BILL ANALYSIS Ó
AB 2855
Page 1
Date of Hearing: April 19, 2016
ASSEMBLY COMMITTEE ON PRIVACY AND CONSUMER PROTECTION
Ed Chau, Chair
AB 2855
(Frazier) - As Amended April 7, 2016
SUBJECT: Charitable solicitations: financial disclosures
SUMMARY: Requires a charity's website and marketing materials
to include a prominent link to the Attorney General's (AG)
website for charitable solicitations, and requires the Attorney
General to publish consumer education information online about
charities. Specifically, this bill:
1)Requires a charity's website home page to include a prominent
link that directs consumers to the AG's website containing
information about consumer rights and protections and charity
research resources.
2)Requires a charity's materials used for charitable
solicitations to include the AG's website address for
information about consumer rights and protections, and charity
research resources.
3)Requires, no later than July 1, 2017, the AG to develop and
publish on the AG's website, information about consumer rights
and protections and charity research resources that will
better prepare potential donors to research a charity before
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making a decision to give.
EXISTING LAW:
1)Generally provides the AG with supervisory and enforcement
powers over charitable corporations, trustees, commercial
fundraisers, fundraising counsel and commercial co-venturers
who solicit or hold property for charitable purposes through
the Supervision of Trustees and Fundraisers for Charitable
Purposes Act (Act) (Government Code Section (GC) 12580 et
seq.)
2)Requires charities to register and file annual financial
reports with the AG, with certain exceptions, such as schools,
hospitals, and churches. (GC 12585 et seq.)
3)Requires a person working for a charity to provide a
prospective donor with a card or other printed materials that
list, among other things, the name and address of the charity
or the fundraiser, the organization's tax or non-tax exempt
status, and the percentage of the gift or purchase that may be
deducted on the donor's tax return. No disclosure is required
if the person is a volunteer who is 18 or younger and the
organization is a 501(c)(3) nonprofit. (Business and
Professions Code (BPC) Section 17510.3)
4)Requires a charity to maintain financial records using
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. (BPC 17510.5)
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5)Prohibits an individual, corporation, or other entity that
solicits funds for a charity from retaining more than 50
percent of the net proceeds collected as a fee for fundraising
services. (BPC 17510.87)
6)Requires any charity that collects more than 50% of its annual
income and takes in more than one million ($1,000,000) in
charitable contributions from California donors in California
in a calendar year, and that spent more than 25% of its annual
income on "nonprogram activities" (i.e., salaries,
fundraising, travel expenses, and overhead associated with
managing and administering the charity), to submit a report to
the AG detailing its nonprogram activity expenses as well as
the salaries of the five highest compensated employees; and
requires the AG to make these reports available to the public.
(BPC 17510.9)
7)Requires the AG to publish an annual report on charities
registered with the AG. (BPC 17510.95)
8)Establishes civil penalty of up to $1,000 for a first
violation of the Act, a fine of up to $2,500 for subsequent
violations, and a civil penalty of up to $10,000 for a
violation of the Act with intent to deceive or defraud any
charity or individual, and authorizes the AG to suspend the
registration of a charity that violates the Act. (GC 12591.1
et seq.)
FISCAL EFFECT: Unknown
COMMENTS:
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1)Purpose of this bill . This bill is intended to give consumers
more information about how to research a charity before making
a gift by requiring charities to provide a link in their
solicitation materials to the AG's website containing
information about charitable giving, and by requiring the AG
to publish educational materials specifically about consumer
rights and protections and charity research resources. This
measure is author-sponsored.
