Legislature(1999 - 2000)

03/06/2000 03:28 PM L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HB 247 - NONPROFIT CORPORATIONS                                                                                               
CHAIRMAN ROKEBERG  announced the next  order of business  would be                                                              
HOUSE BILL  NO. 247, "An  Act revising the nonprofit  corporations                                                              
code and the religious corporations  code; relating to disclosures                                                              
and reports by  certain nonprofit corporations;  amending Rules 3,                                                              
4, 8, 17, 19, 23.1, 24, 25, 65, 79,  and 82, Alaska Rules of Civil                                                              
Procedure, Rule 803,  Alaska Rules of Evidence, and  Rules 602 and                                                              
609, Alaska  Rules of  Appellate Procedure;  and providing  for an                                                              
effective date."  There was a proposed  committee substitute (CS).                                                              
Number 0437                                                                                                                     
PATRICK HARMAN,  Staff to Representative  Pete Kott,  Alaska State                                                              
Legislature,  came  before the  committee  to  present  HB 247  on                                                              
behalf of  the sponsor.  He  noted that the bill  has dramatically                                                              
changed  from   its  original  version  and  that   the  nonprofit                                                              
[corporations]  have  not  had a  chance  to  look at  the  latest                                                              
version.   House  Bill 247,  he said,  is  basically a  disclosure                                                              
bill.  It asks that domestic and  foreign nonprofit [corporations]                                                              
file a Form 990,  a form that they already produce  and provide to                                                              
the Internal  Revenue Service  [IRS], with  the state.   Nonprofit                                                              
[corporations],  he said,  are exempt  from  paying certain  taxes                                                              
because they  provide a  service for  the good  of the public;  in                                                              
that regard,  the bill  asks that  they prove  their service  on a                                                              
regular basis.                                                                                                                  
Number 0531                                                                                                                     
REPRESENTATIVE HALCRO  made a motion to adopt the  proposed CS for                                                              
HB  247, Version  I  [1-LS0676\I, Bannister,  3/3/00],  as a  work                                                              
draft.    There being  no  objection,  Version  I was  before  the                                                              
Number 0547                                                                                                                     
MR. HARMAN  pointed out that the  essence of HB 247 is  Section 4,                                                              
which starts on  page 2, line 31.  He read the  following language                                                              
[Version I, page 3, lines 1-4]:                                                                                                 
     (a)  A  foreign corporation transacting business  in the                                                                   
     state  and a domestic  corporation  shall file with  the                                                                   
     department on  or before July 1  of each year a  copy of                                                                   
        the most recent Form 990 filed by the foreign or                                                                        
     domestic corporation with the federal government.                                                                          
MR. HARMAN  noted that Form  990 is a  public document, but  it is                                                              
very  difficult to  get  from the  IRS. Version  I  asks that  the                                                              
corporation   pay  the   Department   of   Community  &   Economic                                                              
Development a fee in order to keep  it revenue-neutral [subsection                                                              
(c),  page  3,  lines  10-11].    There  are  approximately  5,000                                                              
nonprofit [corporations]  in the state;  and, in that  regard, the                                                              
bill would  increase the department's  costs.  He  noted, however,                                                              
that  there  isn't  a  fiscal  note  for  the  proposed  committee                                                              
substitute yet from the Administration.                                                                                         
Number 0672                                                                                                                     
REPRESENTATIVE  HALCRO  asked  Mr.   Harman  whether  the  federal                                                              
government decides if a corporation is nonprofit.                                                                               
MR. HARMAN replied, "Yes."                                                                                                      
REPRESENTATIVE  HALCRO  asked Mr.  Harman  why  the state  has  an                                                              
interest in making sure that nonprofit  corporations really should                                                              
qualify for  a tax-exempt status  if the IRS already  verifies the                                                              
qualifying nonprofit [corporations].                                                                                            
Number 0695                                                                                                                     
MR. HARMAN replied  that there are nonprofit  organizations coming                                                              
to the state which are trying to  affect public policy on both the                                                              
right and  left of  the political  spectrum.  He  asked:   Who are                                                              
these  people?   Where  are they  getting their  money?   In  that                                                              
regard,  it's  hard  to  track them  down  and  get  their  annual                                                              
CHAIRMAN ROKEBERG remarked that HB  247 is the APOC [Alaska Public                                                              
Offices Commission] bill for nonprofit [corporations].                                                                          
MR.  HARMAN answered  that it  could be  considered as  such.   He                                                              
noted that most of the nonprofit  [corporations] are nonpolitical.                                                              
Number 0744                                                                                                                     
REPRESENTATIVE  HALCRO asked:   If  a  nonprofit [corporation]  is                                                              
taking a  position in an  election to  influence the outcome  of a                                                              
race or ballot proposition, doesn't it fall under APOC anyway?                                                                  
MR. HARMAN  said that is  true but there  are other  public policy                                                              
issues that don't have to do with an election.                                                                                  
