Legislature(1997 - 1998)

03/06/1998 01:07 PM JUD

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
HB 452 - NONPROFIT CORPORATIONS DISCLOSURES                                    
                                                                               
Number 0040                                                                    
                                                                               
CHAIRMAN GREEN announced the first item of business would be HB
452, "An Act relating to registration, disclosures, and reports by             
certain nonprofit corporations," sponsored by Representative Green.            
                                                                               
Number 0052                                                                    
                                                                               
JEFFREY LOGAN, Legislative Assistant to Representative Joe Green,              
Alaska State Legislature, came forward to explain HB 452.  He told             
members, "In the body of American law, there is somewhat of a                  
peculiarity known as the private nonprofit corporation.  It finds              
its roots in liberal laissez faire economics, a branch of economics            
that posits that private associations can do things better than the            
government, and evolves from activities in the late 19th century,              
when private groups and associations began forming to meet public              
needs.  Interestingly enough, this is a trend noted by De                      
Tocqueville in his book, after his visit to the United States, when            
he noted that in America average people just organize themselves               
and take care of public needs, whereas in Europe we appoint kings              
and other accomplished men to accomplish the same tasks.  So it is             
somewhat of an American thing."                                                
                                                                               
MR. LOGAN said in the 1920s and 1930s, a series of Supreme Court               
decisions defined "corporate giving" as a management prerogative.              
This was significant because corporations were beginning to amass              
great wealth, and the court decisions allowed for a wedding of                 
philanthropy and corporate wealth.  The offspring of this marriage             
has evolved into what we know today as the private nonprofit                   
philanthropic foundation.                                                      
                                                                               
Number 0192                                                                    
                                                                               
MR. LOGAN stated, "Sometime later, a deal was struck, wherein the              
body politic, us, afforded these foundations certain advantages,               
namely, tax advantages, in exchange for certain behavior, namely,              
that they would give us part of the money they earned.  So private             
nonprofits developed into a source of money for various groups,                
causes and activities, and they gave money based on a few rules.               
One rule, maybe the main rule, was that there was a prohibition on             
political activities.  This agreement worked pretty well up until              
about ten years ago.  For a number of reasons, on which I could                
expound later if asked, there began a transformation.  First, the              
amount of money in private nonprofit foundations exploded. ... Some            
economists believe that today 10 percent of the total U.S. economy             
is the nonprofit economy.  Secondly, the number of private                     
nonprofit organizations exploded."                                             
                                                                               
MR. LOGAN said today there are about a million nonprofit                       
organizations in the country.  There are about 600,000 are                     
501(c)(3) corporations, which is the Internal Revenue Service (IRS)            
classification we commonly understand to be nonprofit, including               
churches, universities, think tanks, local service clubs, homeless             
shelters, and so forth.  In addition, there are about 40,000                   
private nonprofit foundations, and that number is growing steadily.            
Mr. Logan said the third element of the transformation is that                 
these foundations became political.  The transformation resulted in            
an altered relationship.  Whereas in the past local groups would               
apply to a foundation for money, today there is evidence that                  
foundations target the groups, causes and activities that they want            
to support.                                                                    
                                                                               
Number 0374                                                                    
                                                                               
MR. LOGAN referred to bill packets, first pointing out an article              
quoted from The Washington Post, with a headline of "Foundations,              
Growth May Mean More Grants."  He noted that along with the Alaska             
permanent fund, private nonprofit foundations have enjoyed the boom            
in the stock market.  In the third paragraph of the article, it                
says these increases drive the total endowments of the top                     
foundations to more than $126 billion dollars, or more than 12                 
times as much as the U.S. government spent last year on welfare aid            
to the poor.  "This is big business," Mr. Logan commented.                     
                                                                               
MR. LOGAN referred to the following in committee packets:  A series            
of articles from Boston Globe Online, titled "The Greening of a                
Movement", with a subtitle of "Big Money is Bankrolling Select                 
Environmental Causes"; a piece titled, "Recent Foundation Grants               
for Green Groups Active in Alaska"; and a list titled, "Alaska                 
Conservation Foundation," from a book by Jonathan Adler, which                 
shows some financial information about one group operating in                  
Alaska that receives foundation funding and is active in the                   
environmental movement.                                                        
                                                                               
