BILL ANALYSIS �
SENATE JUDICIARY COMMITTEE
Senator Hannah-Beth Jackson, Chair
2013-2014 Regular Session
AB 2077 (Allen)
As Amended April 21, 2014
Hearing Date: June 17, 2014
Fiscal: Yes
Urgency: No
RD
SUBJECT
Charitable Organizations: Enforcement
DESCRIPTION
Existing law establishes the Registry of Charitable Trusts Fund
(RCT Fund) and requires that moneys in this fund, upon
appropriation by the Legislature, be used by the Attorney
General (AG) solely to operate and maintain the AG's Registry of
Charitable Trusts and the Registry of Conservators, Guardians,
and Trustees, and provide public access via the Internet to
reports filed with the AG.
This bill would: (1) remove the limitation on the use of the RCT
Fund to those sole purposes; and (2) require that moneys in the
RCT Fund, upon appropriation by the Legislature, be used by the
Attorney General to enforce the registration and reporting
provisions.
BACKGROUND
The Supervision of Trustees and Fundraisers for Charitable
Purposes Act (Charitable Purposes Act, or Act) governs
charitable corporations, trustees, commercial fundraisers,
fundraising counsel, and other commercial coventurers who
solicit or hold property for charitable purposes. The Attorney
General (AG) has supervisory powers over these entities and is
required to maintain a registry of charitable corporations and
trustees subject to the Act.
In 2005, AB 139 (Committee on Budget, Ch. 74, Stats. 2005),
among other things, created the Registry of Charitable Trusts
(more)
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Fund (RCT Fund) in which all registration fees, registration
renewal fees, and late fees or other fees paid to the Department
of Justice pursuant to the Supervision of Trustees and
Fundraisers for Charitable Purposes Act and other specified laws
must be deposited. The moneys in this fund, upon appropriation
by the Legislature, must be used by the Attorney General (AG)
solely to operate and maintain the AG's Registry of Charitable
Trusts and Registry of Conservators, Guardians, and Trustees,
and to provide public access via the Internet to reports filed
with the AG. Current law does not, in other words, allow the AG
to use these funds for the enforcement of the Act.
This bill seeks to enable the AG to use RCT Fund moneys to
enforce the registration and reporting provisions of the Act.
CHANGES TO EXISTING LAW
Existing law establishes the Supervision of Trustees and
Fundraisers for Charitable Purposes Act, which requires
charitable corporations, unincorporated associations, trustees,
and other legal entities, commercial fundraisers, fundraising
counsel, and commercial coventurers who hold or solicit property
for charitable purposes to file a registration statement,
articles of incorporation, and an annual financial report with
the Attorney General (AG). The AG has supervisory and
enforcement powers over these entities and is required to
maintain a register of charitable organizations subject to the
Act. (Gov. Code Sec. 12580 et seq.)
Existing law provides that the primary responsibility for
supervising charitable trusts in California, for ensuring
compliance with trusts and articles of incorporation, and for
protection of assets held by charitable trusts and public
benefit corporations, resides in the AG. The AG has broad powers
under common law and California statutory law to carry out these
charitable trust enforcement responsibilities. These powers
include, but are not limited to, charitable trust enforcement
actions under specified laws, including the Supervision of
Trustees and Fundraisers for Charitable Purposes Act. (Gov. Code
Sec. 12598(a).)
Existing law provides that the AG shall be entitled to recover
from defendants named in a charitable trust enforcement action
reasonable attorney's fees and all actual costs incurred in
conducting that action. (Gov. Code Sec. 12598(b).)
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Existing law provides that the AG may refuse to register or may
revoke or suspend the registration of a charitable corporation
or trustee, commercial fundraiser, fundraising counsel, or
coventurer whenever the AG finds that the charitable corporation
or trustee, commercial fundraiser, fundraising counsel, or
coventurer has violated or is operating in violation of any
provisions of this article. (Gov. Code Sec. 12598(e)(1).)
Existing law provides for the establishment of the Registry of
Charitable Trusts Fund (RCT Fund) in the State Treasury, to be
administered by the Department of Justice. 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 the Charitable Purposes Act, and other
specified laws, must be deposited in the RCT Fund. (Gov. Code
Sec. 12587.1(a)-(b).)
