ARIZONA STATE SENATE
Phoenix, Arizona
charitable
solicitations; disclosure and responsibility
(NOW: solicitations; charitable organizations)
Purpose
Requires independent solicitors to identify themselves to potential donors during charitable solicitations, prohibits the registering of “look alike” names and requires charities to disclose if any employees, board members or vendors who have any solicitation responsibilities have felony convictions. Establishes a class 1 misdemeanor for an independent solicitor who fails to comply with solicitation disclosure requirements or conducts any unlawful act or practice relating to the planning, conduct or execution of a solicitation.
Background
Charitable organizations are statutorily required to file a registration statement with the Secretary of State prior to soliciting their first contribution. However, since the terrorist attacks on September 11, 2001, there have been numerous reports of fraudulent charities being established to take advantage of Americans’ charitable nature.
According to the Secretary of State, this legislation is intended to help ensure that such fraudulent entities are not permitted to conduct business in this State by making it difficult for disreputable charities and for-profit middlemen to seek personal financial gain in Arizona. H.B. 2396 requires for-profit middlemen to identify themselves to potential donors during solicitation, prohibits the registering of “look alike” names and requires charities to disclose if employees, board members or vendors who have any solicitation responsibilities have felony convictions. The legislation also imposes a class 1 misdemeanor (punishable by up to six months in jail and $2,500 in fines plus 77 percent in surcharges) on for-profit middlemen who fail to comply with solicitation disclosure requirements or who knowingly conduct any unlawful act or practice relating to the planning, conduct or execution of a solicitation.
The Joint Legislative Budget Committee (JLBC) estimates that this legislation as amended by the House of Representatives may cost the state general fund from $0 to $230,900 in both FY 2002-2003 and FY 2003-2004 for additional staff at the Attorney General’s Office. However, as amended by the Government Committee, the legislation allows, rather than requires, the Attorney General to investigate unlawful solicitation acts or practices and may reduce the fiscal impact estimated by JLBC.
Provisions
1. Requires a tax-exempt charitable organization at the time of its initial registration with the Secretary of State to submit to the Secretary of State a copy of the Internal Revenue Service’s written determination of such exemption.
2. Clarifies that the copy of an organization’s annual information return that may be filed by a tax-exempt organization with the Secretary of State instead of financial disclosure information is for the preceding fiscal year.
3. Allows the Secretary of State to deny an application for registration of the name of a charitable organization if:
a) the name may mislead the public or is not readily distinguishable from other currently registered names.
b) the name is the same as or deceptively similar to an existing corporate name or a corporate name reserved.
c) the name is the same as or deceptively similar to the name of a limited partnership or a foreign limited liability company or a name that is registered as a trademark, service mark or trade name.
4. Allows the Secretary of State to deny an application for registration and allows the Secretary of State to revoke the registration of a charitable organization for any of the following reasons:
a) substantial and material misstatement or omission in the submitted application.
b) conviction of a felony by any employee, member, officer or director who has any solicitation responsibilities or any other person holding any proprietary or beneficial interest in the charitable organization, unless the civil rights have been restored.
c) engagement in deceptive, fraudulent or unlawful business practices that substantially relate to solicitation.
d) violation of any provision relating to solicitation of funds for charitable purposes.
e) the return of a check issued to the order of the Secretary of State due to insufficient funds or any other reason for nonpayment.
5. Requires the Secretary of State to notify the applicant within ten days after receiving the application if the application is denied and the reasons for the denial.
6. Requires independent solicitors during a solicitation, whether by telephone or otherwise, to:
a) identify themselves as for-profit solicitors who are soliciting on behalf of a charitable organization or a contracted fund raiser.
b) disclose the legal name of the charitable organization or contracted fund raiser on whose behalf the independent solicitor is making the solicitation.
c) disclose the independent solicitor’s true legal name.
d) state that the purpose of the solicitation is to raise charitable funds.
7. Allows, rather than requires, the Attorney General to investigate and take appropriate action against unlawful acts or practices relating to the planning, conduct or execution of a solicitation.
8. Establishes an independent solicitor’s failure to comply with solicitation disclosure requirements or who knowingly conducts any unlawful act or practice relating to the planning, conduct or execution of a solicitation as a class 1 misdemeanor.
9. Defines an independent solicitor.
10. Makes conforming and technical changes.
11. Provides for a general effective date.
Amendments
Adopted by Commerce Committee
1. Prohibits the Secretary of State from denying or revoking an application for registration of a charitable organization if the employee, members, officer or director has been convicted of a felony does not have solicitation responsibilities on behalf of the organization.
2. Requires an order or judgement that a charitable organization has engaged of in deceptive and fraudulent practices as a condition for denial or revocation.
Amendments
Adopted by Government Committee
1. Allows rather than requires the Attorney General to investigate unlawful solicitation acts and practices.
2. Makes conforming changes regarding Commerce amendment.
Amendments Adopted by Conference Committee
· Clarifies the penalty for failure to file a registration of a charitable organization.
House Action Senate Action
HS 2/5/02 DPA/SE 7-1-0-2 COM 4/3/02 DPA 5-0-1-0
3rd Read 3/27/02 48-8-4-0 GOV 4/8/02 DPA 4-0-2-0
Final Read 5/15/02 58-0-2-0 Final Read 5/16/02 27-0-3-0
Signed by Governor 5/21/02
Chapter 272
Prepared by Senate Staff
May 28, 2002