Number 0494                                                                    
                                                                               
MR. LOGAN pointed out that environmental groups are not the only               
groups to receive money from foundations, and that foundations                 
which give money to environmental groups are not the only                      
foundations that donate to what could be considered political                  
activities.  He said these examples appear in the packet because               
they were the easiest to get a hold of in the time he had to put               
the packet together.  He expressed the hope that if the committee              
addresses the bill again, he will be able to provide additional                
information to show that there are foundation activities in all                
phases of the political spectrum.                                              
                                                                               
Number 0541                                                                    
                                                                               
MR. LOGAN noted that packets contain a proposed committee                      
substitute, Version E  [0-LS1324\E, Bannister, 3/4/98].  He said               
the changes from the original bill are mostly superficial.                     
However, Version E changes the time within which donations may be              
given from a from a fiscal year to a calendar year, deletes the                
requirement for some information by the corporation, and on page 2             
requires information about where the money ends up.                            
                                                                               
MR. LOGAN concluded, "Overall, the bill simply says that if you are            
a private nonprofit corporation, and you give more than $5,000 in              
a calendar year to an organization in Alaska, you have to tell the             
public where the money goes.  And if you don't, the commissioner               
can revoke your certificate of authority to do business.  It's a               
right-to-know bill.  The information we are requesting pales ... in            
comparison to what the federal government asks for."                           
                                                                               
Number 0639                                                                    
                                                                               
REPRESENTATIVE ERIC CROFT said he had just received the materials,             
except for the original version of the bill.  He asked whether it              
was heard at another time.                                                     
                                                                               
CHAIRMAN GREEN said this is the original hearing.  [It had been                
brought up briefly on March 4, 1998.]                                          
                                                                               
Number 0698                                                                    
                                                                               
REPRESENTATIVE CROFT asked how much of a burden the biennial report            
would be.                                                                      
                                                                               
MR. LOGAN replied that he had not seen the form of the biennial                
report, but someone from the Division of Banking, Securities and               
Corporations was present.                                                      
                                                                               
Number 0745                                                                    
                                                                               
CHAIRMAN GREEN asked for confirmation that this isn't nearly as                
much information as is required by the federal government,                     
including delineation of contributors on the IRS form.                         
                                                                               
MR. LOGAN said that is true, adding that he could provide copies of            
the IRS form and the rules for filling that out.                               
                                                                               
Number 0765                                                                    
                                                                               
REPRESENTATIVE ETHAN BERKOWITZ asked whether a for-profit                      
corporation that is in aggregate and does more than $5,000 worth of            
business in Alaska has filing requirements with the state.  He said            
it seems that certain equal protection considerations might arise.             
                                                                               
MR. LOGAN said he doesn't know, but the drafter had brought that               
issue and a potential commerce clause issue to his attention, "both            
of which she agreed could be issues but that we meet the tests for             
those."                                                                        
                                                                               
Number 0874                                                                    
                                                                               
REPRESENTATIVE JEANNETTE JAMES commented that certainly if a                   
foreign corporation comes into the state to do any business, it                
must first file with the Division of Banking, Securities and                   
Corporations as a foreign corporation, and get a permit.                       
                                                                               
Number 0908                                                                    
                                                                               
REPRESENTATIVE BERKOWITZ asked whether there is a reporting                    
requirement if a foreign corporation purchases $5,000 worth of                 
goods from an Alaska corporation, for example.                                 
                                                                               
CHAIRMAN GREEN said he doesn't know.                                           
                                                                               
Number 0927                                                                    
                                                                               
REPRESENTATIVE CROFT suggested that goes to the definition of doing            
business.  He provided an example, "If Corrections Corporation of              
America, a for-profit company who is not yet doing business in the             
state of Alaska, wanted to give donations to various groups, as I              
read it, ... it just covers nonprofits.  So for-profit corporations            
sending in money to influence or for whatever purpose - not doing              
business but simply sending in the ... type of donations we're                 
talking about here - wouldn't be covered, would they?"                         
                                                                               
MR. LOGAN replied, "That's not the intent, and as I read it, it is             
not covered in this language."                                                 
                                                                               
Number 0979                                                                    
                                                                               
REPRESENTATIVE JAMES suggested putting the reporting requirement on            
the current in-state nonprofits, and making them report where they             
got all of their money.  She noted that those could include health             
providers, treatment centers or special interest groups.                       
                                                                               
