D R A F T
FOR DISCUSSION ONLY
OVERSIGHT OF CHARITABLE ASSETS ACT
NATIONAL CONFERENCE OF COMMISSIONERS
ON UNIFORM STATE LAWS
For October 23-25, 2009 Drafting Committee Meeting
Without Prefatory Notes or Comments
Copyright 82009
By
NATIONAL CONFERENCE OF COMMISSIONERS
ON UNIFORM STATE LAWS
____________________________________________________________________________________________
The ideas and conclusions
set forth in this draft, including the proposed statutory language and any
comments or reporter=s notes, have not been passed upon by the National
Conference of Commissioners on Uniform State Laws or the Drafting
Committee. They do not necessarily
reflect the views of the Conference and its Commissioners and the Drafting
Committee and its Members and Reporter.
Proposed statutory language may not be used to ascertain the intent or
meaning of any promulgated final statutory proposal.
October 6, 2009
DRAFTING COMMITTEE ON AN OVERSIGHT
OF CHARITABLE ASSETS ACT
The Committee appointed by and representing the National Conference of Commissioners on Uniform State Laws in drafting this Act consists of the following individuals:
K. KING BURNETT, P.O.
Box 910, Salisbury, MD 21803-0910, Chair
JAMES BOPP, JR., 1 South 6th St., Terre Haute, IN 47807
MARY JO HOWARD DIVELY, Carnegie Mellon University, Warner Hall, 6th Floor, 5000 Forbes Ave., Pittsburgh, PA 15213
BARRY C. HAWKINS, 300 Atlantic St., Stamford, CT 06901
LYLE W. HILLYARD, 595 South Riverwood Pkwy., Suite 100, Logan, UT 84321
THOMAS L. JONES, University of Alabama School of Law, University Station, P.O. Box 865557, Tuscaloosa, AL 35486-0050
CARL H. LISMAN, 84 Pine St., P.O. Box 728, Burlington, VT05402
JOHN J. MCAVOY, 3110 Brandywine St. NW, Washington, DC 20008
FREDERICK P. STAMP, JR., U.S. District Court, P.O. Box 791, Wheeling, WV 26003
DAVID S. WALKER, Drake University Law School, 2507 University Ave., Des Moines, IA 50311
LAURA BROWN CHISOLM, Case Western Reserve University, 11075 East Blvd., Cleveland, OH 44106, Reporter
EX OFFICIO
ROBERT A. STEIN, University
of Minnesota Law School, 229 19th Ave. S., Minneapolis, MN 55455, President
BARRY C. HAWKINS, 300 Atlantic St., Stamford, CT 06901, Division Chair
AMERICAN BAR ASSOCIATION ADVISOR
BETSY BUCHALTER
ADLER, 235 Montgomery St., Suite 1220, San Francisco, CA 94104-3103, ABA Advisor
SUSAN N. GARY, University
of Oregon School of Law, 1515 Agate St., Eugene, OR 97403, ABA Section Advisor
CYNTHIA ROWLAND, One Ferry Building, Suite 200, San
Francisco, CA 94111, ABA Section Advisor
LISA A. RUNQUIST,
17554 Community St., Northridge, CA 91325-3922, ABA Section Advisor
EXECUTIVE DIRECTOR
JOHN A. SEBERT, 111 N. Wabash Ave., Suite 1010, Chicago, IL 60602, Executive Director
Copies of this Act may be obtained from:
NATIONAL CONFERENCE OF COMMISSIONERS
ON UNIFORM STATE LAWS
111 N. Wabash Ave., Suite 1010
Chicago, Illinois 60602
312/450-6600
www.nccusl.org
OVERSIGHT OF CHARITABLE ASSETS ACT
TABLE OF CONTENTS
SECTION
3. [ATTORNEY GENERAL] AUTHORITY TO
PROTECT CHARITABLE ASSETS
SECTION
4. REGISTER OF CHARITABLE ENTITIES
SECTION
5. PUBLIC INSPECTION OF REGISTER
SECTION
6. INVESTIGATION BY THE [ATTORNEY
GENERAL]
