1     
CHARITABLE SOLICITATION ACT AMENDMENTS

2     
2015 GENERAL SESSION

3     
STATE OF UTAH

4     
Chief Sponsor: Bruce R. Cutler

5     
Senate Sponsor: Curtis S. Bramble

6     

7     LONG TITLE
8     General Description:
9          This bill amends provisions relating to charitable organizations.
10     Highlighted Provisions:
11          This bill:
12          ▸     clarifies defined terms;
13          ▸     modifies the registration fee for a certified local museum;
14          ▸     provides that the Division of Consumer Protection may require an exempt
15     organization to file a renewal of a notice of claim of exemption;
16          ▸     addresses the financial reporting requirements for a charitable organization;
17          ▸     modifies the requirements for a charitable organization and a professional fund
18     raiser relating to separate accounts for contributions and receipts for contributions;
19          ▸     requires a charitable organization and a professional fund raiser to develop and
20     maintain adequate internal controls for receipt, management, and disbursement of
21     money; and
22          ▸     makes technical and conforming changes.
23     Money Appropriated in this Bill:
24          None
25     Other Special Clauses:
26          None
27     Utah Code Sections Affected:
28     AMENDS:
29          13-22-2, as last amended by Laws of Utah 2001, Chapter 210
30          13-22-6, as last amended by Laws of Utah 2009, Chapter 183
31          13-22-8, as last amended by Laws of Utah 2014, Chapter 189
32          13-22-15, as last amended by Laws of Utah 2001, Chapter 210
33          13-22-16, as last amended by Laws of Utah 2001, Chapter 210
34     

35     Be it enacted by the Legislature of the state of Utah:
36          Section 1. Section 13-22-2 is amended to read:
37          13-22-2. Definitions.
38          As used in this chapter:
39          (1) (a) "Charitable organization" or "organization" means any person, joint venture,
40     partnership, limited liability company, corporation, association, group, or other entity:
41          (i) [that] who is or holds itself out to be:
42          (A) a benevolent, educational, voluntary health, philanthropic, humane, patriotic,
43     religious or eleemosynary, social welfare or advocacy, public health, environmental or
44     conservation, or civic organization;
45          (B) for the benefit of a public safety, law enforcement, or firefighter fraternal
46     association; or
47          (C) established for any charitable purpose;
48          (ii) who solicits or obtains contributions solicited from the public for a charitable
49     purpose; or
50          (iii) in any manner employs a charitable appeal as the basis of any solicitation or
51     employs an appeal that reasonably suggests or implies that there is a charitable purpose to any
52     solicitation.
53          (b) "Charitable organization" includes a ["chapter," "branch," "area," "office," or
54     similar "affiliate"] chapter, branch, area, office, or similar affiliate or any person [soliciting]
55     who solicits contributions within the state for a charitable organization [that has its] whose
56     principal place of business is outside the state.
57          (2) "Charitable purpose" means any benevolent, educational, philanthropic, humane,
58     patriotic, religious, eleemosynary, social welfare or advocacy, public health, environmental,
59     conservation, civic, or other charitable objective or for the benefit of a public safety, law
60     enforcement, or firefighter fraternal association.
61          [(4)] (3) "Charitable sales promotion" means an advertising or sales campaign,
62     conducted by a commercial co-venturer, which represents that the purchase or use of goods or
63     services offered by the commercial co-venturer will benefit, in whole or in part, a charitable
64     organization or purpose.