Number 1029                                                                    
                                                                               
REPRESENTATIVE CROFT said he doesn't understand why for-profits                
giving money wouldn't have the same reporting requirements.  He                
asked whether the federal reporting mentioned by Mr. Logan is                  
public information.                                                            
                                                                               
Number 1077                                                                    
                                                                               
MR. LOGAN replied that the form he had mentioned, the 990, is                  
available in some form but is stale by the time it is available to             
the public.  It takes several months after it is reported to get               
from the IRS to the public.  The Council on Foundations, the                   
voluntary trade organization of big nonprofit foundations, has a               
membership service and a library in Washington, D.C., with a few               
branches around the country; they acquire these 990 forms and have             
them available on microfiche.  However, Mr. Logan had asked that               
very day, and the most recent forms they have are two years old.               
For people in Alaska to get this information, even if they know                
about it, would be difficult, and by the time the information was              
available, the effect of the money could long have passed.  Mr.                
Logan said the intent here is to make the information available to             
Alaskans, in Alaska.                                                           
                                                                               
Number 1164                                                                    
                                                                               
REPRESENTATIVE NORMAN ROKEBERG commented that given the giving                 
power of the Alaska Conservation Foundation, according to the                  
exhibit in the file, they would presumably have had to file a 990              
form.  He asked whether Mr. Logan had requested information from               
the IRS about them, to see how the system works.                               
                                                                               
MR. LOGAN said he had tried.  He restated that this information is             
in the packet because it was obtainable, adding that he had tried              
for other groups as well, but unsuccessfully.  He noted that some              
of this information is published by foundations on the Internet.               
                                                                               
Number 1256                                                                    
                                                                               
MR. LOGAN advised members that the IRS requires a public inspection            
period, but does not require the notice to be in a newspaper where             
the file is to be inspected.  Therefore, a Washington-based                    
foundation could put a notice in a newspaper in Macon, Georgia,                
wait for the 180-day period to elapse, and then say they had met               
all the legal requirements.  He told Representative Rokeberg that              
is one of the problems, noting that there is legislation now in                
Congress relating to some of these loopholes.                                  
                                                                               
CHAIRMAN GREEN added, "But the fact is the information is public.              
It's just difficult to find, and this makes it easier to find."                
                                                                               
Number 1317                                                                    
                                                                               
REPRESENTATIVE BERKOWITZ asked how Mr. Logan had obtained the                  
information that is listed.                                                    
                                                                               
MR. LOGAN answered that some is available on the Internet, some is             
available in part in other publications, and some was due to luck.             
                                                                               
REPRESENTATIVE BERKOWITZ asked whether those were government                   
publications.                                                                  
                                                                               
MR. LOGAN said no.  He added that some of the information in Mr.               
Adler's book is no longer current, as it is a few years old.                   
                                                                               
Number 1378                                                                    
                                                                               
REPRESENTATIVE BERKOWITZ expressed concern about unintended                    
consequences, noting that the focus appears to be solely on                    
environmental groups.  He asked whether there were any other groups            
that might have contributed that Mr. Logan knows about.                        
                                                                               
MR. LOGAN said he believes there are, and has been told that, but              
he cannot show that there are.  For example, certain employment                
organizations in the transportation industry have foundations, and             
there is some evidence of this in the education field.                         
Furthermore, someone in Pennsylvania had told him there was a                  
problem there with the Robert Wood Johnson (ph) Foundation, which              
had issued a grant to the health and social services department to             
train people in the department in how to apply for grants from the             
state government; he noted that a legislator there is trying to                
close that loophole.  Mr. Logan restated that it is not only in the            
environmental area.                                                            
                                                                               
Number 1434                                                                    
                                                                               
REPRESENTATIVE BERKOWITZ said it would seem that groups like the               
NAACP [National Association for the Advancement of Colored People]             
or the Anti-Defamation League would somehow get involved in this               
reporting requirement.                                                         
                                                                               
AN UNIDENTIFIED SPEAKER mentioned the NRA.                                     
                                                                               
Number 1443                                                                    
                                                                               
REPRESENTATIVE JAMES referred to a book titled, "Trashing the                  
Economy."  She noted that oil companies also have foundations.  She            
told members that several years before, when there had been                    
controversy over some geothermal energy where she was living,                  
including lobbying against that project, it turned out that oil                
companies were behind it.  She suggested that it is important that             
whoever hears something knows from whom they are hearing it.                   
                                                                               
