all funds. A commercial
fundraiser for charitable purposes is subject to the Attorney General'
s supervision and enforcement over charitable funds and assets to the
same extent as a trustee for charitable purposes under this article.
(h) Not less than 10 working days prior to the commencement of
each solicitation campaign, event, or service, or not later than
commencement of solicitation for solicitations to aid victims of
emergency hardship or disasters, a commercial fundraiser for
charitable purposes shall file with the Attorney General's Registry
of Charitable Trusts a notice on a form prescribed by the Attorney
General that sets forth all of the following:
(1) The name, address, and telephone number of the commercial
fundraiser for charitable purposes.
(2) The name, address, and telephone number of the charitable
organization with whom the commercial fundraiser has contracted.
(3) The fundraising methods to be used.
(4) The projected dates when performance under the contract will
commence and terminate.
(5) The name, address, and telephone number of the person
responsible for directing and supervising the work of the commercial
fundraiser under the contract.
(i) There shall be a written contract between a commercial
fundraiser for charitable purposes and a charitable organization for
each solicitation campaign, event, or service, that shall be signed
by the authorized contracting officer for the commercial fundraiser
and by an official of the charitable organization who is authorized
to sign by the organization's governing body. The contract shall be
available for inspection by the Attorney General and shall contain
all of the following provisions:
(1) The legal name and address of the charitable organization as
registered with the Registry of Charitable Trusts unless the
charitable organization is exempt from registration.
(2) A statement of the charitable purpose for which the
solicitation campaign, event, or service is being conducted.
(3) A statement of the respective obligations of the commercial
fundraiser and the charitable organization.
(4) If the commercial fundraiser is to be paid a fixed fee, a
statement of the fee to be paid to the commercial fundraiser and a
good faith estimate of what percentage the fee will constitute of the
total contributions received. The contract shall clearly disclose
the assumptions upon which the estimate is based, and the stated
assumptions shall be based upon all of the relevant facts known to
the commercial fundraiser regarding the solicitation to be conducted
by the commercial fundraiser.
(5) If a percentage fee is to be paid to the commercial
fundraiser, a statement of the percentage of the total contributions
received that will be remitted to or retained by the charitable
organization, or, if the solicitation involves the sale of goods or
services or the sale of admissions to a fundraising event, the
percentage of the purchase price that will be remitted to the
charitable organization. The stated percentage shall be calculated
by subtracting from contributions received and sales receipts not
only the commercial fundraiser's fee, but also any additional amounts
that the charitable organization is obligated to pay as fundraising
costs.
(6) The effective and termination dates of the contract and the
date solicitation activity is to commence within the state.
(7) A provision that requires that each contribution in the
control or custody of the commercial fundraiser shall in its entirety
and within five working days of its receipt comply with either of
the following:
(A) Be deposited in an account at a bank or other federally
insured financial institution that is solely in the name of the
charitable organization and over which the charitable organization
has sole control of withdrawals.
(B) Be delivered to the charitable organization in person, by
United States express mail, or by another method of delivery
providing for overnight delivery.
(8) A statement that the charitable organization exercises control
and approval over the content and frequency of any solicitation.
(9) If the commercial fundraiser proposes to make any payment in
cash or in kind to any person or legal entity to secure any person's
attendance at, or sponsorship, approval, or endorsement of, a charity
fundraising event, the maximum dollar amount of those payments shall
be set forth in the contract. "Charity fundraising event" means any
gathering of persons, including, but not limited to, a party,
banquet, concert, or show, that is held for the purpose or claimed
purpose of raising funds for any charitable purpose or organization.
(10) A provision that the charitable organization has the right to
cancel the contract without cost, penalty, or liability for a period
of 10 days following the date on which the contract is executed;
that the charitable organization may cancel the contract by serving a
written notice of cancellation on the commercial fundraiser; that,
if mailed, service shall be by certified mail, return receipt
requested, and cancellation shall be deemed effective upon the
expiration of five calendar days from the date of mailing; that any
funds collected after effective notice that the contract has been
canceled shall be deemed to be held in trust for the benefit of the
charitable organization without deduction for costs or expenses of
any nature; and that the charitable organization shall be entitled to
recover all funds collected after the date of cancellation.