SECTION
7. NOTICE TO [ATTORNEY GENERAL].
SECTION
8. PROCEEDINGS CONCERNING CHARITABLE
ENTITIES,
CHARITABLE FIDUCIARIES, AND CHARITABLE ASSETS
SECTION
9. COOPERATION WITH OTHER OFFICIALS
SECTION
10. RELATION TO ELECTRONIC SIGNATURES IN GLOBAL AND
NATIONAL COMMERCE ACT
OVERSIGHT OF CHARITABLE ASSETS ACT
SECTION
1. SHORT TITLE. This [act] may be cited as the
[Uniform][Model] Oversight of Charitable Assets Act.
SECTION
2. DEFINITIONS. In this [act]:
(1) “Charitable asset” means real or personal
property that has been given or solicited for charitable purposes.
(2) “Charitable entity” means a corporation,
trust, unincorporated association, or other legal entity holding or
administering property for or solicited for charitable purposes, whether
pursuant to corporate articles of incorporation, trust declaration or
agreement, will, or other instrument, which is organized under the laws of this
state, has its principal place of business in this state, or holds substantial
charitable assets within this state [does business, or holds property in this
state]. “Charitable entity” includes,
but is not limited to, organizations recognized as exempt under section 501(c)(3)
of the Internal Revenue Code of 1986 (26 U.S.C.501(c)(3)). A corporation, trust, unincorporated
association or other legal entity organized under the laws of another state is
not a “charitable entity” for purposes of this [act] by reason of maintaining a
bank, custody, investment, or similar account in this state.
(3) “Charitable fiduciary” means:
(A) a chief executive officer, director,
executive director, officer, or trustee of a charitable entity; or
(
B) a person, unincorporated association,
corporation, trustee, estate representative or other legal entity holding
property for or property solicited for any charitable purpose. [Need parallel language to exclude someone
with just a bank account, etc. in the state?]
(4) “Charitable purposes” means the relief of
poverty, the advancement of education or religion, the promotion of health, the
promotion of governmental purposes, other purposes the achievement of which is
beneficial to the community, and other civic or public purposes described by
section 501(c)(3) of the Internal Revenue Code of 1986 (26 U.S.C. 501(c)(3)).
(5) “Document” means information that is
inscribed on a tangible medium or that is stored in an electronic or other
medium and is retrievable in perceivable form.
SECTION
3. [ATTORNEY GENERAL] AUTHORITY TO
PROTECT CHARITABLE ASSETS.
(a) It is the duty of the [attorney general] to
represent the public interest in the protection of charitable assets, to enforce
the due application of assets held by a charitable entity to the purposes for
which the entity is established or for which the assets were given to the
entity, and to prevent and correct breaches of fiduciary duty in the administration
of charitable entities or by charitable fiduciaries.
(b) The
powers and duties of the [attorney general] provided in this [act] are in
addition to any other powers and duties arising from the common law or other
statutes, and are not intended to limit or restrict the authority of the [attorney
general] or the rights of others provided by common law or statute.
(c) The provisions of this [act] apply regardless
of any contrary provision in any instrument creating a charitable entity,
designating a charitable fiduciary, or transferring property for charitable
purposes to a charitable entity or a charitable fiduciary.
(d) The [attorney general] may bring an action to
enjoin, correct, obtain damages for, or seek other remedy to:
(1) enforce the due application of assets held by
a charitable entity;
(2) remedy a departure from the purposes for
which a charitable entity is formed;
(3) prevent or correct a breach of fiduciary duty
in the administration of a charitable entity or by a charitable fiduciary; or
(4) enforce the provisions of this [act].
(e) The [attorney general] may adopt rules and
regulations reasonable and necessary for the administration of this [act].
SECTION
4. REGISTER OF CHARITABLE ENTITIES.
(a) The [attorney general] shall establish and
maintain a register of charitable entities established or active in this state.
