HB 75-CONTRIBUTION FROM PFD: AUDITS; UNIVERSITY  8:05:32 AM CHAIR LYNN announced that the first order of business was HOUSE BILL NO. 75, "An Act repealing certain audit requirements for entities receiving contributions from permanent fund dividends; requiring each campus of the University of Alaska to apply to be included on the contribution list for contributions from permanent fund dividends; and requiring a university to pay an application fee for each campus separately listed on the contribution list for contributions from permanent fund dividends." 8:05:50 AM REPRESENTATIVE PAUL SEATON, Alaska State Legislature, presented HB 75 as sponsor. He reviewed that the "Pick.Click.Give" program was established by the [25th Alaska State] Legislature as a simple way for Alaskans to designate a portion of their permanent fund dividend (PFD) as a donation to charities. Currently, he stated, nonprofit organizations with a total budget of less than $250,000 are exempt from the financial audit required of nonprofit organizations with a total budget of $250,000 or greater wishing to participate in Pick.Click.Give. He clarified that the audit is a financial one done by a certified public accountant (CPA); it is not an Internal Revenue Service (IRS) audit. He reviewed that the IRS 990 form, [included in the committee packet], is 12 pages in length, was revised in 2008, and not only ensures nonprofit organizations' income and expense numbers match, but also considers conflicts of interest and governance. 8:07:55 AM REPRESENTATIVE SEATON explained that the current audit requirement is problematic for a nonprofit organization that, for example, makes $260,000 a year, because the cost of the audit is $7,000-$12,000. He opined that the purpose of a nonprofit organization is to accomplish its mission, not to employ CPAs. Representative Seaton said there is no question that CPA audits are best practices; however, he said the question is whether the state should require a CPA audit from a small entity simply to allow people to donate money to that entity. He questioned why it is necessary to disadvantage a smaller nonprofit organization with an onerous requirement that is not required of larger nonprofit organizations until they reach $500,000 in federal funds. REPRESENTATIVE SEATON relayed that many people who did not see their charity on the Pick.Click.Give list mistakenly interpreted that to mean that the charity had lost its nonprofit status, which he said is "another reason to get rid of this." He said The Rasmuson Foundation and other entities are trying to make it very easy for people to donate to the organizations they support and are happy to have more nonprofit organizations participate in the Pick.Click.Give program. 8:11:20 AM REPRESENTATIVE SEATON said the proposed legislation would also correct an oversight in the original legislation. He explained that all the nonprofits pay a $250 administrative fee, but the University of Alaska campuses were left out of that requirement. He offered his understanding that the University of Alaska does not mind being asked to pay that fee. 8:12:21 AM REPRESENTATIVE SEATON, in response to the chair, relayed that the CPA audit looks at finances and account balancing, not whether the expense should have been made. He said the idea for the bill came from a complaint from the Seward Senior Center in Seward, Alaska, which was generating $3,000-$4,000 in donations, while facing an audit that was going to cost $12,000. He remarked that the CPA audit is not even reviewed. In response to a follow-up question, he clarified that a CPA audit would not determine the legitimacy of a nonprofit organization; that is something the IRS would do. 8:15:26 AM REPRESENTATIVE GATTIS said she understands best practices, but questioned what the other purpose of the [CPA] audit could be. She asked if the audit is open to the public. 8:16:23 AM HEATHER BEGGS, Staff, Representative Paul Seaton, Alaska State Legislature, on behalf of Representative Seaton, sponsor of HB 75, stated, "Both the 990 and CPA audits do report some program activities of nonprofits." She said the IRS 990 form is more detailed. She said both documents are open to the public; although the 990 form is more accessible. She relayed that with the revisions made in 2008, "nonprofits are penalized $20 a day every day after five days that they would refuse giving a 990 to a donor." The CPA audit is an internally managed file that should be given but is not required to be given [to the public], she said. REPRESENTATIVE GATTIS asked Ms. Beggs to confirm that [the CPA] audit will not necessarily clarify for donors how their money is spent. MS. BEGGS answered that is correct. 