(11) A provision that, following the initial 10-day cancellation
period, the charitable organization may terminate the contract by
giving 30 days' written notice; that, if mailed, service of the
notice shall be by certified mail, return receipt requested, and
shall be deemed effective upon the expiration of five calendar days
from the date of mailing; and that, in the event of termination under
this subdivision, the charitable organization shall be liable for
services provided by the commercial fundraiser up to 30 days after
the effective service of the notice.
(12) A provision that, following the initial 10-day cancellation
period, the charitable organization may terminate the contract at any
time upon written notice, without payment or compensation of any
kind to the commercial fundraiser, if the commercial fundraiser or
its agents, employees, or representatives (A) make any material
misrepresentations in the course of solicitations or with respect to
the charitable organization, (B) are found by the charitable
organization to have been convicted of a crime arising from the
conduct of a solicitation for a charitable organization or purpose
punishable as a misdemeanor or a felony, or (C) otherwise conduct
fundraising activities in a manner that causes or could cause public
disparagement of the charitable organization's good name or good
will.
(13) Any other information required by the regulations of the
Attorney General.
(j) It shall be unlawful for a commercial fundraiser for
charitable purposes to not disclose the percentage of total
fundraising expenses of the fundraiser upon
receiving a written or oral request from a person
solicited for a contribution for a charitable purpose. "Percentage
of total fundraising expenses," as used in this section, means the
ratio of the total expenses of the fundraiser to the total revenue
received by the fundraiser for the charitable purpose for which funds
are being solicited, as reported on the most recent financial report
filed with the Attorney General's Registry of Charitable Trusts. A
commercial fundraiser shall disclose this information in writing
within five working days from receipt of a request by mail or
facsimile. A commercial fundraiser shall orally disclose this
information immediately upon a request made in person or in a
telephone conversation and shall follow this response with a written
disclosure within five working days. Failure to comply with the
requirements of this subdivision shall be grounds for an injunction
against solicitation in this state for charitable purposes and other
civil remedies provided by law.
(k) If the Attorney General issues a report to the public
containing information obtained from registration forms or financial
report forms filed by commercial fundraisers for charitable purposes,
there shall be a separate section concerning commercial fundraisers
for charitable purposes that obtain a majority of their inventory for
sale by the purchase, receipt, or control for resale to the general
public, of salvageable personal property solicited \by an
organization qualified to solicit donations pursuant to Section 148.3
of the Welfare and Institutions Code. The report shall include an
explanation of the distinctions between these thrift store operations
and other types of commercial fundraising.
(l) No person may act as a commercial fundraiser for charitable
purposes if that person, any officer or director of that person's
business, any person with a controlling interest in the business, or
any person the commercial fundraiser employs, engages, or procures to
solicit for compensation, has been convicted by a court of any state
or the United States of a crime arising from the conduct of a
solicitation for a charitable organization or purpose punishable as a
misdemeanor or felony.
(m) A commercial fundraiser for charitable purposes shall not
solicit in the state on behalf of a charitable organization unless
that charitable organization is registered or is exempt from
registration with the Attorney General's Registry of Charitable
Trusts.
(n) If any provision of this section or the application thereof to
any person or circumstances is held invalid, that invalidity shall
not affect other provisions or application of this section which can
be given effect without the invalid provision or application, and to
this end the provisions of this section are severable.
SEC. 9. Section 12599.1 of the Government Code is amended to read:
12599.1. (a) "Fundraising counsel for charitable purposes" is
defined as any individual, corporation, unincorporated association,
or other legal entity who is described by all of the following:
(1) For compensation plans, manages, advises, counsels, consults,
or prepares material for, or with respect to, the solicitation in
this state of funds, assets, or property for charitable purposes.
(2) Does not solicit funds, assets, or property for charitable
purposes.