(b) Every charitable entity that has received
property for charitable purposes shall register with the [attorney general]
within [30 days, 2 months, 3 months, 6 months] after the date the charitable
entity first receives possession or control of property authorized or required
to be applied [, either presently or in the future,] for charitable purposes,
or the effective date of this [act], whichever is earlier.
(c) The
registration must include:
(1) a true copy of the charitable entity’s
articles of incorporation, trust instrument, or other instrument creating the
entity;
(2) a true copy of the charitable entity’s
by-laws; and
(3) an inventory of the assets of the charitable
entity.
(d) [filing fee?]
(e) The secretary of state shall provide a copy
of the articles of incorporation and amended articles of incorporation of filed
with the Secretary of State by a charitable entity pursuant to [nonprofit
corporation statute provision].
(f) Whenever an estate involves, or may involve,
the distribution of property to a charitable entity or cause the creation of a
charitable entity, the [probate court] shall at the time of the distribution of
the estate forward to the [attorney general] a true copy of the decree of
distribution. [does this process need different descriptors in different
states?]
(g) An officer, agency, board, or commission of
this state or political subdivision that receives applications for exemption
from taxation of charitable entities shall:
(1) annually provide the [attorney general] with
a list of all applications received during the year; and
(2) notify the [attorney general] of any
revocation or suspension of tax-exempt status previously granted.
(h) The [attorney general] may obtain from public
records, taxing authorities, charitable fiduciaries, and other sources whatever
copies of instruments, other records, and other information needed for the
establishment and maintenance of the register.
(i) The custodian of the records of a court
having jurisdiction of probate matters or of charitable trusts and any
custodian of records of any department, agency, or political subdivision of
this state shall furnish to the [attorney general] free of charge copies of any
records and files relating to the subject of this act as the [attorney general]
requires.
SECTION
5. PUBLIC INSPECTION OF REGISTER. The register and documents filed with the [attorney
general] pursuant to Section 4 [and periodic reports, if act ultimately incorporates
periodic reporting requirement] are matters of public record and shall be open
to public inspection, subject to reasonable regulation by the [attorney general],
except that:
(a) the [attorney general] shall withhold from
public inspection copies of any report filed with any other governmental agency
of this state, another state, the United States, or any government subdivision
thereof which is required by law to be kept confidential; and
(b) the [attorney general] shall, upon the written
request of a charitable entity or charitable fiduciary, withhold from public
inspection any part of a document filed which does not relate to charitable
purposes or charitable assets and that is not otherwise a public record.
SECTION 6. INVESTIGATION BY THE [ATTORNEY GENERAL].
(a) [When it appears to the [attorney general]
that it is in the public interest], the [attorney general], on behalf of the
state, may conduct an investigation [upon application to and approval of a
judge of the _____ court] to ascertain:
(1) the condition of a charitable entity’s
affairs;
(2) whether a charitable entity has departed from
the charitable purposes for which it was formed or to which property is
specifically dedicated;
(3) whether a charitable fiduciary has committed a
breach of fiduciary duty; or
(4) whether a charitable entity or charitable
fiduciary has caused a misapplication of charitable assets.
(b) In conducting an investigation under
[pursuant to] subsection (a), the [attorney general] may:
(1) examine under oath any person in connection
with the affairs of the charitable entity;
(2) examine
any document relevant to the investigation; and
(3) [pursuant to an order of the ____ court] impound
any document and retain it in the [attorney general]’s possession until the
completion of all proceedings to which the documentary material is relevant.
(c) The [attorney general] shall issue an order to
any person whose attendance is required, setting forth the time when and the
place where attendance is required and shall cause the order to be served upon
the person in the manner provided for service of process in civil cases at
least [5? 10? 14?] days before the date fixed for attendance. Such an order
shall has the same force and effect as a subpoena.
(d) A person upon whom a notice is served pursuant
to the provisions of subsection (c) shall comply with its terms unless excused
from compliance by the order of a court of the state. Any person who fails to
appear, or with intent to avoid, evade, or prevent compliance with a civil
investigation under this chapter, removes from any place, conceals, withholds,
or destroys, alters, or by any other means falsifies any document, or knowingly
conceals any relevant information, shall be assessed a civil penalty of not
more than ______________.