8:17:47 AM REPRESENTATIVE KELLER asked if any nonprofit 501(c)(3) willing to fill out the 990 form is eligible to be listed in the Pick.Click.Give program. 8:18:23 AM MS. BEGGS answered that there are other requirements, upon which she suggested the Foraker Group could expound, but said every organization must be a 501(c)(3), which is why the bill sponsor feels the 990 form is the best accountability (indisc. - overlapping voices). In response to follow-up questions, she indicated that the status of the University of Alaska is specified in statute, and she offered her understanding that the university is "the only other exception," but again deferred to the Foraker Group for further details. REPRESENTATIVE KELLER stated support of the sponsor's "getting this through." 8:19:43 AM REPRESENTATIVE KELLER stated his belief that the audit became an eligibility requirement because the bar was so high. He said he thinks it is great to take that bar away, as long as everybody gets "a fair shake," and he questioned whether "we" are prepared to make sure everyone can apply on equal terms. He mentioned public schools. He said he was thinking about religious nonprofit organizations and "how that eligibility is required." He indicated that the IRS has made changes related to 501(c)(3) organizations, but stated that "they weren't that difficult." 8:20:51 AM REPRESENTATIVE SEATON said the general purpose of [the Pick.Click.Give program] is to enable people to give donations with ease. He said generally people give money to organizations they know. He stated that really small organizations are already exempt; [the proposed] legislation is designed for those organizations with budgets over $250,000. 8:23:22 AM REPRESENTATIVE KELLER said he understands the purpose of the proposed legislation, but clarified that he wants to know if [the division] is prepared for the increased number of nonprofit organizations that might participate in Pick.Click.Give if HB 75 passes. Further, he expressed concern that there would be an equal basis of qualification for all charities. REPRESENTATIVE SEATON responded that HB 75 would get rid of inequality. Regarding the concern about being prepared for the change, he noted that representatives from the Rasmuson Foundation and the division were available to testify. He related that "they" have not expressed concern about the additional work that may result from allowing more nonprofit organizations into the Pick.Click.Give program. 8:26:29 AM MS. BEGGS, in response to Representative Isaacson, stated that the 990 forms were all changed in 2008 and are "tiered" to accommodate organizations with smaller budgets, but still include "all the same accountable categories." REPRESENTATIVE ISAACSON asked if the intent of HB 75 is to allow nonprofit organizations to use whichever form they file to the IRS as the form they submit to the Pick.Click.Give program. REPRESENTATIVE SEATON answered that is correct. 8:28:46 AM REPRESENTATIVE HUGHES noted that the 990 form lists the purpose of the nonprofit organization. She further noted that 990 forms can be accessed easily on line. She offered her understanding that [Alaska] has one of the highest nonprofit organizations to population ratios, which she said could mean a long list burdening the division; however, she recollected hearing about a requirement wherein "they have to receive a certain amount of their revenue income via donations" - an amount that she said seemed high, such as $100,000 - and she suggested that that detail could limit the rise in program participants. 8:30:26 AM MS. BEGGS suggested that Representative Hughes might be referring to the "one-third public support test," which is part of the 990 form requirement for nonprofit organizations, but not part of the Pick.Click.Give application. 8:30:50 AM REPRESENTATIVE KREISS-TOMKINS pointed to a research brief from Legislative Legal and Research Services, dated 1/24/13, in which it is noted that Diane Kaplan, president of the Rasmuson Foundation, testified in 2007 that there were budget and staffing requirements related to qualifications of a nonprofit organization to take part in the Pick.Click.Give program. He asked for details regarding those requirements. 8:31:22 AM MS. BEGGS deferred to other testifiers to answer further questions. 8:32:02 AM MIKE WALSH, MPA, Ph.D., Vice President, Operations, Foraker Group, in response to the chair, explained that the Foraker Group is a 501(c)(3) nonprofit management core organization whose job is to strengthen nonprofit organizations through education, training, organizational development, and shared financial human services. In response to [Representative Hughes'] previous mention of a $100,000 price point, confirmed that that pertains to a requirement of the Pick.Click.Give program wherein an organization must receive 5 percent or at least $100,000 of its revenue from donated sources. In response to Representative Isaacson, he clarified, "... whichever is the lower." 