2)Author's statement . According to the author's office, "In
recent years, there has been a focus on calling for greater
transparency of the financial activity of charities that
solicit donations from individuals seeking to contribute to a
good cause. The Federal Trade Commission recently charged the
Cancer Fund of America, Cancer Support Services, Children's
Cancer Fund of America and The Breast Cancer Society of
operating sham charities than bilked $187 million from
consumers. According to the FTC's press release on the
matter, individuals donating to their causes were told they
'would help cancer patients, including children and women
suffering from breast cancer, but the overwhelming majority of
donations benefitted only the perpetrators, their families and
friends, and fundraisers.' The executive leadership [of these
organizations] 'used the organizations for lucrative
employment for family members and friends, and spent consumer
donations on cars, trips, luxury cruises, college tuition, gym
memberships, jet ski outings, sporting event and concert
tickets, and dating site memberships.' The FTC further noted
that the charities 'hired professional fundraisers who often
received 85% or more of every donation.' "
3)Exposing questionable activities of charities . According to
the author, many charities have been criticized in media
reports for making questionable financial decisions with the
money donated to them to fulfill their stated missions. CNN
called The Kids Wish Network "the worst charity in America"
because it raised "millions of dollars in donations in the
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name of dying children and their families" while spending
"less than 3 cents on the dollar helping kids." According to
the CNN report, the charity directed $110 million in donations
to its corporate sponsors and an additional $4.8 million to
the charity's founder and his consulting firm. ("Above the
law: America's worst charities," CNN, June 13, 2013)
The Wounded Warrior Project has also garnered attention from
the media for spending only 60% of its funding on veterans
while other veteran charities such as the Disabled American
Veterans Charitable Service Trust and the Fisher House spend
96% and 91% fulfilling their mission to serve veterans.
According to a CBS report, Wounded Warrior Project spent $26
million on conferences and meetings, which was "about the same
amount the group spends on combat stress recovery -- its top
program." ("Wounded Warrior Project accused of wasting
donation money," CBS, January 26, 2016)
4)Charities currently submit annual public financial reports to
the AG . Most charities in California must file annual
financial reports with the Attorney General's Registry of
Charitable Trusts (Registry). These reports must be filed by
all public benefit corporations and charitable trusts, unless
they are exempted by statute. Currently, only hospitals,
schools, and churches are exempt from the annual filing
requirements. In addition, all charitable trustees and
fundraising professionals are required to register and file
annual financial disclosure reports with the Registry.
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Registered charities are required to file a copy of their tax
Form 990 on an annual basis with the Registry, as well as with
the Internal Revenue Service (IRS). Through a partnership
with the IRS, GuideStar (www.guidestar.org) publishes the
electronically-filed Form 990s submitted to the IRS.
The Registry is accessible through a Registry Search tool on
the AG's existing webpage for charities:
www.oag.ca.gov/charities. The Registry Search tool allows a
charity's public filings to be viewed and downloaded from the
Registry database. These public filings include a copy of the
annual IRS return (Forms 990, 990-PF, and 990-EZ) filed with
the Registry, as well as registration forms and documents that
organizations are required to file with the AG. In addition,
the Registry maintains a current index of all registered
California charities.
5)The AG investigates and prosecutes bad actor charities and
fundraisers . The AG is responsible for regulating charities
and the professional fundraisers who solicit on their behalf.
The attorneys and auditors of the AG's Charitable Trusts
Section investigate and bring legal actions against charities
and fundraising professionals that misuse charitable assets or
engage in fraudulent fundraising practices. Charities that
violate California's laws are subject to suspension,
revocation and civil fines.
6)Prior legislation applied a similar requirement on moving
companies . In 2012, the Legislature passed and the Governor
signed AB 2118 (Butler), Chapter 544, Statutes of 2012, which
required household goods carriers to add links to their
websites that direct consumers to the Public Utilities
Commission's website containing consumer education information
for customers of moving companies.
Similarly, the author contends that it makes good sense to help
consumers ensure that their dollars would be well spent by
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assisting them in researching charities, whether they are
using those dollars to buy consumer products and services or
make a charitable gift.
7)Recent amendments revise and recast the bill . This bill was
amended on April 7, 2016, to delete the existing provisions of
the bill and insert the current language.