(e) Upon application of the [attorney general],
obedience to an order issued pursuant to subsection (c) may be enforced by the
_________ court having jurisdiction of the charitable entity in the county
where the entity has its principal place of business or the person receiving
the notice resides or is found, in the same manner as though the notice were a
subpoena. The court, after hearing, for
cause, and upon application of any person aggrieved by the order, may amend,
suspend or postpone all or any part of the notice.
(f) No person shall be excused from testifying or
from producing documentary materials in an investigation by the [attorney
general] or in any hearing before the [attorney general] on the ground that the
testimony or evidence may tend to incriminate that person or subject that
person to a penalty or forfeiture; but no person may be prosecuted or subjected
to any penalty or forfeiture on account of any matter concerning which the
person, after claiming this privilege, has, by order of the [attorney general],
testified under oath or produced documentary evidence.
(g) Any document or other information produced pursuant
to this section may not be disclosed to any person other than the authorized
agent or representative of the [attorney general], unless ordered by a court of
the state for good cause shown, with the consent of the person producing the
document or information, or pursuant to section 9 of this act.
(a) Amendment of governing documents. Every charitable entity registered with the [attorney
general] shall file with the [attorney general] any amendment to its articles
of incorporation, trust instrument, or other document creating the entity
within [20, 30, 60 days] after adoption of the amendment if the amendment
changes the purposes of the entity or results in a material change to the
structure, governance, or activities of the entity.
(b) Dissolution.
(1) A charitable entity that is a corporation must
give written notice to the [attorney general] that it intends to dissolve at or
before the time it delivers articles of dissolution to the [secretary of
state] pursuant to [dissolution
provisions of nonprofit corporation statute].
The notice must include a copy of the plan of dissolution.
(2) No assets may be transferred in connection
with the dissolution process until the earlier of:
(A) twenty days after the notice required by
subsection (1) has been delivered to the [attorney general];
(B) the entity’s receipt of the [attorney
general]’s consent in writing to the plan of dissolution; or
(C) the entity’s receipt of written notice that
the [attorney general] will take no action with respect to the transfer.
(3) When substantially all of the assets of a
charitable entity have been transferred pursuant to a plan of dissolution, the
entity shall deliver to the [attorney general] a list of the names and
addresses of those, other than creditors, to whom the assets were
transferred. The list must include a
description of what assets each transferee received .
(c) Disposition of assets. A charitable entity shall give written notice
to the [attorney general] at least [20, 30, 60] days before it sells, leases,
exchanges, or otherwise disposes of [all or substantially all of its property]
[more than 50% of the fair market value of its tangible and intangible assets,
including goodwill, within a period of 36 consecutive months] unless:
(1) the transaction or series of transactions
that result in the transfer is in the usual or regular course of the entity’s
activities; or
(2) the [attorney general] has given the entity a
written waiver of this section.
(d) Merger.
A charitable entity shall give written notice to the [attorney general]
at least [20, 30, 60] days before the consummation of any merger with any other
entity. The notice must include a copy
of the proposed plan of merger.
(e) Termination of charitable trust. A charitable entity that is a trust shall
give notice to the [attorney general] no later than [20, 30, 60] days before
the termination of the trust pursuant to [provision in trust statutes allowing
termination of small trust].
SECTION 8. PROCEEDINGS CONCERNING CHARITABLE ENTITIES,
CHARITABLE FIDUCIARIES, AND CHARITABLE ASSETS.
(a) Notice to [attorney general] of
proceedings. Any person who commences any
of the following kinds of proceeding in any court of this state shall give written
notice to the [attorney general] no later than the commencement of the proceeding. The notice must include a copy of the
complaint.
(1) Any action against or on behalf of a
charitable entity brought pursuant to [nonprofit corporation statutes] by
someone other than the [attorney general].
