Legislature(1997 - 1998)
04/29/1998 01:00 PM House JUD
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 452 - NONPROFIT CORPORATIONS DISCLOSURES Number 2070 CHAIRMAN GREEN announced the next item of business would be HB 452, "An Act relating to registration, disclosures, and reports by certain nonprofit corporations." As sponsor, he called upon Jeff Logan to explain changes in the new proposed committee substitute. Number 2085 JEFFREY LOGAN, Legislative Assistant to Representative Joe Green, Alaska State Legislature, reminded members that at the previous hearing he had illustrated how money from organizations outside of Alaska is directed to in-state organizations for the purpose of affecting or steering public policy debates one way or another. The proposal was to require disclosure by the outside or foreign corporations when they donated large sums of money. Mr. Logan noted that testimony from the Division of Banking, Securities and Corporations had been that such an arrangement would be virtually unenforceable. He stated, "However, we heard support from the committee for the end result, for the policy goal that would be achieved by such a law." As a result, he said, they had worked with the division and the drafter, and had come up with Version F, 0-LS1324\F, Bannister, 4/27/98. MR. LOGAN went through the bill section by section. He told members Section 1 simply amends AS 10.20.325 to include failing to file the disclosure report required by the new Section 5 of this bill, as a reason for involuntary dissolution by the commissioner. It lists that offense with several others. Mr. Logan said this is substantially conforming language. Number 2245 MR. LOGAN advised members that Section 2 says the commissioner's power to dissolve ceases if the report is filed in a timely manner. Section 3 addresses not the corporations themselves but the organizations doing business in the state under a certificate of authority; it allows the commissioner to revoke the certificate if the report required by Section 5 of the bill is not filed. Section 4 limits the commissioner's power to do so if the report is filed. Number 2300 MR. LOGAN reported that Section 5 is the substance of the bill. It states that a public benefit corporation that is a domestic or foreign corporation transacting business in the state, that has received an aggregate of $5,000 or more during the calendar year, shall file with the department, by July 1 of each year, on forms provided by the department, a report that lists the payments received. He noted that the $5,000 is the same threshold used in the previous bill version. The list must include the name and address of the corporation, the amounts of the payments, and their purpose. On page 3, line 27, it also adds definitions of "foreign nonprofit corporation," "nonprofit corporation," and "public benefit corporation." Section 6 contains conforming language. Number 2401 REPRESENTATIVE ROKEBERG mentioned the $7.5 million general fund fiscal note. CHAIRMAN GREEN said that was an error and should read 7.5 thousand dollars, for notification. He had talked with people in the Department of Commerce and Economic Development, and he said less notifications have been absorbed by the departments, using the words "essentially no additional impact." TAPE 98-77, SIDE A Number 0006 REPRESENTATIVE JAMES asked what "foreign" means for a corporation. CHAIRMAN GREEN said it means anything outside of the state. Number 0057 REPRESENTATIVE ROKEBERG referred to page 4, Section 6, and asked whether failure to file applies to all of these, with only a $5 penalty. MR. LOGAN said this question came to the sponsor's attention as well. People at the division had informed them that this penalty is in addition to the filing fee. Usually the filing fee is $15, and if a corporation files late, it would be a total of $20. Number 0128 REPRESENTATIVE ROKEBERG suggested there is no hammer here. CHAIRMAN GREEN indicated the hammer would be the threat of losing their license, unless the committee wanted to create a significant fine. He noted that unfortunately a corporation could refile with a new name. Number 0299 REPRESENTATIVE CROFT agreed that the ultimate hammer is the involuntary dissolution. He made a motion to adopt a conceptual amendment, on page 3, lines 17, 19, 20 and 22, to remove "nonprofit," so that it would say "foreign corporation." He added that they would not need lines 27 through 30, page 3, anymore, because they already know what "foreign corporation" means. Number 0293 REPRESENTATIVE ROKEBERG and CHAIRMAN GREEN objected. REPRESENTATIVE CROFT explained that what is good for the goose is good for the gander. To the extent they want to know who is contributing to and influencing decision making of public benefit corporations, they also need to know about profit-making foreign entities that contribute. They need to know, regardless of whether it is the Rockefeller Foundation or Exxon