(3) Does not receive or control funds, assets, or property
solicited for charitable purposes in this state.
(4) Does not employ, procure, or engage any compensated person to
solicit, receive, or control funds, assets, or property for
charitable purposes.
(b) "Fundraising counsel for charitable purposes" does not include
any of the following:
(1) An attorney, investment counselor, or banker who in the
conduct of that person's profession advises a client when actually
engaged in the giving of legal, investment, or financial advice.
(2) A trustee as defined in Section 12582 or 12583.
(3) A charitable corporation as defined in Section 12582.1, or any
employee thereof.
(4) A person employed by or under the control of a fundraising
counsel for charitable purposes, as defined in subdivision (a).
(5) A person, corporation, or other legal entity, engaged as an
independent contractor directly by a trustee or a charitable
corporation, that prints, reproduces, or distributes written
materials prepared by a trustee, a charitable corporation, or any
employee thereof, or that performs artistic or graphic services with
respect to written materials prepared by a trustee, a charitable
corporation, or any employee thereof, provided that the independent
contractor does not perform any of the activities described in
paragraph (1) of subdivision (a).
(6) A person whose total annual gross compensation for performing
any activity described in paragraph (1) of subdivision (a) does not
exceed twenty-five thousand dollars ($25,000).
(c) A fundraising counsel for charitable purposes shall, prior to
managing, advising, counseling, consulting, or preparing material
for, or with respect to, the solicitation in this state of funds,
assets, or property for charitable purposes, register with the
Attorney General's Registry of Charitable Trusts on a registration
form provided by the Attorney General. Renewals of registration shall
be filed with the Registry of Charitable Trusts by January 15 of
each calendar year in which the fundraising counsel for charitable
purposes does business and shall be effective for one year.
A registration or renewal fee of two hundred dollars ($200) shall
be required for registration of a fundraising counsel for charitable
purposes, and shall be payable by certified or cashier's check to the
Attorney General's Registry of Charitable Trusts at the time of
registration and renewal. The Attorney General may adjust the annual
registration or renewal fee as needed pursuant to this section. The
Attorney General's Registry of Charitable Trusts may grant
extensions of time to file annual registration as required, pursuant
to subdivision (b) of Section 12586.
(d) A fundraising counsel for charitable purposes shall file
annually with the Attorney General's Registry of Charitable Trusts on
a form provided by the Attorney General, a report listing each
person, corporation, unincorporated association, or other legal
entity for whom the fundraising counsel has performed any services
described in paragraph (1) of subdivision (a), and a statement
certifying that the fundraising counsel had a written contract with
each listed person, corporation, unincorporated association, or other
legal entity that complied with the requirements of subdivision (f).
(e) Not less than 10 working days prior to the commencement of the
performance of any service for a charitable organization by a
fundraising counsel for charitable purposes, or not later than
commencement of solicitation for solicitations to aid victims of
emergency hardship or disasters, the fundraising counsel shall file
with the Attorney General's Registry of Charitable Trusts a notice on
a form prescribed by the Attorney General that sets forth all of the
following:
(1) The name, address, and telephone number of the fundraising
counsel for charitable purposes.
(2) The name, address, and telephone number of the charitable
organization with whom the fundraising counsel has contracted.
(3) The projected dates when performance under the contract will
commence and terminate.
(4) The name, address, and telephone number of the person
responsible for directing and supervising the work of the fundraising
counsel under the contract.
(f) There shall be a written contract between a fundraising
counsel for charitable purposes and a charitable organization for
each service to be performed by the fundraising counsel for the
charitable organization, that shall be signed by the authorized
contracting officer for the fundraising counsel and by an official of
the charitable organization who is authorized to sign by the
organization's governing body. The contract shall be available for
inspection by the Attorney General and shall contain all of the
following provisions:
(1) The legal name and address of the charitable organization as
registered with the Registry of Charitable Trusts unless the
charitable organization is exempt from registration.
(2) A statement of the charitable purpose for which the
solicitation campaign is being conducted.