Number 0767                                                                                                                     
REPRESENTATIVE  BRICE  stated that  nonprofit  [corporations]  are                                                              
broken down as (c)(2), (c)(3), (c)(4),  and so forth.  Traditional                                                              
nonprofit   [corporations]  such   as  the   human  services   are                                                              
designated  as  (c)(3),  while  labor  unions  are  designated  as                                                              
(c)(6).   He can see the benefit  of getting that  information for                                                              
some, but  for others  it would  be a  little overburdensome.   He                                                              
asked Mr. Harman what the Form 990 shows.                                                                                       
MR. HARMAN  distributed to  committee members  a copy of  Form 990                                                              
from the IRS.                                                                                                                   
REPRESENTATIVE BRICE asked Mr. Harman  what types of fees would be                                                              
associated with this requirement for a nonprofit [corporation].                                                                 
MR. HARMAN  replied, if  there were 5,000  filings and if  $20 was                                                              
collected  for a  filing fee,  it ought  to be  close to  revenue-                                                              
neutral.   He deferred  the question  to a  representative  of the                                                              
Department of Community & Economic Development.                                                                                 
Number 0889                                                                                                                     
FRED   JENKINS,  Session   Executive  Director,   United  Way   of                                                              
Anchorage, testified  via teleconference  from Anchorage.   He had                                                              
received  notice of  HB 247  last  Friday, and  he had  not had  a                                                              
chance  to really  look  at it.   He  hopes,  therefore, that  the                                                              
committee can  answer a few questions.   He asked:  What  is hoped                                                              
to be  accomplished by the  bill?  Is  what is being  accomplished                                                              
for  the  benefit  of  the  public  or  for  the  benefit  of  the                                                              
MR. HARMAN replied that HB 247 is  based on a political philosophy                                                              
of free and open disclosure.                                                                                                    
CHAIRMAN  ROKEBERG asked  Mr.  Harman what  the  sponsor hopes  to                                                              
accomplish from the bill.                                                                                                       
MR.  HARMAN replied  that nonprofit  corporations are  essentially                                                              
tax exempt - a privileged position.   House Bill 247 would require                                                              
nonprofit  [corporations]  to  validate  their  status  by  filing                                                              
annual reports stating  where they get their funding  and how they                                                              
spend it.                                                                                                                       
Furthermore,  they already  submit a  Form 990  annually with  the                                                              
IRS; in  that regard,  the sponsor  wants to  make the  disclosure                                                              
open but not onerous.                                                                                                           
CHAIRMAN  ROKEBERG  stated  that  the  sponsor  is  targeting  the                                                              
nonprofit [corporations]  which engage  in the political  activity                                                              
in the state that  do not have to disclose where  their sources of                                                              
funds come from - the rationale behind HB 247.                                                                                  
Number 1007                                                                                                                     
MR.  JENKINS asked  whether  the rationale  is  to have  nonprofit                                                              
corporations which  don't currently  do so disclose  their sources                                                              
of funds.                                                                                                                       
CHAIRMAN ROKEBERG  affirmed that.   He  asked Mr. Jenkins  whether                                                              
the sources of funds are disclosed to the IRS.                                                                                  
MR. JENKINS  replied, "Yes."  He  asked whether HB 247  is for the                                                              
benefit of the public or the department.                                                                                        
CHAIRMAN ROKEBERG replied that he  would say it is for the benefit                                                              
of the public, not the department.                                                                                              
Number 1034                                                                                                                     
MR. JENKINS asked why the definition  of "transacting business" in                                                              
Version I is being expanded [page 3, lines 18-19].                                                                              
MR.  HARMAN answered  that  the bill  drafter  expressed that  the                                                              
definition of  "transacting business"  was too broad and  too hard                                                              
to interpret.   The  language, therefore, was  included to  pin it                                                              
MR. JENKINS  said, "So,  the intent  is that  if you're  expending                                                              
money in the state, you're transacting business?"                                                                               
MR. HARMAN answered, "That's correct."                                                                                          
Number 1090                                                                                                                     
MR. JENKINS asked how nonprofit [corporations]  know that they are                                                              
to  file a  certificate  of authority  with  the state.   Does  an                                                              
organization  that  solicits  in   a  newspaper  or  magazine  and                                                              
receives donations  have to file  a certificate of  authority with                                                              
the state?                                                                                                                      
MR. HARMAN  answered that it is not  the intent of the  sponsor to                                                              
require nonprofit corporations to  have a certificate of authority                                                              
if they  aren't already  required to have  one.  He  further said,                                                              
"Transactions of business would be  expending monies in the state.                                                              
I think solicitations  wasn't the intent.  That,  if you're buying                                                              