or any other major business entity. Representative Croft noted that people outside of the state have interests in the state on both sides of issues. Whatever burden it adds, he said it is important to do for both nonprofit and for-profit corporations that intend to influence issues. Number 0401 REPRESENTATIVE ROKEBERG said he would assume the amendment would gut the bill. He asked whether they were deleting "nonprofit" or adding "profit." REPRESENTATIVE JAMES pointed out that it would only be for the contributor. Number 0446 REPRESENTATIVE CROFT specified that it was to delete "nonprofit," so that any public benefit corporation that receives money would reveal the foreign corporation sources, whether nonprofit or for- profit. CHAIRMAN GREEN said he had misunderstood, and he apologized. He suggested people know why for-profit corporations contribute, however. Number 0523 MR. LOGAN added that throughout the law, for-profit and nonprofit corporations are treated entirely differently. Nonprofit corporations are essentially tax-free corporations, and society has made a deal with these groups, which are supposed to do essentially benevolent and beneficial things with this money, not use it for political purposes. Mr. Logan said these entities are not the same and shouldn't be treated the same way. Number 0602 REPRESENTATIVE BUNDE suggested they basically want to follow the money for nonprofits. If some major corporation wants to influence a nonprofit in Alaska, for good or ill, but Alaskans don't know who is pulling the strings, nothing prevents them from creating a nonprofit and then "laundering" the money through that. This would shorten the laundry list a little bit by taking out the nonprofit end. If some major corporation was putting money into a nonprofit, this would give a better idea of who they were. He said he didn't know that it is absolutely needed, but he doesn't see that it causes any harm. CHAIRMAN GREEN said the concern is that under a benign name, the message might be different from the name. Number 0696 REPRESENTATIVE JAMES stated that Representative Croft's amendment certainly has merit, because this legislation requires nonprofits or public benefit corporations operating within Alaska to report where they got their money, if it is $5,000 or more. To only include money received from foreign nonprofit corporations doesn't tell the whole story. She pointed out that it would not be a burden for the for-profit corporations, because it would be the public benefit corporation within the state doing the reporting. Number 0820 REPRESENTATIVE ROKEBERG proposed that they shouldn't delete "nonprofit" but should add "for-profit." REPRESENTATIVE JAMES suggested they could do it either way. Number 0857 REPRESENTATIVE CROFT concurred. He said he thinks they both do the same thing, but if there is some legal, technical or other reason, they could use "foreign nonprofit and for-profit corporations." Number 0876 REPRESENTATIVE BERKOWITZ asked why they are excluding individuals. He said in a way this is a lot like the campaign disclosure requirements. He suggested the best antidote is to disclose, which allows people to review information and make their own determinations. Number 0936 MR. LOGAN said initially the problem defined involved large foreign corporations called foundations that provide large sums of money. He said if they had seen a problem with individuals, he supposed they would have been incorporated into the draft. Number 1052 REPRESENTATIVE ROKEBERG agreed with Representative Berkowitz regarding the follow-the-money theory, mentioning a possible limitation like the $250 used by the Alaska Public Offices Commission (APOC). He also expressed concern about the language, "derives more than 10 percent of its annual income from donations", noting that some foundations are entirely self-funded. MR. LOGAN suggested a representative from the division could clarify that. He said that language is from the American Bar Association model nonprofit corporations code, and it is the definition of a public benefit corporation. He added, "And, again, I'm not sure that an organization that is organized under this chapter, and that meets ... (B), 'derives more than 10 percent of its annual income from donations,' is the problem." Number 1140 REPRESENTATIVE JAMES said her concern is that whenever they pass legislation, it ought not to be just for a specific purpose. There are public benefit corporations that are not necessarily controversial. She suggested there could be a benefit to some larger for-profit corporations from the reporting because it would be picked up by the news media. Representative James said she likes the idea of having everything that is in aggregate over $5,000 be reported annually for these public benefit corporations, whether it comes from nonprofit or for-profit corporations. However, she questioned the value of having individuals in there, and the benefit of