BILL ANALYSIS Ó
SENATE JUDICIARY COMMITTEE
Senator Hannah-Beth Jackson, Chair
2015-2016 Regular Session
AB 2219 (Wagner)
Version: March 31, 2016
Hearing Date: June 21, 2016
Fiscal: Yes
Urgency: No
TH
SUBJECT
Attorney General: Schedule of Donors: Confidentiality
DESCRIPTION
This bill would amend the Supervision of Trustees and
Fundraisers for Charitable Purposes Act to specify that certain
instruments, documents, and reports filed with the Attorney
General are to be withheld from public inspection.
BACKGROUND
The Supervision of Trustees and Fundraisers for Charitable
Purposes Act (Gov. Code Sec. 12580 et seq.) establishes the
Attorney General's supervisory authority over charitable
trustees and entities to ensure that funds received for
charitable purposes are properly managed and devoted to
charitable programs. This Act is derived from the Uniform
Supervision of Trustees for Charitable Purposes Act, which
California enacted in 1959, and requires most charities
operating in California to register with the Attorney General
and file annual financial reports listing their revenues and
expenditures. Under existing law, any charitable organization
that seeks to solicit tax deductible contributions in California
must first register with the state's Registry of Charitable
Trusts and provide certain documents to the Attorney General.
These documents and other annual financial reports are used by
the Attorney General to investigate and litigate cases of
charity fraud and mismanagement by trustees and directors.
The Registry of Charitable Trusts, along with copies of
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instruments and reports filed with the Attorney General, are
generally open to public inspection, subject to limitations
imposed through rule or regulation. However, existing law
requires any instrument filed "whose content is not exclusively
for charitable purposes" to be withheld from public inspection.
(Gov. Code Sec. 12590.)
This bill would further require the Attorney General to withhold
from public inspection:
any report filed with any other governmental agency of this
state, another state, the United States, or any governmental
subdivision thereof that is required by law to be kept
confidential;
upon request of a charity or charitable fiduciary, any part of
a document filed with the Attorney General that does not
relate to charitable purposes or charitable assets and that is
not otherwise a public record; and
donor information that is exempt from public disclosure under
the Internal Revenue Code, as specified, unless the disclosure
is pursuant to a court or administrative proceeding brought
pursuant to the Attorney General's charitable trust
enforcement responsibilities, or the disclosure is in response
to a search warrant.
CHANGES TO EXISTING LAW
Existing law establishes the Supervision of Trustees and
Fundraisers for Charitable Purposes Act, which 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, as specified. (Gov. Code
Secs. 12580, 12581.)
Existing law requires the Attorney General to establish and
maintain a register of charitable corporations, unincorporated
associations, trustees, and entities that hold property for
charitable purposes. Existing law authorizes the Attorney
General to conduct whatever investigation is necessary, and to
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. (Gov. Code Sec.
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12584.)
Existing law directs every charitable corporation,
unincorporated association, and trustee to file with the
Attorney General an initial registration form, under oath,
setting forth information and attaching documents prescribed in
accordance with rules and regulations of the Attorney General,
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. (Gov. Code Sec. 12585.)
Existing law directs the Attorney General to adopt rules and
regulations as to the contents of the initial registration form
and the manner of executing and filing that document or
documents. (Gov. Code Sec. 12585.)
Existing law requires every charitable corporation,
unincorporated association, and trustee, except as specified, to
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.
(Gov. Code Sec. 12586.)
Existing law empowers the Attorney General to investigate
transactions and relationships of corporations and trustees for
the purpose of ascertaining whether or not the purposes of the
corporation or trust are being carried out in accordance with
the terms and provisions of the articles of incorporation or
other instrument. The Attorney General may require any agent,
trustee, fiduciary, beneficiary, institution, association, or
corporation, or other person to appear, at a named time and
place, in the county where the person resides or is found, to
give information under oath and to produce books, memoranda,
papers, documents of title, and evidence of assets, liabilities,
receipts, or disbursements in the possession or control of the
person ordered to appear. (Gov. Code Sec. 12588.)
Existing law states that, subject to reasonable rules and
regulations adopted by the Attorney General, the register,
copies of instruments, and the reports filed with the Attorney
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General shall be open to public inspection, except the Attorney
General shall withhold from public inspection any instrument so
filed whose content is not exclusively for charitable purposes.
(Gov. Code Sec. 12590.)
This bill recasts the above provision to state, subject to
reasonable rules and regulations adopted by the Attorney
General, the register, copies of instruments, documents, and the
reports filed with the Attorney General shall be open to public
inspection, except:
any report filed with any other governmental agency of this
state, another state, the United States, or any governmental
subdivision thereof that is required by law to be kept
confidential;
upon request of a charity or charitable fiduciary, any part of
a document filed with the Attorney General that does not
relate to charitable purposes or charitable assets and that is
not otherwise a public record; and
donor information that is exempt from public disclosure under
the Internal Revenue Code, unless the disclosure is pursuant
to a court or administrative proceeding brought pursuant to
the Attorney General's charitable trust enforcement
responsibilities, or the disclosure is in response to a search
warrant.
COMMENT
1.Stated need for the bill
The author writes:
Current law does not prohibit the Attorney General from
publicly disclosing annual donor information of Internal
Revenue Code Section 501(c)(3) tax exempt charitable,
educational and scientific organizations. This is information
that federal law makes confidential, but which the Attorney
General has asserted that such organizations must provide to
comply with California's Charitable Trust registration
requirements. Neither the Public Records Act nor the
Government Code provisions authorizing the Attorney General to
regulate charitable organizations contain any flat
prohibitions [regarding such information]. Moreover, current
law provides no penalties for intentional or inadvertent
public disclosure of such donor information by the Attorney
General or an official of any state agency to whom the
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Attorney General may provide such information.
