A Summary of the Proposed Legislation Prepared by: Stephanie Guyon - PowerPoint PPT Presentation

A Summary of the Proposed Legislation Prepared by: Stephanie Guyon Deputy Attorney General Idaho Attorney General’s Office

“CHARITABLE ORGANIZATION” A person who holds charitable assets for a charitable purpose, regardless of the legal form of such organization. ICAPSA “Person” Applies to: An individual, corporation, LLC, governmental subdivision, trust, estate, partnership, or other entity. Excludes: Banks, credit unions, & trust companies “Charitable Assets” Charitable Any interest in any type of property that a charitable organization Organizations holds for a charitable purpose. “Charitable Purpose” Any purpose described in I.R.C. 501(c)(3); or Any humane, patriotic, social welfare, public health, environmental, veteran, or other philanthropic purpose. 2

 It helps prevent misleading charitable solicitations. ICAPSA Serves  It helps protect the public’s interest Three in charitable assets. Purposes  It clarifies the Attorney General’s duties and authorities as to charitable assets. 3

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P URPOSE N O . 1 ICAPSA Helps Prevent Misleading Charitable Solicitations 5

Section 48-12-201 Misleading Charitable Solicitations  Not a new law (codified as Idaho Code 48-1202 since 1993).  People who solicit contributions (money, clothes, cars, etc.) can’t mislead the public. Examples:  Can’t ask for money to support cancer research and then use that money to buy a boat.  Can’t advertise that donations are tax deductible when they aren’t. Section 48-12-202 Private Right of Action  Not a new law (codified as Idaho Code 48-1204 since 1993)  Donors can sue for damages.  Have 2 years to sue from date of damage (i.e., statute of limitations).  Relief provided under Idaho Consumer Protection Act – Idaho Code 48-608. 6

P URPOSE N O . 2 ICAPSA Helps Protect the Public’s Interest in Charitable Assets 7

Section 48-12-301 Knowing Misuse of Charitable Assets  This is a new law.  Covers only “accountable persons” and “charitable organizations.”  “Accountable persons” includes: directors, officers, trustees, executives, employees, or fiduciaries.  Applies only if a person or organization knowingly misuses charitable assets.  In other words — the person or organization must deliberately use charitable assets for a reason that is:  contrary to the law  Example: a director deliberately uses charitable assets to fund terrorist activities.  contrary to donor intent  Example: a person dies and, in her trust, gives her estate to the city library, and the trustee of trust instead deliberately gives the estate to the deceased’s kids.  contrary to the organization’s charitable purpose  Example: the charitable organization’s articles of incorporation specify the organization’s charitable purpose is cancer research, but its charitable assets are deliberately used to feed the homeless 8

Section 48-12-301 Accountable Persons – Defenses to Liability  An accountable person is NOT responsible for any wrongdoing under this section if that person:  Obeyed the standards of conduct outlined in Idaho Code 30-30-618 or 30-30-623 (located in the Idaho Nonprofit Corporation Act).  These sections outline a director’s or officer’s fiduciary duties to the nonprofit corporation.  If an accountable person complies with these standards, that person does NOT violate 48-12-301.  If an accountable person acts according to the advice of a licensed professional advisor (lawyer, accountant), that person does NOT violate 48-12-301.  Complied with the applicable trust instrument and that instrument complies with Idaho law. 9

Section 48-12-302 Written Notice (Dissolution, Liquidation, Closure)  A new notice law.  Only covers charitable organizations that hold charitable assets with a FMV of $100,000 or more.  Requires written notice to Attorney General at least 30 days before the charitable organization:  Sells or disposes of all of substantially all of its charitable assets in a transaction not in the regular course of business.  This means the organization is dissolving, shutting down, going out of business, liquidating, or otherwise closing.  NO NOTICE REQUIRED IF:  Organization’s charitable assets have FMV of less than $100,000.  Organization is transferring all or substantially all of its assets to a charitable organization with a similar charitable purpose.  The transaction is in the regular course of business (i.e., the organization is NOT shutting down). 10

Section 48-12-302 Contents of Written Notice  Written notice to Attorney General must include (if available):  Legal names and mailing addresses of parties involved in the transaction.  Description of the transaction.  Copy of the purchase and sale agreement.  Copy of the appraisal or property valuation.  Attorney General has 30 days to object (in writing) to the transaction. 11

P URPOSE N O . 3 ICAPSA Clarifies the Attorney General’s Duties and Authorities as to Charitable Assets 12

The Attorney General’s Current Authority over Charitable Assets is Vague Idaho Code 67-1401(5) The Attorney General CURRENTLY has a duty to:  Supervise persons holding property subject to any charitable trust. BUT . . .  Supervise how?  Are there any limitations to that supervisory authority?  Enforce any noncompliance or departure from the general purpose a charitable trust. BUT . . .  Enforce how?  Can the Attorney General enter into a pre-litigation settlement agreement?  Examine persons holding such charitable trust property and ascertain the condition of trust property. BUT . . .  Examine and ascertain how?  Can the Attorney General require a person to turn over documents? Can he subpoena documents?  Institute in the name of the state any proceeding necessary to enforce compliance with the charitable trust. BUT . . .  Who may the Attorney General name in his lawsuit?  May the Attorney General recover restitution for charitable organizations ? 13

48-12-401 – 48-12-408 CLARIFIES THE ATTORNEY GENERAL’S AUTHORITY Applies Only to Two Sections of ICAPSA:  48-12-201 (misleading charitable solicitations)  48-12-301 (misuse of charitable assets) Clarifies the Attorney General’s Authority to:  Investigate Alleged Violations of the above Sections (48-12-401) (Allows Investigative Demands, Subpoenas, and Depositions)  Resolve Problems through Court-Approved Settlements (48-12-402) (Allows Assurances of Voluntary Compliance and Consent Decrees)  Recover Penalties, Restitution, and Reasonable Fees and Expenses (48-12-406 & 407) (Penalties and Attorney’s Fees and Costs Go to the Consumer Protection Fund) (Restitution Goes to Damaged Organizations or Other Organizations) 14

REQUIRED CHANGES TO CURRENT STATUTES 15

Repeals Title 48, Chapter 12, Idaho Code (Idaho Charitable Solicitation Act)  ICAPSA replaces Title 48, Chapter 12, Idaho Code.  This is for convenience purposes only — otherwise ICAPSA we would need to repeal chapter 12 and add an additional chapter to Title 48. Changes Amends Idaho Code 67-1401(5) (Attorney General’s Duties) Two  ICAPSA now contains the Attorney General’s Current specific duties and authorities.  That makes most of Idaho Code 67-1401(5) Laws unnecessary.  We amended Idaho Code 67-1401(5) so that it references ICAPSA and deletes the unnecessary language. 16

Who to Contact If You Have Questions: Brett DeLange Stephanie Guyon Deputy Attorney General Deputy Attorney General Attorney General’s Office Attorney General’s Office Consumer Protection Division Consumer Protection Division 208.334.4114 208.334.4135 brett.delange@ag.idaho.gov stephanie.guyon@ag.idaho.gov Idaho Attorney General ICAPSA Presentation-V.31-Jan-17 17