Charitable Solicitations Info

Legislature Adopts Changes in Charitable Solicitations Regulations

Secretary of State Sam Reed and members of the group that worked on SHB 1777 celebrate the governor's signature on the bill

The 2007 Session of the Washington legislature adopted SHB 1777 by unanimous votes in both houses. This bill makes numerous revisions to Chapter 19.09 of the Revised Code of Washington, the “Charitable Solicitations Act.”

EA Public Policy staff Putnam Barber has prepared a presentation that outlines the regulations governing charitable solicitations in Washington state and highlights the changes that will come as SHB takes effect.

This document, “Soliciting for Charity in Washington” is available as a .pdf file here.

It will take some time for the changes contained in SHB 1777 to take effect; many of them require the Secretary of State to adopt rules under the Administrative Procedures Act. As the rules are developed, Executive Alliance will monitor the process and post information here to keep members and others with an interest informed.

Click here for an outline of the requirements of the Charitable Solicitations Act as it stands today with notes highlighting the effect of the proposed changes.

2007 proposals for revision of RCW 19.09 (Charitable Solicitations)

There is a draft of proposed legislation revising RCW 19.09 -- Washington's Charitable Solicitations Act. Generally, this act requires organizations and commercial firms that raise money from the public for charitable purposes to register with the state and report the financial details of their fundraising campaigns. See the proposed 2007 Charities Legislation and Explanatory Sheet at www.secstate.wa.gov/charities/.

The 2007 version responds to the comments that were made at the six town-hall meetings held last summer across the state and has benefited from detailed suggestions from the Task Force appointed by the Secretary of State in the fall of 2006. The new proposals will, if adopted by the legislature, result in a more effective and less burdensome charitable solicitations program in Washington while making clear that accurate financial reports must be available to maintain public trust in organizations that raise funds from the public. Major provisions of the 2007 draft include authority for the Secretary of State to adopt rules (following the Administrative Procedures Act) to:

(1) Require larger organizations covered by the act to secure independent review of financial results. For organizations with more than $1 million in annual revenues, the rule may require that their normal federal filings be prepared or reviewed by an independent expert. For most organizations, this requirement would affect the Form 990 that they enclose with their report to the state; the new rules would also deal with organizations that do not, for one reason or another file a Form 990. Organizations with more than $3 million in annual revenues would routinely be required also to include with their report to the state a copy of an audited financial statement. In both cases, the calculation of the threshold is to be based on the average of the three preceding years revenues. The familiar registration and reporting requirements will still apply to organizations whose revenues are below these thresholds and who are not otherwise excluded.

(2) Permit adoption of a new fees to support an education program for organizations covered by 19.09, their boards, and the general public.

(3) Provide for reciprocal agreements with other states that set conditions allowing organizations that operate elsewhere to file with their home states in lieu of reporting under Washington's law.

Boards will be required to review and accept financial reports to be filed with the state under this act. A penalty may be imposed on an organization that files a financial report that is incorrect in "any material way." Contracts between commercial fundraisers and charitable organizations must be filed before any work is done.

The 2007 draft also clarifies several definitions and improves the presentation of the types of organizations and charitable appeals that are excluded from its requirements. The effect of these changes is to make clear that, among other exclusions, "fundraising counsel" and “commercial coventurers” do not have to register and that the act does not apply to an appeal for a named person (such as a family that has lost their home in a fire) so long as all the proceeds go directly to that person. Further changes in the definitions are discussed below.

The draft gives the Secretary of State the authority to operate an education program and to appoint an advisory council to assist with the design of that program and more generally with the administration of the charitable solicitations program. In the definitions section there are these changes:

"Charitable purposes" are defined using language based on the Internal Revenue Code and IRS regulations, while extending the concept to include explicitly the benefiting of persons who protect public safety such as police and firefighters.

"Church" and "religious organizations" are defined separately to allow greater clarity for the point that churches are excluded while social welfare and similar programs operating within a religious context are required to comply with the Charitable Solicitations Act.

"Fund-raising counsel" (a consultant who does not conduct campaigns or receive money) and "commercial coventurer" (a seller who says that part of the proceeds of a sale will go to a charitable purpose) are excluded from the definition of "commercial fund raiser." A major purpose of RCW 19.09 is, of course, to require commercial fund raisers to register with the secretary of state and to file reports on the fundraising that they do on behalf of client charitable organizations.

This proposal retains from 2006 the provisions that will facilitate electronic filing. It does not contain any proposals affecting RCW 11.110 -- the charitable trusts statute. As in the 2006 proposals, the provision that allows the filing of a single report for a group of related organization by an "umbrella organizations" is removed.

Meeting with Secretary of State Sam Reed, May 9, 2006

Susie Burdick and Put Barber met with Sec. of State Sam Reed in Tacoma to discuss the concerns that Executive Alliance and others in the nonprofit sector have with respect to proposals to amend Washington statutes governing the activities of nonprofits and commercial fundraisers. Also attending: Mike Ricchio, Director of the Corporations Division; Rebecca Sherrill, head of the Charities Program; and Shane Hamlin, Legislative Liaison (all of the Office of the Secretary of State). Laura Hitchcock, who had planned to join the meeting as well, was unable to be present.

Sec. Reed began the conversation by expressing frustration that although there is widespread agreement on the need for accountability and transparency in the work of nonprofits, specific proposals to increase accountability and transparency often encounter strong resistance from the field. In response, Put Barber pointed out that most nonprofits are already following what they believe to be good procedures to assure accountability and transparency. As a result, when proposals are made that might require changes and expose organizations to the risk of bad publicity or penalties for failing to adopt new procedures, it takes a lot to convince their leaders that the new ideas are enough better than existing practices to justify the change. Susie Burdick added that when organizations have not been involved in the process of identifying the problems and devising proposals to address them, it is even more difficult to secure a favorable reaction.

Mike Ricchio responded by saying that his goal this year is to assure adequate consultation and communication so that any proposals are widely understood before they are introduced. Sec. Reed asked what sorts of consultation should be organized. Susie Burdick and Put Barber responded by saying that small group of knowledgeable people should be asked to serve as a sounding board to give feedback and advice as the proposals are refined, that public meetings should be convened in several parts of the state – relying on local nonprofit centers where possible for assistance in pulling them together – and that the practices of consulting with organized groups (such as the accountants and the attorneys) and of publishing drafts on the Office of the Secretary of State (OSOS) website (www.secstate.wa.gov) and inviting comments through correspondence should be continued. There seemed to be agreement that all four approaches should be followed. A general conversation about how to organize the committee and the community meetings followed; Shane Hamlin appeared to be taking responsibility for next steps.

Mike Ricchio expressed concern about the pressures he is seeing from various parts of the federal government to gain deeper access to information collected for administrative purposes by state officials; the federal interest reflects a concern that corporations (both for profit and nonprofit) may be used as conduits for financing or organizing of terrorist activities. He suggested that the review of Washington’s nonprofit statutes should be conducted with this federal interest in mind. Put Barber mentioned the recent publication of an exposure draft for a new Model Nonprofit Corporation Act by the ABA. Mike Ricchio said that most of the interest in the Model Act would probably be in the Attorney General’s office (not OSOS), though of course he would be looking for elements of the Model Act that should be adopted to align the practices of his office with other states and with contemporary views of good procedure.

At the end of the meeting, everyone agreed that we look forward to working together over the next few months to develop a proposal that can be ready for consideration well before the legislature convenes in January 2007.

-- Putnam Barber, 5/11/06