65          [(3)] (4) (a) "Charitable solicitation" or "solicitation" means any request, directly or
66     indirectly, for money, credit, property, financial assistance, or any other thing of value on the
67     plea or representation that it will be used for a charitable purpose. [A charitable solicitation
68     may be made in any manner, including:]
69          (b) "Charitable solicitation" or "solicitation" includes:
70          [(a)] (i) any oral or written request, including any request by telephone, radio or
71     television, or other advertising or communications media;
72          [(b)] (ii) the distribution, circulation, or posting of any handbill, written advertisement,
73     or publication; [or]
74          (iii) an application or other request for a grant; or
75          [(c)] (iv) the sale of, offer or attempt to sell, or request of donations in exchange for
76     any advertisement, [book, card, chance, coupon, device, magazine,] membership,
77     [merchandise,] subscription, [ticket, flower, flag, button, sticker, ribbon, token, trinket, tag,
78     souvenir, candy,] or [any] other article in connection with which any appeal is made for any
79     charitable purpose, or the use of the name of any charitable organization or movement as an
80     inducement or reason for making any purchase donation, or, in connection with any sale or
81     donation, stating or implying that the whole or any part of the proceeds of any sale or donation
82     will go to or be donated to any charitable purpose.
83          (5) "Commercial co-venturer" means a person who for profit is regularly and primarily
84     engaged in trade or commerce other than in connection with soliciting for a charitable
85     [organizations or purposes] organization or purpose.
86          (6) (a) "Contribution" means the pledge or grant for a charitable purpose of any money
87     or property of any kind, including any of the following:
88          (i) a gift, subscription, loan, advance, or deposit of money or anything of value;
89          (ii) a contract, promise, or agreement, express or implied, whether or not legally
90     enforceable, to make a contribution for charitable purposes; [and] or
91          (iii) fees, dues, or assessments paid by members, when membership is conferred solely
92     as consideration for making a contribution.
93          (b) "Contribution" does not include:
94          (i) money loaned to a charitable organization by a financial institution in the ordinary
95     course of business; or
96          (ii) fees, dues, or assessments paid by members when membership is not conferred
97     solely as consideration for making a contribution.
98          (7) "Contributor" means any donor, pledgor, purchaser, or other person who makes a
99     contribution.
100          (8) "Director" means the director of the Division of Consumer Protection.
101          (9) "Division" means the Division of Consumer Protection of the Department of
102     Commerce.
103          (10) "Material fact" means information that a person of ordinary intelligence and
104     prudence would consider relevant in deciding whether or not to make a contribution in
105     response to a charitable solicitation.
106          (11) (a) "Professional fund raiser[,]" [except as provided in Subsection (11)(b),] means
107     [any] a person who:
108          (i) for compensation or any other consideration solicits contributions for charitable
109     purposes, or plans or manages the solicitation of contributions for or on behalf of any
110     charitable organization or any other person;
111          (ii) engages in, or [who holds himself out to persons in this state as] represents being
112     independently engaged in, the business of soliciting contributions for a charitable organization;
113          (iii) manages, supervises, or trains any solicitor whether as an employee or otherwise;
114     or
115          (iv) uses a vending device or vending device decal for financial or other consideration
116     that implies a solicitation of contributions or donations for any charitable organization or
117     charitable purposes.
118          (b) "Professional fund raiser" does not include a bona fide officer, director, volunteer,
119     or full-time employee of a charitable organization.
120          (12) (a) "Professional fund raising counsel or consultant" or other comparable
121     designation or title means a person who:
122          (i) for compensation plans, manages, advises, counsels, consults, or prepares material
123     for, or with respect to, the solicitation in this state of contributions for a charitable
124     organization, whether or not at any time the person has custody of contributions from a
125     solicitation;
126          (ii) does not solicit contributions; and
127          (iii) does not employ, procure, or engage any compensated person to solicit or receive
128     contributions.
129          (b) "Professional fund raising counsel or consultant" does not include an attorney,
130     investment counselor, or banker who in the conduct of that person's profession advises a client
131     when actually engaged in the giving of legal, investment, or financial advice.
132          (13) "Vending device" means a container used by a charitable organization or
133     professional fund raiser, for the purpose of collecting a charitable solicitation, contribution, or
134     donation whether or not the device offers a product or item in return for the contribution or
135     donation. "Vending device" includes machines, boxes, jars, wishing wells, barrels, or any
136     other container.