This bill would now require charities to provide a link on their
website to the AG's webpage with consumer resources for
charitable giving. The bill would not require a charity to
create a website, but if the charity has an existing website,
then the website must contain a link on the homepage to the
AG's website.
In addition, the bill requires charities to include the AG's
website address in documents the charity uses to solicit
donations. For example, if the charity mails a solicitation
letter or hands out a brochure to prospective donors, then the
letter or brochure would need to contain a link to the AG's
website where a consumer can find out more information about
charities. Materials that do not contain an overt solicitation
would not need to include the link.
Lastly, the bill requires the AG to develop and post on its
website educational materials for consumers, so that they can
learn about how to research charities to help determine
whether they should make a donation.
While the prior version of the bill had more prescriptive
provisions than the current version, a coalition of nonprofit
organizations remain opposed to the bill, contending that
these requirements are a significant burden and would create
problems for most charities.
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8)Arguments in opposition . The California Association of
Nonprofits (CalNonprofits) states in opposition to this bill
that, "AB 2855 (Frazier)?would require every charity seeking
funds to support their work to include on their web sites and
any document a charity produces which includes fundraising
language to include a link to the Attorney General's web site.
While the web site disclosure requirement in subsection (a)
is burdensome, expensive, duplicative, confusing and likely
both unconstitutional and unenforceable, the 'any document'
requirement in subsection (b) is all those things on
steroids."
CalNonprofits further states that, "Burdening nonprofits in
and beyond California with required speech on 'any document'
which seeks donor support to simply advertise what the public
can easily find is unnecessarily punitive without serving any
compelling public interest. Imagine all the 'documents' that
non-profit organizations create to solicit funds to support
their mission-based work: signs on coin collection jars,
private letters to individual donors, billboards and other
large-scale outdoor advertisements, flyers posted in
laundromats, neighborhood association newsletters, to name
just a few. And AB 2855's provisions would apply to any
charity - regardless of where they are based - that solicits
donations from Californians. So, every inbound piece of mail
from any charity in the world would have to include this
unnecessary disclosure. The additional cost of including this
provision on 'any document' would be extraordinary."
The California Association of Private School Organizations
states in opposition that this bill "will have little, if any,
impact upon unscrupulous operators while burdening legitimate
charities with a set of draconian requirements that invite the
perception of impropriety. We say this because most sham
operations rely upon direct mail and telemarketers, rather
than websites, and those that utilize websites will simply
cease doing so if AB 2855 should become law. While the bad
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actors can simply side-step AB 2855's provisions and continue
to prosper, legitimate charities such as the 1,450 nonprofit,
K-12 private schools served by our member organizations will
remain beholden to its onerous requirements."
9)Reconsideration vote . This bill failed passage in this
committee on April 12, 2016, but was granted reconsideration.
10)Prior legislation . AB 556 (Irwin), Chapter 299, Statutes of
2015, expanded the definition of a "commercial fundraiser for
charitable purposes" in order to strengthen the AG;s ability
to enforce disclosure requirements for charity fundraisers,
and establishes a ten-year statute of limitations for
enforcement actions against charity fundraisers, consultants
and other third parties who engage in fraud or prohibited
conduct.
AB 2327 (Feuer), Chapter 483, Statutes of 2012, enhanced the
penalties applicable to a violation of the Act and gave the AG
authority to suspend the registration of a charitable
organization that violates the Act.
SB 2015 (Sher), Chapter 475, Statutes of 2000, amended the
UETA to grant the AG additional enforcement tools and
resources, including: ability to assess late fees, authority
to suspend or revoke registrations, the ability to impose
criminal penalties for violations of the Act, and the
appropriation of all fines, penalties, attorney's fees and
costs to the AG for the administration and enforcement of that
Act.