(3) A statement of the respective obligations of the fundraising
counsel and the charitable organization.
(4) A clear statement of the fees and any other form of
compensation, including commissions and property, that will be paid
to the fundraising counsel.
(5) The effective and termination dates of the contract and the
date services will commence with respect to solicitation in this
state of contributions for a charitable organization.
(6) A statement that the fundraising counsel will not at any time
solicit funds, assets, or property for charitable purposes, receive
or control funds, assets, or property solicited for charitable
purposes, or employ, procure, or engage any compensated person to
solicit, receive, or control funds, assets, or property for
charitable purposes.
(7) A statement that the charitable organization exercises control
and approval over the content and frequency of any solicitation.
(8) A provision that the charitable organization has the right to
cancel the contract without cost, penalty, or liability for a period
of 10 days following the date on which the contract is executed; that
the charitable organization may cancel the contract by serving a
written notice of cancellation on the fundraising counsel; and that,
if mailed, service shall be by certified mail, return receipt
requested, and cancellation shall be deemed effective upon the
expiration of five calendar days from the date of mailing.
(9) A provision that, following the initial 10-day cancellation
period, the charitable organization may terminate the contract by
giving 30 days' written notice; that, if mailed, service of the
notice shall be by certified mail, return receipt requested, and
shall be deemed effective upon the expiration of five calendar days
from the date of mailing; and that, in the event of termination under
this subdivision, the charitable organization shall be liable for
services provided by the fundraising counsel to the effective date of
the termination.
(10) Any other information required by the regulations of the
Attorney General.
(g) It shall be unlawful for any fundraising counsel for
charitable purposes to manage, advise, counsel, consult, or prepare
material for, or with respect to, the solicitation in this state of
funds, assets, or property for charitable purposes unless the
fundraising counsel for charitable purposes has complied with the
registration or annual renewal and financial reporting requirements
of this article.
(h) A fundraising counsel for charitable purposes is subject to
the Attorney General's supervision and enforcement to the same extent
as a trustee for charitable purposes under this article.
(i) If any provision of this section or the application thereof to
any person or circumstances is held invalid, that invalidity shall
not affect other provisions or application of this section which can
be given effect without the invalid provision or application, and to
this end the provisions of this section are severable.
SEC. 10. Section 12599.3 is added to the Government Code, to read:
12599.3. (a) A contract between a charitable organization and a
commercial fundraiser for charitable purposes or fundraising counsel
for charitable purposes shall be voidable by the charitable
organization unless the commercial fundraiser or the fundraising
counsel is registered with the Attorney General's Registry of
Charitable Trusts prior to the commencement of the solicitation.
(b) Whenever a charitable organization contracts with a commercial
fundraiser for charitable purposes or fundraising counsel for
charitable purposes, the charitable organization shall have the right
to cancel the contract without cost, penalty, or liability for a
period of 10 days following the date on which the contract is
executed. Any provision in the contract that is intended to waive
this right of cancellation shall be void and unenforceable.
(c) A charitable organization may cancel a contract pursuant to
subdivision (b) by serving a written notice of cancellation on the
fundraising counsel or commercial fundraiser. If mailed, service
shall be by certified mail, return receipt requested, and
cancellation shall be deemed effective upon the expiration of five
calendar days from the date of mailing. The notice shall be
sufficient if it indicates that the charitable organization does not
intend to be bound by the contract.
(d) Whenever a charitable organization cancels a contract pursuant
to this section, it shall mail a duplicate copy of the notice of
cancellation to the Attorney General's Registry of Charitable Trusts.
(e) Any funds collected after effective notice that a contract has
been canceled shall be deemed to be held in trust for the benefit of
the charitable organization without deduction for costs or expenses
of any nature. A charitable organization shall be entitled to
recover all funds collected after the date of cancellation.