(2) Any action against any charitable fiduciary
concerning the application of funds held for charitable purposes or the breach
of fiduciary duty owed to a charitable entity.
(3) Any proceeding brought by a charitable
entity, charitable fiduciary, or other person holding charitable assets:
(A) seeking instructions relating to the
administration or use of the charitable assets or income produced by the
assets;
(B) seeking construction of the instrument under
which the assets are held; or
(C) seeking modification of the terms under which
the assets are held.
(4) Any proceeding affecting a charitable trust,
including but not limited to:
(A) an action to terminate the trust;
(B) an action seeking instructions regarding the
use or distribution of charitable property; or
(C)
an action seeking to depart from the objects of the trust as stated in
the instrument creating the trust, including a proceeding in which the doctrine
of cy pres is invoked.
(D) an action to construe, nullify, or impair the
provisions of a testamentary or other instrument creating or affecting a charitable trust.
(E) an action to determine matters relating to
the probate and administration of an estate involving a charitable trust.
(5)
Any proceeding to contest or set aside
the probate of an alleged will under which anything of value [threshold
amount?] is given for charitable purposes.
(b) [Attorney general] participation in
proceedings involving charitable entities.
(1) Whenever any provision of this [act], [the
nonprofit corporation statutes], or [other?] requires that notice be given to
the [attorney general] before or after commencing a proceeding or permits the [attorney
general] to commence a proceeding:
(A) if no
proceeding has been commenced, the [attorney general] may take appropriate
action including, but not limited to, seeking injunctive relief; or
(B) if a proceeding has been commenced by a
person other than the [attorney general], the [attorney general], as of right,
may intervene in the proceeding.
(2) The [attorney general] may join or enter into
a compromise, settlement agreement, contract, or judgment relating to a
proceeding involving a charitable entity, charitable property, or charitable
fiduciary.
(3) A compromise, settlement agreement, contract,
or judgment relating to a proceeding involving a charitable entity is voidable
on motion of the [attorney general] unless the [attorney general] has declined
in writing to be a party to the proceeding or approved the compromise,
settlement agreement, contract, or judgment.
SECTION 9. COOPERATION WITH OTHER OFFICIALS.
(a) The [attorney general] may cooperate with any
official of this state, another state, the United States, or any political
subdivision or agency thereof charged with overseeing charitable entities or
charitable assets. In order to
cooperate, the [attorney general] may:
(1) notify the official of the commencement,
status, or resolution of an investigation or proceeding pursuant to this [act];
(2) make available to the official any statement,
document, or other information relating to a charitable entity or charitable
fiduciary that is relevant to the official’s oversight of charitable entities
and charitable assets; or
(3) acquire from an official or agency of this
state, another state, the United States, or any political subdivision
statements, documents, or other information relevant to an investigation
pursuant to Section 6 or a proceeding under Section 8.
(b) Any statement, document, or other information
provided to another official or agency or received from another official or
agency pursuant to subsection (a) shall be withheld from public inspection if
the statement, document, or other information is required or permitted to be
kept confidential by the law of either the sending or receiving government.
SECTION 10. RELATION TO ELECTRONIC SIGNATURES IN GLOBAL AND NATIONAL
COMMERCE ACT. This [act] modifies,
limits, and supersedes the federal Electronic Signatures in Global and National
Commerce Act, 15 U.S.C. Section 7001, et seq., but does not modify, limit, or
supersede Section 101(c) of that act, 15 U.S.C. Section 7001(c), or 36
authorize electronic delivery of any of the notices described in Section 103(b)
of that act, 15 U.S.C. Section 7003(b).
SECTION 11. [UNIFORMITY]. This act shall be construed so as to protect the
rights and interest of the people of the state and the uncertain and indefinite
beneficiaries of property dedicated to charitable purposes and to promote
uniformity of the law with respect to its subject matter in the states that
adopt it.
SECTION 12. EFFECTIVE DATE. This [act] takes effect . . . .
SECTION 13. REPEAL. The following acts and parts of acts are
repealed.