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SB 1262 (Sher), Chapter 919, Statutes of 2004, imposed audit
requirements on charities that receive or accrue a gross
revenue of $500,000 dollars or more, require specific
disclosures during a solicitation or fundraising campaign, and
require specific provisions in written contracts between
fundraisers and the charitable organization.
Support
None on file.
Opposition
Actors and Others for Animals
AgLantis
Alameda Homeless Network/Midway Shelter
Alliance for Nonprofit Excellence
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Alliance of Arizona Nonprofits
American Sports Institute
Angels Nest TLP
Arkansas Nonprofit Alliance
Arts for LA
Arts for Oakland Kids
Aspire Creative Arts Program
Autism Advocates in Action Support Group
Axis Advocacy
Balboa Park Cultural Partnership
Berkeley Organizing Congregations for Action
Berkeley Student Cooperative
Black Arts Los Angeles, Inc.
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California Aquatic Therapy & Wellness Center, Inc. DBA Pools
of Hope
California Arts Advocates
California Association of Nonprofits (CalNonprofits)
California Association of Private School Organizations
California Budget & Policy Center
California Hepatitis C Task Force, Inc.
California Partnership to End Domestic Violence
California Professional Firefighters
California ReLeaf
California State Alliance of YMCAs
California Symphony
Care of the Soul Foundation, Inc.
Catholic Big Brothers Big Sisters, Inc.
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Center for Human Services
Center for Nonprofit Advancement
Center for Non-Profits
Center for Sierra Nevada Conservation
Center for Volunteer & Nonprofit Leadership
CFIDS & Fibromyalgia Self-Help Program
Chamberlain's Children Center
Chimineas Ranch Foundation
Chinese Performing Arts of America
Citadel Ministries, Inc.
City Garage Theatre
Coastal Kids Home Care
Colorado Nonprofit Association
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Community Action Agency of Butte County
Community Counts Inc.
Community Housing Partnership
ConnectHealthcare
Connecticut Connuity Nonprofit Alliance, Inc.
Contra Costa Youth Council
Cope Family Center
Del Norte Child Care Council
Del Norte Senior Center, Inc.
Delaware Alliance for Nonprofit Advancement - DANA
Descanso Gardens Guild, Inc.
EarthShare California
Faith in Action: Interfaith Volunteer Caregivers of Solano
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County
Fallbrook Citizens' Crime Prevention Committee
Fighting Back Partnership
Folsom's Hope
Forefront
Foundation for Successful Solutions
Foundation for Sustainable Development
Four Paws To Freedom
Fresno Food Commons
Glenwood Dads Club
Global Citizen Year
GSA Network
Hawaii Alliance of Nonprofit Organizations
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Health Connected
Healthy Adventures Foundation
Hope for Santa Maria
Hopkins Bank and Orchestra Boosters
Humboldt Skatepark Collective
Icthus International
Idaho Nonprofit Center
Infectious Disease Association of California
Inland Temporary Homes
Institute for Wildlife Studies
Kennedy King Memorial Scholarship Fund
Kentucky Nonprofit Network
KidWorks Community Development
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LA Harbor International Film Festival
Lake County Theatre Company
LA's BEST After School Enrichment Program
Latino Educational Fund
Legal Aid Association of California
Library & Literacy Foundation for San Joaquin
Life Charities, Inc. DBA Rescue Task Force
Lions Sight & Hearing Foundation of Southern CA
Lodi Community Art Center
Long Term Care Ombudsman Services of San Luis Obispo County
Louisiana Association of Nonprofit Organizations
Lummis Day Community Foundation
Maine Association of Nonprofits
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Maryland Nonprofits
Marin Villages
Mateel Community Center
McKinleyville Community Collaborative
Meals on Wheels Santa Maria Valley
Michigan Nonprofit Association
Minnesota Council of Nonprofits
Mission Peak Wind Symphony
Mississippi Center for Nonprofits
Montana Nonprofit Association
Mount Diablo Interpretive Association
Mountain Ranch Youth Alliance
Mountain Valley Elder Care
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Museum of Teaching and Learning
Music in the Vineyards Inc.