Number 1489                                                                    
                                                                               
REPRESENTATIVE CROFT noted that major American oil companies                   
operate in Alaska, suggesting that if they didn't, however, and if             
their sole operation was to influence that geothermal project                  
through donations, it wouldn't be covered here, as he sees it.                 
That would be a for-profit company trying to influence public                  
opinion, not generally doing business here but trying to influence             
it by giving in the aggregate over $5,000.                                     
                                                                               
CHAIRMAN GREEN noted that if it gave to a nonprofit, that would be             
disclosed.                                                                     
                                                                               
Number 1525                                                                    
                                                                               
REPRESENTATIVE CROFT pointed out that it says a foreign nonprofit              
corporation is considered to be transacting business if it gives               
over $5,000 to a nonprofit.  He said he still doesn't understand               
that distinction on the giving end, although he may understand it              
somewhat on the receiving end.                                                 
                                                                               
REPRESENTATIVE BRIAN PORTER said he believes the example was that              
these companies have foundations.                                              
                                                                               
REPRESENTATIVE CROFT replied, "That was that example:  If they                 
wanted to directly influence it, they wouldn't have to report; if              
they wanted to do it through a foundation, they would.  I don't                
understand that."                                                              
                                                                               
Number 1559                                                                    
                                                                               
REPRESENTATIVE JAMES said that point is well-taken.  She said it               
seems the purpose of the reporting is to know who is funding the               
nonprofit corporations in the state, in order to determine whether             
the behavior follows the donations.  She again suggested requiring             
local nonprofit corporations to report where they get their money,             
as opposed to making those that give money do the reporting.                   
                                                                               
Number 1601                                                                    
                                                                               
MR. LOGAN agreed Representative Croft's point is well-taken.  He               
added that the point of the bill is to compel foundations, which               
were originally organized to have certain tax advantages and which             
are becoming more political, to disclose what they are doing in                
Alaska.  He noted that a representative from the Department of                 
Commerce and Economic Development had information about the                    
nonprofit corporations code and what is going on in that area.                 
                                                                               
CHAIRMAN GREEN asked whether there were questions before hearing               
testimony.  He announced that those waiting on teleconference could            
testify first.                                                                 
                                                                               
Number 1652                                                                    
                                                                               
MANO FREY, Co-Chair, Arctic Power, testified via teleconference                
from Anchorage, specifying that he is one of two co-chairs of                  
Arctic Power, a nonprofit group with the single goal of "seeing                
the safe and efficient development, exploration and use of a small             
little piece of land in Alaska, the coastal plain on the Arctic                
coast."  Noting that he is also involved in several other nonprofit            
groups, he expressed great interest in hearing the answers to some             
of the questions being brought up.                                             
                                                                               
MR. FREY stated his understanding that this only applies to                    
501(c)(3)s, which have limited purposes, and for which it is pretty            
well defined under law what they can or cannot do.  He told members            
his initial reaction to the bill is that he doesn't have a problem             
with it, as he understands its purpose.  However, he also                      
understands from the discussion that it may be a little more                   
focused in another draft; he expressed interest in seeing any                  
future changes.                                                                
                                                                               
Number 1753                                                                    
                                                                               
JOHN CONLEY, Ketchikan Chamber of Commerce, testified via                      
teleconference from Ketchikan.  He told members this bill kind of              
excites him, because if he makes a large contribution to a                     
political candidate, he and the candidate are required to disclose             
that to the Alaska Public Offices Commission (APOC) and it becomes             
public information immediately, available on the Internet.  He said            
he likes this because in Ketchikan he has discovered that a lot of             
East Coast foundations have sought to change the public image, or              
to affect the public process, by giving to organizations within                
Alaska.  He stated, "You know, when we were fighting for the timber            
industry here, we kept bumping into these so-called community-based            
groups claiming to represent a section of their community.  And                
it's always been my belief that they were actually funded by an                
East Coast corporation, through grants, and ... their sole purpose             
was to affect public policy, basically, to abort the legislative               
process and to act as a lobbying group."  He said he didn't want to            
name names, then cited specific examples.                                      
                                                                               
Number 1894                                                                    
                                                                               
REPRESENTATIVE BERKOWITZ agreed there needs to be a level playing              
field, but said if he recalls correctly, there were also                       
organizations in the Lower 48, including land use groups, that were            
supportive of the timber industry.  He asked Mr. Conley if that                
would affect his decision on this bill in any way.                             
                                                                               