137          (14) "Vending device decal" means any decal, tag, or similar designation material that
138     is attached to a vending device, whether or not used or placed by a charitable organization or
139     professional fund raiser, that would indicate that all or a portion of the proceeds from the
140     purchase of items from the vending device will go to a specific charitable organization.
141          Section 2. Section 13-22-6 is amended to read:
142          13-22-6. Application for registration.
143          (1) An applicant for registration or renewal of registration as a charitable organization
144     shall:
145          (a) pay an application fee as determined under Section 63J-1-504; and
146          (b) submit an application on a form approved by the division which shall include:
147          (i) the organization's name, address, telephone number, facsimile number, if any, and
148     the names and addresses of any organizations or persons controlled by, controlling, or affiliated
149     with the applicant;
150          (ii) the specific legal nature of the organization, that is, whether [it] the organization is
151     an individual, joint venture, partnership, limited liability company, corporation, association, or
152     other entity;
153          (iii) the names and residence addresses of the officers and directors of the organization;
154          (iv) the name and address of the registered agent for service of process and a consent to
155     service of process;
156          (v) the purpose of the solicitation and use of the contributions to be solicited;
157          (vi) the method by which the solicitation will be conducted and the projected length of
158     time [it] the solicitation is to be conducted;
159          (vii) the anticipated expenses of the solicitation, including all commissions, costs of
160     collection, salaries, and any other items;
161          (viii) a statement of what percentage of the contributions collected as a result of the
162     solicitation are projected to remain available for application to the charitable purposes declared
163     in the application, including a satisfactory statement of the factual basis for the projected
164     percentage;
165          (ix) a statement of total contributions collected or received by the organization within
166     the calendar year immediately preceding the date of the application, including a description of
167     the expenditures made from or the use made of the contributions;
168          (x) a copy of any written agreements with any professional fund raiser involved with
169     the solicitation;
170          (xi) disclosure of any injunction, judgment, or administrative order or conviction of
171     any crime involving moral turpitude with respect to any officer, director, manager, operator, or
172     principal of the organization;
173          (xii) a copy of all agreements to which the applicant is, or proposes to be, a party
174     regarding the use of proceeds for the solicitation or fundraising;
175          (xiii) a statement of whether [or not] the [charity] charitable organization, or [its] the
176     charitable organization's parent foundation, will be using the services of a professional fund
177     raiser or of a professional fund raising counsel or consultant;
178          (xiv) if either the [charity or its] charitable organization or the charitable organization's
179     parent foundation will be using the services of a professional fund raiser or a professional fund
180     raising counsel or consultant:
181          (A) a copy of all agreements related to the services; and
182          (B) an acknowledgment that fund raising in the state will not commence until both the
183     charitable organization, its parent foundation, if any, and the professional fund raiser or
184     professional fund raising counsel or consultant are registered and in compliance with this
185     chapter; [and]
186          (xv) any documents required under Section 13-22-15; and
187          [(xv)] (xvi) any additional information the division may require by rule.
188          (2) If any information contained in the application for registration becomes incorrect or
189     incomplete, the applicant or registrant shall, within 30 days after the information becomes
190     incorrect or incomplete, correct the application or file the complete information required by the
191     division.
192          (3) In addition to the registration fee, an organization failing to file a registration
193     application or renewal by the due date or filing an incomplete registration application or
194     renewal shall pay an additional fee of $25 for each month or part of a month after the date on
195     which the registration application or renewal were due to be filed.
196          (4) Notwithstanding Subsection (1)(a), the registration fee for a certified local museum
197     under Section 9-6-603 is [65% of] $25 less than the registration fee established under
198     Subsection (1).
199          Section 3. Section 13-22-8 is amended to read:
200          13-22-8. Exemptions.