Napa Valley Community Housing
National Council of Nonprofits
Neuropathy Action Foundation
New Advances for People with Disabilities
New Door Ventures
New Hampshire Center for Nonprofits
New Morning Youth & Family Services
New York Council of Nonprofits
Nipomo Area Recreation Association
Nonprofit Association of the Midlands, Omaha NE
Nonprofit Finance Fund
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North Carolina Center for Nonprofits
North Dakota Association of Nonprofit Organizations
North Peninsula Food Pantry & Dining Center of Daly City
O'Hanlon Center for the Arts
Oklahoma Center for Nonprofits
Operation SafeHouse
Orchard Valley Fine Arts Foundation, Inc.
Our Healing Hearts
Pacifica's Environmental Family
Pasadena YouthBuild
PDAP of Ventura County, Inc.
Peninsula Family Service
Pennsylvania Association of Nonprofit Organizations
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People Acting in Community Together
Philharmonic Society of Orange County
Pittsburg Community Theatre
Point Arena Lighthouse
Presidio Graduate School
Program for Torture Victims
Progressive Employment Concepts, Inc.
Project High Hopes
Providers' Council Massachusetts
Rebuilding Together Silicon Valley
Recovery Café San Jose
Redbud Audubon
Redwood Bluegrass Associates
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Redwood Cove Community Center, Inc.
Redwood Parks Association
Riverside Museum Associates
Rock School Scholarship Fund
Role Players Ensemble
Rona Barrett Foundation
Sacramento Area Bicycle Advocates
Sacramento International Gay & Lesbian Film Festival
San Diego Hua Xia Chinese School
San Diego Youth Symphony and Conservatory
San Francisco SAFE, Inc.
San Francisco SPCA
Sanchez Art Center
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Santa Clara City Library Foundation & Friends
Save Mount Diablo
School of Unity and Liberation
SCRAP
Serving People in Need (dba SPIN)
SF-Marin Food Bank
Sickle Cell Disease Foundation of CA
Slavic Chorale
Solano Symphony Orchestra
Sons of Charity Inc.
SoundVision Productions
South Carolina Association of Nonprofit Organizations
Southeast Symphony Association, Inc.
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Southern California Center for Nonprofit Management
Special Kids Foundation, Inc.
Spirit Awakening Foundation
Spirit House Center for Attitudinal Healing
St. John Boys Home, Inc.
Sunny Hills Services
Susan G. Komen Orange County
Sustainable Agriculture Education (SAGE)
Symphony of the Redwoods
Teacher Resource Center of the North Bay
Tenderloin Neighborhood Development Corporation (TNDC)
The Arc and United Cerebral Palsy California Collaboration
The Bolsa Chica Land Trust
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The Center for Healthy Generations
The Down Syndrome Connection of the Bay Area
The Eel River Multigenerational Center
The Foraker Group - Alaska's State Nonprofit Association
The Humane Society of the United States
The Network of Care
The Nonprofit Association of Oregon
The OMI Cultural Participation Project
The Place Within Counseling Folsom
The River Otter Ecology Project
The Soldiers Project
The Taylor Family Foundation
Theatre Bay Area
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Transition House
Traverso Santana Design
Tri-City Hospital Foundation
Trips for Kids
Triumphant Life
Tustin Preservation Conservancy
United Way of Kern County
United Ways of California
Utah Nonprofits Association
Washington Nonprofits
Villa Esperanza Services
Volunteer Council of the East Bay (VCEB)
We Are the Next
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West Oakland Environmental Indicators Project
West Virginia Nonprofit Association
Women's Economic Ventures
World of Children Wyoming Nonprofit Network
Youth 2 Leaders Education Foundation
Analysis Prepared by:Jennie Bretschneider / P. & C.P. / (916)
319-2200