MR. CONLEY replied, "No, sir, it wouldn't.  In fact, I'm president             
of a local grassroots organization called CARE.  And we have                   
nothing to hide.  I mean, our membership is made up of local                   
Ketchikan folks and folks from around the nation with similar                  
interests.  I believe what this legislation would do is it would               
show the amount of money being funneled into Alaska to affect                  
public policy in Alaska.  I think there's a big difference there.              
The people on my side have no fear.  I mean, what more can we lose?            
But we can only pick up a paper daily and see that public policy is            
being established on the East Coast for Alaskans.  It is my belief             
that these East Coast foundations, through these limited                       
environmental groups, are specifically trying to affect public                 
policy."                                                                       
                                                                               
Number 1979                                                                    
                                                                               
DICK COOSE, Executive Director, Concerned Alaskans for Resources               
and Environment (CARE), testified next via teleconference from                 
Ketchikan, expressing support for the concept of this bill and                 
agreeing the playing field needs to be leveled out.  He suggested              
the committee consider not only (c)(3) organizations but (c)(4) and            
(c)(6) organizations as well.  "And we are a (c)(4), and we do not             
have anything to hide," he added.  Mr. Coose spoke about people on             
the East Coast telling Alaskans how to live their lives, manage                
their companies and manage their lands.                                        
                                                                               
MR. COOSE said the Alaska Rainforest Campaign, along with other                
groups, spent $70,000 the previous month to put a full-page ad in              
the New York Times saying how bad the Tongass is.  He stated, "And             
each and every one of you sitting in that room, I know, understand             
the Tongass is a well-managed forest, and it's being caused to have            
economic output that's [considerably] below its sustainable level.             
And I'd just encourage you to go ahead and pass something similar              
to what you have.  We really need it, so that the public realizes              
that these groups, be they environmental or others, are not really             
funded locally, as they would have you perceive they are."                     
                                                                               
Number 2045                                                                    
                                                                               
STEVE BORELL, Executive Director, Alaska Miners Association,                   
Incorporated (Anchorage), testified via teleconference from                    
Fairbanks on behalf of the association, stating support for the                
bill, and saying he believes the concepts that are changes in the              
proposed committee substitute are appropriate.  Mr. Borell told                
members that for years or possibly decades, outside money has been             
coming into Alaska to influence public policy, development of                  
regulations, and who knows what else.  He agreed with testimony                
about the difficulty of getting information except through the                 
Internet.  He said it was not until these web sites were developed             
that they began to understand the incredible magnitude of the money            
and the "widespread tentacles" of what is being done.                          
                                                                               
MR. BORELL said they feel that these donors translate into                     
opposition for projects not due to real environmental issues but               
using the environment to block projects, lock up more land into                
conservation system units, block access, and so forth.  He stated,             
"These outside dollars have been disastrous for the communities,               
especially the Southeast, and not so much in the mining but in the             
logging, and in the opposition of ANWR [Arctic National Wildlife               
Refuge]."  Mr. Borell concluded by encouraging passage of HB 452,              
saying he believes it is a necessary step that will not hamper                 
foundations' contributing but will put state residents, and the                
legislature, on notice as to what monies are being brought in to               
affect public policy.                                                          
                                                                               
Number 2163                                                                    
                                                                               
MICHAEL MONAGLE, Records and Licensing Supervisor, Corporations                
Section, Division of Banking, Securities and Corporations,                     
Department of Commerce and Economic Development, came forward to               
testify.  He first commented on the bill itself, mentioning its                
fiscal impact.  Mr. Monagle advised members that right now there               
are 23,000 active corporations, of which 4,600 are nonprofit.                  
Using Mr. Logan's statistics, with 600,000 501(c)(3) corporations              
and 40,000 private nonprofit foundations, if they saw an increase              
of 400 filings the next year, they could probably handle that.                 
However, 4,000 more would require additional staff, and 40,000                 
would require them to double their staff.  "And if we saw 600,000,             
Juneau would get its new state office building," he added.                     
                                                                               