201          (1) Section 13-22-5 does not apply to:
202          (a) a solicitation that an organization conducts among [its] the organization's own
203     established and bona fide membership exclusively through the voluntarily donated efforts of
204     other members or officers of the organization;
205          (b) a bona fide religious, ecclesiastical, or denominational organization if:
206          (i) the solicitation is made for a church, missionary, religious, or humanitarian purpose;
207     and
208          (ii) the organization is either:
209          (A) a lawfully organized corporation, institution, society, church, or established
210     physical place of worship, at which nonprofit religious services and activities are regularly
211     conducted and carried on;
212          (B) a bona fide religious group:
213          (I) that does not maintain specific places of worship;
214          (II) that is not subject to federal income tax; and
215          (III) not required to file an IRS Form 990 under any circumstance; or
216          (C) a separate group or corporation that is an integral part of an institution that is an
217     income tax exempt organization under 26 U.S.C. Sec. 501(c)(3) and is not primarily supported
218     by funds solicited outside [its] the group's or corporation's own membership or congregation;
219          (c) a solicitation by a broadcast media owned or operated by an educational institution
220     or governmental entity, or any entity organized solely for the support of that broadcast media;
221          (d) except as provided in Subsection 13-22-21(1), a solicitation for the relief of any
222     person sustaining a life-threatening illness or injury specified by name at the time of
223     solicitation if the entire amount collected without any deduction is turned over to the named
224     person;
225          (e) a political party authorized to transact [its] the political party's affairs within this
226     state and any candidate and campaign worker of the political party if the content and manner of
227     any solicitation make clear that the solicitation is for the benefit of the political party or
228     candidate;
229          (f) a political action committee or group soliciting funds relating to issues or candidates
230     on the ballot if the committee or group is required to file financial information with a federal or
231     state election commission;
232          (g) any school accredited by the state, any accredited institution of higher learning, or
233     club or parent, teacher, or student organization within and authorized by the school in support
234     of the operations or extracurricular activities of the school;
235          (h) a public or higher education foundation established under Title 53A, State System
236     of Public Education, or Title 53B, State System of Higher Education;
237          (i) a television station, radio station, or newspaper of general circulation that donates
238     air time or print space for no consideration as part of a cooperative solicitation effort on behalf
239     of a charitable organization, whether or not that organization is required to register under this
240     chapter;
241          (j) a volunteer fire department, rescue squad, or local civil defense organization whose
242     financial oversight is under the control of a local governmental entity;
243          (k) any governmental unit of any state or the United States; and
244          (l) any corporation:
245          (i) established by an act of the United States Congress; and
246          (ii) that is required by federal law to submit an annual report:
247          (A) on the activities of the corporation, including an itemized report of all receipts and
248     expenditures of the corporation; and
249          (B) to the United States Secretary of Defense to be:
250          (I) audited; and
251          (II) submitted to the United States Congress.
252          (2) Any organization claiming an exemption under this section bears the burden of
253     proving its eligibility for, or the applicability of, the exemption claimed.
254          (3) Each organization exempt from registration pursuant to this section that makes a
255     material change in [its] the organization's legal status, officers, address, or similar changes shall
256     file a report informing the division of [its] the organization's current legal status, business
257     address, business phone, officers, and primary contact person within 30 days of the change.
258          (4) The division may by rule:
259          (a) require [organizations] an organization that is exempt from registration [pursuant
260     to] under this section to:
261          (i) file a notice of claim of exemption; and
262          (ii) file a renewal of a notice of claim of exemption;
263          (b) prescribe the contents of [the] a notice of claim of exemption and a renewal of a
264     notice of claim of exemption; and
265          (c) require a filing fee for [the] a notice[,] of claim of exemption and a renewal of a
266     notice of claim of exemption as determined under Section 63J-1-504.
267          Section 4. Section 13-22-15 is amended to read:
268          13-22-15. Financial reports required.
269          (1) (a) [Each] Except as provided in Subsection (1)(c), as part of a charitable
270     organization's application for registration or renewal of registration described in Section
271     13-22-6, each charitable organization [registered under this chapter] shall file [each year of
272     registration]:
273          (i) an annual financial report [or] on a form prescribed by the division;
274          (ii) an IRS Form 990, 990EZ, 990N, or 990PF[. The financial report or IRS Form 990,
275     990EZ, or 990PF shall be filed with the division within 30 days after the end of the year
276     reported . If an annual financial report or IRS Form 990, 990EZ, or 990PF are]; or
277          (iii) both the documents described in Subsections (1)(a)(i) and (ii).