just knowing a person's name. She said they shouldn't lose track of the reason for doing this, which is knowledge of where the money comes from that tries to affect policy or public attitudes. Number 1276 REPRESENTATIVE ROKEBERG referred to individual foundations and suggested use of the word "person" would catch all. He said he can think of many individual foundations that don't receive contributions, at least not 10 percent of their annual income. He cited examples. REPRESENTATIVE CROFT pointed out that it says "or." REPRESENTATIVE BERKOWITZ specified that it is on page 4. Number 1342 CHAIRMAN GREEN called a brief at-ease, then called the meeting back to order. He offered a friendly amendment, "that throughout where we have 'from a foreign nonprofit corporation,' that we just drop 'foreign nonprofit' and say ... whether it's contributions from corporations." REPRESENTATIVE CROFT agreed to that. REPRESENTATIVE JAMES noted that it would cover in-state and out-of- state corporations both. CHAIRMAN GREEN said in-state, out-of-state, for-profit and nonprofit. Number 1386 REPRESENTATIVE BERKOWITZ suggested it would require a title change. CHAIRMAN GREEN concurred. REPRESENTATIVE ROKEBERG noted that subsection (1) on the bottom of page 3, the definition of "foreign nonprofit corporation," would be deleted. CHAIRMAN GREEN agreed, specifying that they would delete lines 27 and 28 of page 3. Number 1402 REPRESENTATIVE BERKOWITZ pointed out that they are picking up all kinds of groups, including churches. MR. LOGAN said under the definition listed on page 3, line 31, a public benefit corporation does not include a religious organization. REPRESENTATIVE ROKEBERG asked why it wouldn't include a church. MR. LOGAN replied that a religious organization is not organized for a public or charitable purpose. REPRESENTATIVE CROFT said it is an "or." Number 1441 REPRESENTATIVE BERKOWITZ suggested it would also sweep up things like boys' and girls' clubs, Special Olympics, and so forth. MR. LOGAN asked someone from the department to correct him if he was wrong, then said he believes those organizations would be defined as mutual benefit corporations. REPRESENTATIVE BERKOWITZ expressed concern that they might be putting a burden on apolitical organizations. Number 1501 REPRESENTATIVE ROKEBERG inquired about putting in mutual benefit corporations and defining them, so that there is clear statutory grounds for those reading the law. He asked whether it is already in statute. Number 1530 MR. LOGAN replied that he doesn't believe it is in statute, and he isn't sure the drafters would add it if it isn't referred to in the bill. He suggested saying a public benefit corporation does not mean a mutual benefit corporation. CHAIRMAN GREEN said that would be a good idea. He suggested including that as part of subsection (3), in the same conceptual amendment. Number 1559 REPRESENTATIVE CROFT replied that he would prefer to keep it clean. He proposed doing that as a second amendment. Number 1565 CHAIRMAN GREEN agreed to that. Noting that conceptual Amendment 1 was dropping "foreign nonprofit", he asked whether there was an objection. There being none, Amendment 1 was adopted. Number 1588 REPRESENTATIVE ROKEBERG made a motion to add, in the vicinity of lines 6 and 7 on page 4, the exclusion of mutual benefit corporations, and to add a definition, as appropriate, for mutual benefit corporations, with the understanding that these are usually religious, youth and other activities. He asked Mr. Logan where that is defined. MR. LOGAN replied that it is an organization organized for the mutual benefit of its members, such as a country club or a booster club at the high school. It is defined in the American Bar Association model nonprofit corporations code. Number 1635 CHAIRMAN GREEN agreed to use that definition. He asked whether there was any objection to Amendment 2; there was none. REPRESENTATIVE BUNDE questioned whether the $15 registration fee would cover paperwork costs. He said he didn't want to make an amendment, then suggested the House Finance Committee get testimony about the actual cost and have the application fee reflect that. CHAIRMAN GREEN said that seems reasonable. MR. LOGAN noted that the bill has no House Finance Committee referral because there is not a fiscal note. CHAIRMAN GREEN added that there is a zero fiscal note to offset the $7.5 million error. Number 1677 REPRESENTATIVE BUNDE recommended that some note go along with the bill, in case it gets to the House Finance Committee. CHAIRMAN GREEN responded, "If it ends up there, we certainly shall." Number 1714 REPRESENTATIVE BUNDE made a motion to move HB 452 [Version F, as amended] from committee with individual recommendations and attached fiscal note. CHAIRMAN GREEN asked whether there was any objection. There being none, CSHB 452(JUD) moved from the House Judiciary Standing Committee.
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