Number 2204                                                                    
                                                                               
MR. MONAGLE said the point is that nobody knows how much money is              
coming in, the number of filings, or the impact on his agency, but             
there would be an impact.  Each filing would have to be handled and            
processed.  If the state captured this information that is not                 
available elsewhere easily, then newspapers, magazines and people              
from all over the country would seek that information from his                 
office, where it would be easy to obtain as a public record.                   
Therefore, the numbers of requests for copies of reports would                 
rise.  The bottom line is that it could potentially have a dramatic            
impact on the agency.                                                          
                                                                               
MR. MONAGLE pointed out that right now the bill doesn't specify the            
nature of the $5,000 being given to a nonprofit corporation.  He               
stated, "So, if I have a mission in a village in Alaska, and I have            
a church outside the state that gives $5,000 to that mission, I                
have to register, which I would not have had to have done before.              
That prompts two questions.  One, is that $5,000 gift from that                
foundation worth the hassle to that foundation of having to                    
register?  And would that take away that gift from taking place?               
And that $5,000 gift to that mission might be very important to                
that particular mission.  So, what impact would it have ... on the             
receivers of these funds and monies who are churches?  If I have a             
church, and I want to build a new church, and I have an extension              
society, again, under the current statute I'm not registered.  But             
if I make a loan to that church so they can put up a building, am              
I then required to register?  So, there's a scope of how broad this            
bill is."                                                                      
                                                                               
Number 2283                                                                    
                                                                               
MR. MONAGLE referred to enforceability and noted that if the                   
corporation fails to turn in this report, the corporation's                    
authority to do business in this state will be revoked.  He asked              
what prompts them to have to comply in the first place, or causes              
them to be aware of the requirement.                                           
                                                                               
MR. MONAGLE mentioned a point raised by Representative James.  He              
said in 1991, the Alaska Code Review Commission submitted a bill               
for consideration, although it never went anywhere.  There was a               
revision of the Nonprofit Mofrl Corporation Act by the American Bar            
Association.  Quite a few states have adopted this revision,                   
although Mr. Monagle said he didn't have statistics on it.  He said            
Alaska's existing statute is virtually unchanged since statehood,              
and all kinds of organizations are included such as sewing clubs,              
booster groups for athletic events, churches and environmental                 
groups.  The revised model Act would break out nonprofits into                 
essentially religious corporations; mutual benefit corporations,               
which would be homeowner associations, booster clubs, and so forth;            
and public benefit corporations.                                               
                                                                               
MR. MONAGLE said it seems if they want disclosure on funding                   
sources, passage of a revision of the revised model Act, creating              
a public benefit type of nonprofit corporation, could put a                    
requirement in the statute that says, "Tell us who your funding                
sources are."  Administratively, for the department, it would not              
increase the number of corporations coming into the state.  It                 
would simply separate out and identify the public benefit                      
nonprofits, and make some filing requirements necessary for them.              
                                                                               
Number 2383                                                                    
                                                                               
REPRESENTATIVE CROFT asked whether each donor would be charged a               
filing fee under this bill.                                                    
                                                                               
MR. MONAGLE replied that right now under the regulations, each                 
registration would be charged $50; therefore, each corporation                 
would pay $50.  He explained, "Once registered, they would also                
fall under the other provisions as a foreign corporation doing                 
business here, which would mean any amendments that they have in               
their domicile they'd have to file here, mergers would have to be              
filed here, notification changes of their officers and directors               
would have to file here.  So it goes beyond just the initial                   
registration as well.  Once you're registered, you're subject to               
other requirements that you have to file changes with the state."              
                                                                               
REPRESENTATIVE CROFT asked, "We would keep on file their board of              
directors and their current articles?"                                         
                                                                               
MR. MONAGLE affirmed that.                                                     
                                                                               
Number 2419                                                                    
                                                                               
CHAIRMAN GREEN said the increase in workload appears to be offset              
by the filing fee.  He asked what is so onerous about filing this.             
                                                                               
MR. MONAGLE explained that each corporation would have to submit an            
application for registration, which needs to be reviewed to make               
sure they have complied with what is in statute; typically, that is            
handled by a person who would then issue some type of certificate              
of registration.  That paper would have to be retained, currently              
either by converting those records to microfiche or microfilm,                 
although they have a small pilot project for imaging; those become             
permanent archival records.  Each application that comes in would              
have to be processed, and would have a $50 check with it, so there             
would be fiscal aspects of processing that.  Once the information              
is stored, whether on microfilm, microfiche or electronically,                 
people then request information that the department must provide.              
                                                                               