8:34:38 AM DR. WALSH, in response to a question from Representative Keller, stated that there is little administrative burden anticipated as a result of HB 75, because the process for taking in applications is on line and simple. 8:36:19 AM KATHLEEN LIGHT, Executive Director, Ketchikan Arts and Humanities Council (KAHC), testified in support of HB 75. She stated that KAHC cannot participate in the Pick.Click.Give program because it is too great a financial burden to do so. She said the program is an extraordinary means to increase funding for many nonprofit organizations, as well as a philanthropic opportunity for Alaskan citizens, and participation in the program gives a "stamp of approval" to an organization; however, ironically the program disenfranchises those organizations that cannot participate because of its cost. Ms. Light said KAHC receives numerous calls from people asking why the council is not in the Pick.Click.Give program, and has discovered later that those people are not donating money to the council, because they have already given through the Pick.Click.Give program. Under HB 75, she said, KAHC would be financially able to participate in the Pick.Click.Give program. MS. LIGHT relayed that KAHC was established in 1953, has been a nonprofit organization since 1970, and has a budget of approximately $320,000. She said the council receives grants from the City of Ketchikan, the Ketchikan Borough, the State of Alaska, the Alaska State Council on the Arts, the National Endowment for the Arts, Westaff (ph), the Rasmuson Foundation, and the Murdock Trust. She said it is not unusual for nonprofit organizations in Alaska to receive grants from so many different sources, all of which require the 990 form, which is "sufficient for them in reviewing our finances and our standing as a good nonprofit." 8:39:46 AM ANGELA RODELL, Deputy Commissioner, Department of Revenue (DOR), said she was present to answer questions on behalf of the Permanent Fund Division. In response to a question from Representative Keller, she stated that HB 75 would not place additional burden on the Permanent Fund Division, and said the department is comfortable with the affect the proposed legislation may have. In response to a follow-up question, she said the $250 application fee would sufficiently cover the division's cost in running the Pick.Click.Give program. In response to the chair, she confirmed that the fiscal note is zero because there would be no additional cost to the division as a result of HB 75. 8:41:28 AM DANA PAPERMAN, Executive Director, Seward Senior Center, testified in support of HB 75. She related that the Seward Senior Center has served seniors and social services for 35 years. She thanked the bill sponsor for bringing forth the legislation under House Bill 302 in 2012 and again as HB 75 this year. She said the Seward Senior Center became a Pick.Click.Give recipient in the first year of the program, and it received $50 from those known personally to the center. Ms. Paperman indicated that she worked in partnership with the Seward Community Foundation, which helps finance direct marketing in the community, to increase local awareness of the Pick.Click.Give program and the recipients in Seward who benefit from it, and in the second year of the Pick.Click.Give program the Seward Senior Center received $1,100, again coming from friends of the center. However, she stated that in 2011, the center's budget climbed above the $250,000 mark that requires the audit, which is a financial burden on the Seward Senior Center. She said the Pick.Click.Give program created a valuable avenue for the center to increase its unrestricted funds without creating a burden on the center's funds or operating staff. She encouraged the committee to support HB 75 and to help Alaska's nonprofit organizations. 8:43:23 AM CHAIR LYNN, after ascertaining that there was no one else who wished to testify, closed public testimony. 8:43:33 AM REPRESENTATIVE KELLER said he thinks HB 75 is a good bill, and he expressed his hope that the testimony that had been heard would be helpful in continued process of hearing the bill. 8:43:54 AM REPRESENTATIVE GATTIS commented that the proposed legislation would provide generous Alaskans the opportunity to give where they choose, and she said she cannot find a problem with [the proposed legislation]. 8:44:15 AM REPRESENTATIVE GATTIS moved to report HB 75 out of committee [with individual recommendations] and the accompanying zero fiscal notes. There being no objection, HB 75 was reported out of the House State Affairs Standing Committee.