media  time,   if  you're  renting   office  space,   [if]  you're                                                              
procuring,  distributing printed  material  in the  state but  not                                                              
necessarily mailing  it to the state or newspaper  ad (indisc.), a                                                              
national advertisement."                                                                                                        
MR. JENKINS said, "So, if you place  an advertisement in the state                                                              
in  a   periodical  or  any   kind  of  publication   then  you're                                                              
transacting  business in  the state  and spending  dollars in  the                                                              
MR. HARMAN  replied  that it depends  on whether  it's a  national                                                              
MR. JENKINS said, "So, national, no.  But state or local, yes."                                                                 
MR. HARMAN replied,  if a merchant or business  received the money                                                              
in the state.                                                                                                                   
CHAIRMAN ROKEBERG  asked Mr. Jenkins whether he  had any testimony                                                              
to provide.                                                                                                                     
MR. JENKINS replied,  no, not at this point; he  hadn't had enough                                                              
time to  really look  at the  bill.   However, he appreciates  Mr.                                                              
Harman's answering his questions.                                                                                               
Number 1238                                                                                                                     
REPRESENTATIVE BRICE asked Mr. Jenkins  whether there are specific                                                              
federal designations  that the  United Way  of Anchorage  will not                                                              
support as a 501(c)(3) organization.                                                                                            
MR.  JENKINS replied  that the  United Way  of Anchorage  supports                                                              
activities  which   are  within  their  bylaws   and  articles  of                                                              
incorporation  in relation  to health  and human  services in  the                                                              
community.   They do not  contribute to political  candidates, for                                                              
REPRESENTATIVE BRICE  asked Mr. Jenkins whether the  United Way of                                                              
Anchorage stays with the 501(c)(3) types of designations.                                                                       
MR. JENKINS replied, "Yes."                                                                                                     
REPRESENTATIVE HALCRO asked Mr. Jenkins  whether the United Way of                                                              
Anchorage completes a Form 990 every year.                                                                                      
MR. JENKINS affirmed that.                                                                                                      
REPRESENTATIVE  HALCRO asked  Mr. Jenkins  whether a person  could                                                              
request to see the form from the IRS.                                                                                           
MR. JENKINS  replied, "Yes."   A person  could come to  the office                                                              
and request to see the form as well.                                                                                            
Number 1326                                                                                                                     
RICHARD  BLOCK,   Christian  Science  Committee   on  Publication,                                                              
testified via teleconference from  Anchorage.  He noted that he is                                                              
the person  requested by Christian  Science churches in  the state                                                              
to  overlook legislation  that may  affect the  practice of  their                                                              
religion.  He noted that under Section  6033 of the IRS churches -                                                              
among  other  organizations  - are  specifically  and  mandatorily                                                              
exempted from filing a Form 990.                                                                                                
MR.  BLOCK   said  the   bill,  however,   requires  a   nonprofit                                                              
corporation  to file a  statement of  information with  the state.                                                              
The   Christian  Science   Committee   would  find   that  to   be                                                              
objectionable  because  of  the   burden  of  filing  a  form  and                                                              
disclosing  the internal  workings  of a  church.   It also  mixes                                                              
church  and state  activities, which  he  supposes is  why at  the                                                              
federal level  the IRS has mandated  that churches be  exempt from                                                              
the filing  requirement.  He pointed  out that the  legislature is                                                              
considering  HB  387,  which  requires  that  there  shall  be  no                                                              
legislation  or  act by  a  state,  municipal or  school  district                                                              
entity unless  there is a showing  of a compelling  state interest                                                              
that it interferes  with the practice of religion.   If there is a                                                              
compelling state interest,  the least restrictive means  has to be                                                              
used.  In the case of churches, he  doesn't see a compelling state                                                              
interest  so  far in  relation  to HB  247  other than  a  general                                                              
curiosity of  who is contributing  money to the organization.   If                                                              
there was  a compelling state interest,  he's sure that  there are                                                              
lesser restrictive  means in which  to accomplish whatever  may be                                                              
the  compelling state  interest.   In  that regard,  he urged  the                                                              
committee members to remove subsection  (b) [page 3, lines 5-9, of                                                              
Version I] so that churches are not  required to make the filings.                                                              
CHAIRMAN ROKEBERG  stated, to Mr.  Block, he's sure that  it's not                                                              
the sponsor's  intent to  "throw his net  so wide that  it catches                                                              
his organization."   He asserted that a committee  substitute with                                                              
an exemption section or provisions to that effort would be made.                                                                
CHAIRMAN  ROKEBERG announced  that  HB 247  would be  held in  the                                                              
committee for further consideration.                                                                                            

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