TAPE 98-31, SIDE B                                                             
Number 0006                                                                    
                                                                               
MR. MONAGLE continued, saying that if additional staffing is                   
required, there would be additional equipment needs, as well as                
increased contractual costs for microfiche from the central                    
microfilm lab and increased postage and telephone costs.  He said              
it all is part of the filing process.                                          
                                                                               
CHAIRMAN GREEN asked how the $50 was established.                              
                                                                               
MR. MONAGLE said it is set out in regulation as a filing fee, to               
cover the cost of filing and processing.                                       
                                                                               
Number 0029                                                                    
                                                                               
REPRESENTATIVE JAMES said she didn't recall the bill Mr. Monagle               
had mentioned that would rewrite the nonprofit corporation                     
designations.  She asked, "So, you're saying that if that was done             
and then we required this from the receiver - not the payer but                
from the receiver - there would be no cost then, it would just be              
absorbed in what you are already doing?"                                       
                                                                               
MR. MONAGLE said that is correct.                                              
                                                                               
REPRESENTATIVE CROFT asked for a brief explanation of the                      
differences between a (c)(3), a (c)(4) and a (c)(6) corporation.               
                                                                               
MR. MONAGLE said he didn't know, as they don't get involved in the             
tax issues.  He explained, "They file with us, saying they are a               
nonprofit; we make no determination on whether they are tax-exempt.            
That is strictly an IRS requirement.  Right now, in checking with              
Department of Revenue, they receive 1,100 filings a year, 990 forms            
from nonprofit corporations.  Under their statute, that information            
is confidential; so you couldn't get a copy if you wanted to.  If              
you filed these types of reports with the Department of Commerce,              
they're public record; anybody would have access."                             
                                                                               
Number 0081                                                                    
                                                                               
REPRESENTATIVE BERKOWITZ referred to questions he had asked Mr.                
Logan about filing requirements of for-profit corporations.  He                
asked Mr. Monagle if he knows the answer to those questions.                   
                                                                               
MR. MONAGLE replied, "I don't recall your specific questions.                  
Generally, the nexus that we use for registration is fairly similar            
to what Department of Revenue uses, in that you have to have some              
type of presence in the state to be required to register.  So, a               
nonprofit formed in Florida, before they register with us,                     
generally open a chapter of their organization in Alaska, or they              
have an office in Alaska, or they have some type of, quote,                    
'presence' here.  If they don't have a presence, right now they                
would not be required to register.  The similar thing with for-                
profit corporations -- there's a section under the bill that                   
revises, or it says excluding 10.24.60,  Now, that's a section of              
the nonprofit act that says these activities do not constitute                 
transacting business.  And they're similar to the for-profit                   
corporations.  Things like holding title to real and personal                  
property, by itself, does not mean you're transacting business in              
Alaska.  Making loans or acquiring indebtedness in the state is                
exempt from the definition of doing business.  So right now ...                
those activities would be exempt from registration.  But under this            
bill, they would require registration anyway."                                 
                                                                               
CHAIRMAN GREEN noted that it would be if they met the $5,000                   
threshold.                                                                     
                                                                               
MR. MONAGLE concurred.                                                         
                                                                               
Number 0149                                                                    
                                                                               
REPRESENTATIVE ROKEBERG referred to AS 10.20.645, relating to a                
failure or refusal to file reports.  He asked about the $5 fine.               
                                                                               
MR. MONAGLE explained that for a domestic corporation that has                 
failed to file, currently the state has authority to involuntarily             
dissolve the corporation's charter.  For an out-of-state                       
corporation, the authority already resides with the commissioner to            
revoke its certificate of authority.  He said he is not familiar               
with that $5 fine.                                                             
                                                                               
Number 0182                                                                    
                                                                               
REPRESENTATIVE ROKEBERG asked whether there are other provisions               
within that title, which the department enforces, and which provide            
for penalties for failure to file.                                             
                                                                               
MR. MONAGLE answered that the "stick" that the department has, in              
almost all cases, is the authority to dissolve a corporation.  If              
the department dissolved a corporate charter because of failure to             
file reports, for example, the department can reinstate that                   
corporation if it pays the fees assessable at the time the report              
was due.  In the case of for-profit corporations, there is a                   
provision in statute for a double-the-amount-due penalty to                    
reinstate.  Therefore, there is an additional penalty to reactivate            
a charter if the corporation fails to file in a timely manner.                 
                                                                               