(f) Following the initial 10-day cancellation period, a charitable
organization may terminate a contract with a commercial fundraiser
for charitable purposes or a fundraising counsel for charitable
purposes by giving 30 days' written notice. If mailed, service of
the notice shall be by certified mail, return receipt requested, and
shall be deemed effective upon the expiration of five calendar days
from the date of mailing. In the event of termination under this
subdivision, the charitable organization shall be liable for services
provided by the commercial fundraiser or fundraising counsel up to
30 days after the effective service of the notice.
(g) Following the initial 10-day cancellation period, a charitable
organization may terminate at any time upon written notice a
contract with a commercial fundraiser for charitable purposes or a
fundraising counsel for charitable purposes, without payment or
compensation of any kind to the commercial fundraiser or fundraising
counsel, if the commercial fundraiser or the fundraising counsel, or
their agents, employees, or representatives (1) make any material
misrepresentations in the course of solicitations or with respect to
the charitable organization, (2) are found by the charitable
organization to have been convicted of a crime arising from the
conduct of a solicitation for a charitable organization or purpose
that is punishable as a felony or misdemeanor, or (3) otherwise
conduct fundraising activities in a manner that causes or could cause
public disparagement of the charitable organization's good name or
good will.
SEC. 11. Section 12599.6 is added to the Government Code, to read:
12599.6. (a) Charitable organizations and commercial fundraisers
for charitable purposes shall not misrepresent the purpose of the
charitable organization or the nature or purpose or beneficiary of a
solicitation. A misrepresentation may be accomplished by words or
conduct or failure to disclose a material fact.
(b) A charitable organization must establish and exercise control
over its fundraising activities conducted for its benefit, including
approval of all written contracts and agreements, and must assure
that fundraising activities are conducted without coercion.
(c) A charitable organization shall not enter into any contract or
agreement with, or employ, any commercial fundraiser for charitable
purposes or fundraising counsel for charitable purposes unless that
commercial fundraiser or fundraising counsel is registered with the
Attorney General's Registry of Charitable Trusts or, if not
registered, agrees to register prior to the commencement of any
solicitation.
(d) A charitable organization shall not enter into any contract or
agreement with, or raise any funds for, any charitable organization
required to be registered pursuant to this act unless that charitable
organization is registered with the Attorney General's Registry of
Charitable Trusts or, if not registered, agrees to register prior to
the commencement of the solicitation.
(e) Each contribution in the control or custody of a commercial
fundraiser for charitable purposes shall in its entirety and within
five working days of receipt (1) be deposited in an account at a bank
or other federally insured financial institution that is solely in
the name of the charitable organization on whose behalf the
contribution was solicited and over which the charitable organization
has sole control of withdrawals or, (2) be delivered to the
charitable organization in person, by Express Mail, or by another
method of delivery providing for overnight delivery.
(f) Regardless of injury, the following acts and practices are
prohibited in the planning, conduct, or execution of any solicitation
or charitable sales promotion:
(1) Operating in violation of, or failing to comply with, any of
the requirements of this act or regulations or orders of the Attorney
General, or soliciting contributions after registration with the
Attorney General's Registry of Charitable Trusts has expired or has
been suspended or revoked.
(2) Using any unfair or deceptive acts or practices or engaging in
any fraudulent conduct that creates a likelihood of confusion or
misunderstanding.
(3) Using any name, symbol, emblem, statement, or other material
stating, suggesting, or implying to a reasonable person that the
contribution is to or for the benefit of a particular charitable
organization when that is not the fact.
(4) Misrepresenting or misleading anyone in any manner to believe
that the person on whose behalf a solicitation or charitable sales
promotion is being conducted is a charitable organization or that the
proceeds of the solicitation or charitable sales promotion will be
used for charitable purposes when that is not the fact.
(5) Misrepresenting or misleading anyone in any manner to believe
that any other person sponsors, endorses, or approves a charitable
solicitation or charitable sales promotion when that person has not
given consent in writing to the use of the person's name for these
purposes.
(6) Misrepresenting or misleading anyone in any manner to believe
that goods or services have endorsement, sponsorship, approval,
characteristics, ingredients, uses, benefits, or qualities that they
do not have or that a person has endorsement, sponsorship, approval,
status, or affiliation that the person does not have.