State law should be clarified to protect against public
disclosure donor information of public charities and
educational institutions provided to the IRS, which federal
law currently makes confidential, but which state law does not
specifically make confidential in the possession of the
Attorney General. While the Attorney General is considering
adoption of a regulation to exempt such donor information from
public disclosure, a regulation is insufficient to provide
ironclad protection against public disclosure, either by the
Attorney General or another public agency to which the
Attorney General may provide such information. This
legislation would enact such protections. AB 2219 would
specify that those records are not subject to public
disclosure, pursuant to federal or state law, and would
include a schedule of donors that is exempt from such
disclosure and is provided to the Attorney General as a
condition of registration or maintenance of tax exempt status
by an organization.
2.Impact to proposed rulemaking
On December 11, 2015, the Department of Justice (DOJ) issued a
Notice of Proposed Rulemaking (NPRM) regarding the disclosure of
information pertaining to, and the filing requirements for,
charitable organizations and entities over which the Attorney
General has enforcement and supervisory powers. DOJ's Initial
Statement of Reasons for its proposed rule states:
Chapter 4 of Title 11, Division 1 of the California Code of
Regulations implements the registration and reporting
requirements of the [Supervision of Trustees and Fundraisers
for Charitable Purposes Act]. Section 301 requires charitable
trustees and organizations subject to the reporting
requirements to annually file a copy of the Internal Revenue
Service Form 990, including all schedules, with the Registry.
Schedule B of Form 990 is a schedule of donors that have
contributed $5,000 or more to the organization. Schedule B
donor information is not subject to disclosure by the Internal
Revenue Service unless the organization is classified as a
private foundation or a political organization as described in
Section 527 of the Internal Revenue Code. Similar to the
Internal Revenue Service, the Attorney General does not
disclose Schedule B donor information and does not post the
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document on its website or otherwise make it available to the
public. . . . The proposed amendments to [Section 310
codifies] the Attorney General's practice to exempt donor
information from public disclosure. . . . The proposed
[amendments] codify the Attorney General's historical and
current practice that specific donor information will be
exempt from public disclosure, and are not a change in policy
or procedure.
The changes proposed to existing law in this bill mirror several
provisions in DOJ's NPRM regarding the disclosure of records
under its proposed regulations, with one exception -- DOJ's
proposed rule would create an exception to the disclosure
restrictions "in response to an administrative subpoena of an
agency, bureau, or department of this state if the agency,
bureau, or department agrees to maintain the confidentiality of
the information received consistent with this regulation." (See
http://oag.ca.gov/sites/all/files/agweb/pdfs/charities/pdf/propos
ed-text.pdf? [as of June 12, 2016].) Given that this bill
arguably addresses only disclosure to the public and not to
other government entities, it is unclear whether the omission of
this component from the text of the bill would undermine the
enforcement activities of other departments and agencies that
seek donor information regarding regulated charities from the
Attorney General.
Suggested Amendments :
add a provision to the bill that parallels the missing
element from DOJ's proposed rule;
condition enactment of the bill on DOJ failing to
promulgate a rule by January 1, 2017, that is substantially
similar to the proposed rule.
1.Pending litigation
In the past, this Committee has raised concerns about bills that
interfere with pending litigation. Any such interference could
result in a direct financial windfall to a private party,
prevent a court from deciding an action based upon the laws in
place at the time the cause of action accrued, or create a
situation where the legislative branch is used to circumvent the
discretion and independence of the judicial branch.
The author has informed the Committee that the disclosure of
donor information pursuant to the Supervision of Trustees and
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Fundraisers for Charitable Purposes Act is currently the subject
of litigation in Ctr. for Competitive Politics v. Harris
(E.D.Cal., No. 2:14-cv-00636-MCE-DAD). The plaintiff, Center
for Competitive Politics, a non-profit educational organization
under 11 U.S.C. Sec. 501(c)(3), has filed suit against the
Attorney General under 42 U.S.C. Sec. 1983, seeking to enjoin
her from requiring it to file an unredacted Form 990 Schedule B,
arguing that disclosure of its major donors' names is preempted
by federal law and violates the right of free association
guaranteed to it and its supporters by the First Amendment.
It is unlikely that the provisions of this bill would impact the
Center for Competitive Politics' ongoing litigation. As noted
in Comment 2, this bill focuses on the disclosure of donor
information to members of the public, not on information that
must be disclosed to the Attorney General in order to operate as
a charitable organization in California. As such, the concerns
typically raised by the Committee regarding impacts to pending
litigation are not present in this case.
Support : None Known
Opposition : None Known
HISTORY
Source : Author
Related Pending Legislation : None Known
Prior Legislation :
SB 1262 (Sher, Ch. 919, Stats. 2004) revised, recast, and added
to existing law regulating charitable organizations, commercial
fundraisers and fundraising counsel.
SB 2015 (Sher, Ch. 475, Stats. 2000) gave the Attorney General
additional enforcement tools and resources, including enhanced
civil fines, the power to revoke or suspend the registration of
a charitable corporation or trustee, commercial fundraiser or
fundraising counsel or coventurer, and assessments for late
filings.
Prior Vote :
AB 2219 (Wagner)
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Assembly Floor (Ayes 79, Noes 0)
Assembly Appropriations Committee (Ayes 20, Noes 0)
Assembly Judiciary Committee (Ayes 9, Noes 0)
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