Number 0223                                                                    
                                                                               
REPRESENTATIVE ROKEBERG asked what the fee is for a profit-making              
corporation to file.  He further asked, "How could you dissolve a              
foreign corporation?"                                                          
                                                                               
MR. MONAGLE replied that right now the initial fee is $350 for an              
out-of-state corporation to register; that breaks down to a $150               
filing fee, plus the first two-year, biennial tax of $200.  He                 
pointed out that they cannot dissolve an out-of-state corporation              
but can simply revoke its authority to do business in Alaska, which            
means the certificate of authority no longer exists and the                    
corporation would be prohibited from certain activities under the              
statute.                                                                       
                                                                               
REPRESENTATIVE ROKEBERG asked whether the $200 biennial tax is                 
incurred against the corporation's taxable income or is another                
form of tax.                                                                   
                                                                               
MR. MONAGLE answered that it is a flat tax, called in some states              
a franchise tax.                                                               
                                                                               
REPRESENTATIVE ROKEBERG asked whether a corporation also needs a               
business license.                                                              
                                                                               
MR. MONAGLE said yes.                                                          
                                                                               
Number 0279                                                                    
                                                                               
REPRESENTATIVE PORTER recalled discussion of the nonprofit                     
legislation, but asked whether Mr. Monagle remembered what happened            
to it.                                                                         
                                                                               
MR. MONAGLE said he believed it was in 1991 or thereabouts, and it             
was introduced late in the session.  He suggested a major code                 
revision like that would require a bill that runs 200 pages, and               
the committee did not feel up to tackling it at that point.  He                
said unfortunately the Code Review Commission was disbanded in the             
interim, as it was not funded, and the issue went away.  "The                  
department certainly would support a revision of that code," he                
added.                                                                         
                                                                               
CHAIRMAN GREEN noted that everyone who had signed up had testified.            
He asked the wish of the committee.                                            
                                                                               
Number 0332                                                                    
                                                                               
REPRESENTATIVE ROKEBERG expressed concern about the failure-to-file            
provision, mentioning the $5 penalty and noting Mr. Monagle's                  
testimony that the "stick" is dissolving a corporation.  He asked              
whether that would be enough enforcement to preclude the continued             
contributions of funds if corporations didn't file.                            
                                                                               
Number 0370                                                                    
                                                                               
REPRESENTATIVE PORTER said he thinks the idea of "sunshining" this             
information is laudatory, and he would like to do that.  He                    
questioned the ability to do that with this vehicle, however.  For             
example, he said he doesn't believe that the Brainerd Foundation               
referenced in packets does business in Alaska and would therefore              
be required to file for anything.  Consequently, there would be no             
enforceability there.                                                          
                                                                               
CHAIRMAN GREEN replied that he may be right, but suggested it is a             
step in the right direction to gather those that don't skirt the               
law through loopholes.                                                         
                                                                               
Number 0427                                                                    
                                                                               
REPRESENTATIVE PORTER asked whether there had been consideration of            
the notion of reporting by those who receive the money.                        
                                                                               
CHAIRMAN GREEN said there really wasn't.                                       
                                                                               
Number 0461                                                                    
                                                                               
REPRESENTATIVE JAMES agreed that if they want to know where                    
nonprofits in Alaska get their money, they ought to ask those                  
nonprofits.  She said she wished they had in front of them the                 
rewrite of the nonprofit law, as it is unnecessary to get the                  
information from missions and churches, for example.  She also                 
agreed with Representative Porter that probably many corporations,             
both for-profit and nonprofit, send money into Alaska without being            
registered to do business in the state.  She offered to work on the            
bill.                                                                          
                                                                               
Number 0537                                                                    
                                                                               
REPRESENTATIVE ROKEBERG told members that the House Labor and                  
Commerce Committee, which he chairs, has been in communication with            
the Department of Commerce and Economic Development on a larger                
rewrite.  He said if it was Chairman Green's desire, they would be             
happy to look further into that.  He mentioned the alleged 200                 
pages, noting that Chapter 20 is only 35 pages long.                           
                                                                               
CHAIRMAN GREEN asked if there were further comments, then thanked              
participants.  [HB 452 was held over.]                                         
                                                                               

Document Name Date/Time Subjects