(7) Using or exploiting the fact of registration with the Attorney
General's Registry of Charitable Trusts so as to lead any person to
believe that the registration in any manner constitutes an
endorsement or approval by the Attorney General. The use of the
following statement is not prohibited:
"The official registration and financial information regarding
(insert the legal name of the charity as registered with the Registry
of Charitable Trusts) can be obtained from the Attorney General's
Web site at http://caag.state.ca.us/charities/. Registration does
not imply endorsement."
(8) Representing directly or by implication that a charitable
organization will receive an amount greater than the actual net
proceeds reasonably estimated to be retained by the charity for its
use.
(9) With respect to solicitations by commercial fundraisers for
charitable purposes on behalf of law enforcement personnel,
firefighters, or other persons who protect the public safety,
issuing, offering, giving, delivering, or distributing any honorary
membership cards, courtesy cards, or similar cards, or any stickers,
emblems, plates, or other items that could be used for display on a
motor vehicle, and that suggest affiliation with, or endorsement by
any public safety personnel or a group comprising such personnel.
(10) (A) Soliciting for advertising to appear in a for-profit
publication that relates to, purports to relate to, or that could
reasonably be construed to relate to, any charitable purpose without
making the following disclosures at the time of solicitation:
(i) The publication is a for-profit, commercial enterprise.
(ii) The true name of the solicitor and the fact that the
solicitor is a professional solicitor.
(iii) The publication is not affiliated with or sponsored by any
charitable organization.
(B) Where a sale of advertising has been made, the solicitor,
prior to accepting any money for the sale, shall make to the
purchaser the disclosures required by subparagraph (A) in written
form and in conspicuous type.
(11) Representing that any part of the contributions solicited by
a charitable organization will be given or donated to any other
charitable organization unless that organization has consented in
writing to the use of its name prior to the solicitation. The
written consent shall be signed by one authorized officer, director,
or trustee of the charitable organization.
(12) Representing that tickets to events will be donated for use
by another, unless all of the following requirements have been met:
(A) The charitable organization or commercial fundraiser has
commitments, in writing, from charitable organizations stating that
they will accept donated tickets and specifying the number of tickets
they are willing to accept.
(B) The donated tickets will not, when combined with other ticket
donations, exceed either of the following:
(i) The number of ticket commitments the charitable organization
or commercial fundraiser has received from charitable organizations.
(ii) The total attendance capacity of the site of the event.
(g) A ticket commitment from a charitable organization alone, as
described in subdivision (i), does not constitute written consent to
use of the organization's name in the solicitation campaign.
SEC. 12. Section 12599.7 is added to the Government Code, to read:
12599.7. (a) A commercial fundraiser for charitable purposes
shall maintain during each solicitation campaign and for not less
than 10 years following the completion of each solicitation campaign
records, including any electronic records, containing the following
information, which shall be available for inspection upon demand by
the Attorney General:
(1) The date and amount of each contribution received as a result
of the solicitation campaign and, for noncash contributions, the name
and mailing address of each contributor.
(2) The name and residence address of each employee, agent, or
other person involved in the solicitation campaign.
(3) Records of all revenue received and expenses incurred in the
course of the solicitation campaign.
(4) For each account into which the commercial fundraiser
deposited revenue from the solicitation campaign, the account number
and the name and location of the bank or other financial institution
in which the account was maintained.
(b) If a commercial fundraiser for charitable purposes sells
tickets to an event and represents that tickets will be donated for
use by another, the commercial fundraiser shall maintain for not less
than 10 years following the completion of the event records
containing the following information, which shall be available for
inspection upon demand by the Attorney General:
(1) The number of tickets purchased and donated by each
contributor.
(2) The name and address of all organizations receiving donated
tickets for use by others, including the number of tickets received
by each organization.
SEC. 13. No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of the
Government Code, or changes the definition of a crime within the
meaning of Section 6 of Article XIII B of the California
Constitution.