Existing law provides that moneys in the RCT Fund, upon
appropriation by the Legislature, must be used by the Attorney
General solely 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. (Gov. Code
Sec. 12587.1(c).)
This bill would, instead, provide that moneys in the RCT Fund,
upon appropriation by the Legislature, must be used by the
Attorney General to operate and maintain the Attorney General's
Registry of Charitable Trusts and Registry of Conservators,
Guardians, and Trustees, and to provide public access via the
Internet to reports filed with the Attorney General.
This bill would provide that moneys in the RCT Fund, upon
appropriation by the Legislature, must be used by the Attorney
General to enforce the registration and reporting requirements.
COMMENT
1. Stated need for the bill
According to the author:
The AG's Report on Commercial Fundraising has shown that time
and time again there are firms that raise millions of dollars
and only spend a small percentage of those dollars on the
proclaimed mission of the charity.
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Current[ ]law tasks the Attorney General with the
registration, enforcement, and oversight of the charitable
organizations in California. It also provides for them to
maintain a database of nonprofits that have been found to be
bad actors. [However,] the AG's office doesn't have the
resources to enforce the laws on the books surrounding these
bad charities.
This bill allows the AG's office to utilize existing revenue
to enforce their registration codes and enforce the laws on
the books to "go after" bad charities.
2. Bill authorizes the AG to use its existing enforcement
powers
Under current California law, the Supervision of Trustees and
Fundraisers for Charitable Purposes Act (Act) governs charitable
corporations and other legal entities that hold or solicit
property for charitable purposes and is supervised and enforced
by the AG. Interestingly, prior to 2000 and the enactment of SB
2015 (Sher, Ch. 475, Stats. 2000), the Act included a provision
(former Gov. Code Sec. 12598(d)) that required all moneys
recovered by the AG pursuant to the Act be deposited into the
General Fund and be used to offset the costs of future
charitable trust enforcement actions by the Attorney General.
In contrast, the Act's Registry of Charitable Trusts (RCT) Fund,
established in 2005 under Government Code Section 12587.1,
provides that all registration fees, registration renewal fees,
late fees, and other fees collected as result of the AG's
enforcement of the Act must be deposited into the RCT Fund, but
then limits the use of those moneys to the operation and
maintenance of the AG's Registry of Charitable Trusts, and other
specified purposes. It, however, says nothing about the use of
its moneys for the enforcement of the Act.
Notably, this bill in no way alters the AG's existing authority
to regulate and enforce the Supervision of Trustees and
Fundraisers for Charitable Purposes Act; it merely amends
existing law restrictions on the RCT Fund to provide the AG with
the authority to use those existing powers of enforcement.
Specifically, the bill would require that the money in the AG's
RCT Fund, upon appropriation by the Legislature, be used by the
AG to enforce the registration and reporting provisions of the
Act.
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Support : None Known
Opposition : None Known
HISTORY
Source : Author
Related Pending Legislation : None Known
Prior Legislation :
AB 2327 (Feuer, Ch. 483, Stats. 2012), among other things,
revised the enforcement provisions of the Charitable Purposes
Act to instead authorize the AG to issue a cease and desist
order whenever the AG finds that any person or entity that the
act applies to has committed an act that would constitute a
violation of, or is operating in violation of, any provision of
the act. The bill also authorized the AG to impose a specified
penalty on any person or entity for each act or omission that
constitutes a violation of the act, subject to certain
procedures, and further authorized the AG to suspend the
registration of that person or entity under certain
circumstances.
SB 1262 (Sher, Ch. 919, Stats. 2004) imposed audit requirements
on charities that receive or accrue a gross revenue of $500,000
or more, require specific disclosures during a solicitation or
fundraising campaign, and require specific provisions in written
contracts between fundraisers and the charitable organization.
SB 2015 (Sher, Ch. 475, Stats. 2000) gave the AG 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. That
bill also authorized the AG to accept an assurance of voluntary
compliance through which a person in violation may agree to
discontinue the offensive act or to correct any deficiencies
under the Act.
Prior Vote :
Assembly Floor (Ayes 76, Noes 0)
Assembly Appropriations Committee (Ayes 17, Noes 0)
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Assembly Business, Professions & Consumer Protections Committee
(Ayes 14, Noes 0)
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