278          (b) The division shall instruct each applicant for registration or renewal of registration
279     as a charitable organization on which documents to file under Subsection (1)(a).
280          (c) If a document required under Subsections (1)(a) and (b) is not available during [its]
281     the charitable organization's first year of registration, upon request from the division, the
282     charitable organization shall provide a quarterly financial [reports] report to the division within
283     30 days after the [end of the quarter reported] day on which the division requests the quarterly
284     financial report.
285          (2) Each annual or quarterly financial report shall disclose:
286          (a) the gross amount of contributions received;
287          (b) the amount of contributions disbursed or to be disbursed to each charitable
288     organization or charitable purpose represented;
289          (c) aggregate amounts paid to any professional fund raiser;
290          (d) amounts spent for overhead, expenses, commissions, and similar purposes; and
291          (e) unless disclosed in another part of the charitable organization's application for
292     registration or renewal of registration, the name and address of any professional fund raiser
293     used by the charitable organization.
294          (3) Each report required under this section shall be signed under oath by an officer or
295     principal of the charitable organization.
296          [(4) The registration of any organization that fails to file a timely report or IRS Form
297     990, 990EZ, or 990PF as required in this section or files an incomplete report or IRS Form 990,
298     990EZ, or 990PF is automatically suspended pending a final order of the division under
299     Section 13-22-12. The division may reinstate the registration after receiving:]
300          [(a) a report or IRS Form 990, 990EZ, or 990PF fulfilling the requirements of this
301     section;]
302          [(b) an application for renewed registration; and]
303          [(c) a penalty of $25 for each month or part of a month after the date on which the
304     quarterly report or IRS Form 990 was due to be filed.]
305          (4) (a) If a charitable organization fails to timely file a quarterly financial report in
306     accordance with Subsection (1)(c), the charitable organization's registration is immediately and
307     automatically suspended pending a final order of the division under Section 13-22-12.
308          (b) The division may reinstate the charitable organization's registration after the
309     division receives:
310          (i) the quarterly financial report requested in accordance with Subsection (1)(c); and
311          (ii) a penalty of $25 for each full or partial calendar month after the day on which the
312     quarterly report was due.
313          Section 5. Section 13-22-16 is amended to read:
314          13-22-16. Separate accounts and receipts required.
315          (1) (a) Each [organization required to be registered under this chapter and each]
316     professional fund raiser shall segregate and maintain all contributed funds in an account held
317     separately from [its] the professional fund raiser's operating account.
318          (b) Each contribution in the control or custody of the professional [solicitor] fund raiser
319     shall, [in its entirety and within] no later than 10 days [of its receipt,] after the day on which the
320     contribution is received, be deposited [in] into an account at a bank or other federally insured
321     financial institution [which shall be] that is in the name of the charitable organization.
322          (c) The charitable organization shall maintain and administer the account and shall
323     have sole control of all withdrawals.
324          (2) Each organization required to be registered under this chapter and each professional
325     fund raiser shall [maintain and use duplicate receipts for contributions of money, securities, and
326     cash equivalents so that one receipt is issued to each contributor and one is maintained by the
327     charitable organization.]:
328          (a) maintain a record of each contribution of money, securities, or cash equivalent
329     sufficient to allow the organization or professional fund raiser to provide a receipt to the
330     contributor upon request or as required by law; and
331          (b) provide a contributor a receipt for each contribution upon request or as required by
332     law.
333          (3) An organization required to be registered under this chapter and each professional
334     fund raiser shall develop and maintain adequate internal controls for receipt, management, and
335     disbursement of money that are reasonable in light of the organization's or professional fund
336     raiser's assets and organizational complexity.