Amended in Assembly April 21, 2014

Amended in Assembly March 28, 2014

California Legislature—2013–14 Regular Session

Assembly Bill No. 2077

Introduced by Assembly Member Allen

February 20, 2014

An act to amend Section begin delete 12599 of the GovernmentCode, relating to charitable solicitations. end delete begin insert 12587.1 of the Government Code, relating to charitable organizations. end insert

LEGISLATIVE COUNSEL’S DIGEST

AB 2077, as amended, Allen. Charitable begin delete solicitations: commercial fundraisers. end delete begin insert organizations: enforcement. end insert

begin insert

The Supervision of Trustees and Fundraisers for Charitable Purposes Act governs charitable corporations, unincorporated associations trustees, commercial fundraisers, fundraising counsel, commercial coventurers, and other legal entities who hold or solicit property for charitable purposes over which the Attorney General has enforcement and supervisory powers. That act requires those legal entities to register, and file specified reports, with the Attorney General’s Registry of Charitable Trusts, as provided.

end insert begin insert

The act establishes the Registry of Charitable Trusts Fund in the State Treasury, which is administered by the Department of Justice. The act requires, among other specified fees, all registration fees paid to the Department of Justice pursuant to the act to be deposited in the fund, and requires those moneys to be used by the Attorney General, upon appropriation by the Legislature, among other specified purposes, to operate and maintain the Attorney General’s Registry of Charitable Trusts.

end insert begin insert

This bill would additionally require moneys in the fund, upon appropriation by the Legislature, to be used by the Attorney General to enforce the registration and reporting provisions of the act.

end insert begin delete

The Supervision of Trustees and Fundraisers for Charitable Purposes Act requires a commercial fundraiser for charitable purposes, prior to soliciting any funds, assets, or property in California for charitable purposes, or prior to receiving and controlling any funds, assets, or property as a result of a solicitation in this state for charitable purposes, register with the Attorney General’s Registry of Charitable Trusts. That act also requires a commercial fundraiser for charitable purposes to file with the Attorney General’s Registry of Charitable Trusts a notice that sets forth specified information not less than 10 working days prior to the commencement of each solicitation campaign, event, or service.

end delete begin delete

This bill would instead require a commercial fundraiser for charitable purposes to file with the Attorney General’s Registry of Charitable Trusts that notice not less than 15 working days prior to the commencement of each solicitation campaign, event, or service.

end delete

Vote: majority. Appropriation: no. Fiscal committee:  begin delete no end delete begin insert yes end insert . State-mandated local program: no.

The people of the State of California do enact as follows:

begin insert

begin insert SECTION 1. end insert   

end insert

begin insert Section 12587.1 of the end insert begin insert Government Code end insert begin insert is
amended to read: end insert

12587.1.  

(a) The Registry of Charitable Trusts Fund is hereby
established in the State Treasury, to be administered by the
Department of Justice.

(b) Notwithstanding any other provision of law, all registration
fees, registration renewal fees, and late fees or other fees paid to
the Department of Justice pursuant to this article, Section 2850 of
the Probate Code, or Section 320.5 of the Penal Code, shall be
deposited in the Registry of Charitable Trusts Fund.

(c) Moneys in the fund, upon appropriation by the Legislature,
shall be used by the Attorney General begin delete solely end delete to operate and
maintain the Attorney General’s Registry of Charitable Trusts and
Registry of Conservators, Guardians, and Trustees, and provide
public access via the Internet to reports filed with the Attorney
General.

begin insert

(d) Moneys in the fund, upon appropriation by the Legislature,
shall be used by the Attorney General to enforce the registration
and reporting provisions.

end insert

begin delete

SECTION 1.  

Section 12599 of the Government Code is
amended to read:

12599.  

(a) “Commercial fundraiser for charitable purposes”
means 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
that 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, or means of payment,
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. No separate fee shall be charged by the Attorney General
for electronic registration, electronic renewal, or electronic
repayment of fees.

(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 15 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 includes all of the following statements:

(A) 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.

(B) The charitable organization may cancel the contract by
serving a written notice of cancellation on the commercial
fundraiser.

(C) 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.

(D) 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.

(E) The charitable organization shall be entitled to recover all
funds collected after the date of cancellation.

(11) A provision that includes all of the following statements:

(A) Following the initial 10-day cancellation period, the
charitable organization may terminate the contract by giving 30
days’ written notice.

(B) 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.

(C) 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 do any of
the following:

(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.

(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 any other provision or application of this section that
can be given effect without the invalid provision or application,
and to this end the provisions of this section are severable.

end delete