Senate Bill No. 107

Senate Bill No. 107-Committee on Commerce and Labor

(On Behalf of the Office of the Attorney General)

February 3, 1997
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Referred to Committee on Commerce and Labor

SUMMARY--Provides for regulation of solicitations for contributions to charitable organizations. (BDR 52-609)

FISCAL NOTE: Effect on Local Government: Yes.

Effect on the State or on Industrial Insurance: Yes.

EXPLANATION - Matter in italics is new; matter in brackets [ ] is material to be omitted.

AN ACT relating to charitable solicitations; providing for the regulation of solicitations for contributions to charitable organizations; requiring the disclosure of certain information to persons being solicited for such contributions; requiring charitable organizations and professional fund-raisers to maintain certain records; providing civil penalties; and providing other matters properly relating thereto.

THE PEOPLE OF THE STATE OF NEVADA, REPRESENTED IN SENATE AND ASSEMBLY, DO ENACT AS FOLLOWS:

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Section 1 Title 52 of NRS is hereby amended by adding thereto a new chapter to consist of the provisions set forth as sections 2 to 22, inclusive, of this act.
Sec. 2 As used in this chapter, unless the context otherwise requires, the words and terms defined in sections 3 to 7, inclusive, of this act, have the meanings ascribed to them in those sections.
Sec. 3 1. "Charitable organization" means a person who:
(a) The Secretary of the Treasury has determined to be tax exempt pursuant to the provisions of section 501(c)(3) of the Internal Revenue Code; or
(b) Is, or holds himself out to be, established for a charitable purpose.
2. The term does not include a bona fide religious institution or a group or corporation which forms an integral part of such a religious institution if:
(a) The religious institution, group or corporation is tax exempt under the Internal Revenue Code;
(b) No part of the net income of the religious institution, group or corporation inures to the direct benefit of any person; and
(c) The conduct of the religious institution, group or corporation is primarily supported by governmental or private grants or contracts, money solicited from its members, fees charged for the services it provides or any combination thereof.
Sec. 4 "Charitable purpose" means:
1. A benevolent, philanthropic, patriotic, educational, humane, scientific, public health, public safety, environmental, conservational, civic, social welfare or advocacy, or other eleemosynary purpose; or
2. Any purpose for the benefit of personnel of law enforcement agencies, fire fighters, or other persons who protect the public safety.
Sec. 5 1. "Contribution" means a promise, grant or pledge of money, credit, property, financial assistance or other thing of value, excluding voluntary services, which is given or made in response to a solicitation, including a payment or promise to pay in consideration of performance, for admission to an event or for goods or services.
2. The term does not include:
(a) The payment by a member of a charitable organization to the organization for membership fees, dues, fines or assessments or for services rendered to its members, if:
(1) The payment of the fees, dues, fines or assessments confers a bona fide right, privilege, professional standing, honor or other direct benefit relating to membership; and
(2) Membership in the organization is not conferred solely as consideration for making the payment in response to a solicitation;
(b) A grant from a governmental entity; or
(c) A contract with a governmental entity.
Sec. 6 "Professional fund-raiser" means a person who, for compensation, causes or attempts to cause a solicitation for contributions. The term does not include:
1. A bona fide salaried officer or employee of a charitable organization who is employed in other than a temporary capacity;
2. A bona fide volunteer who receives a nonmonetary gift of nominal value as an incentive or a token of appreciation relating to the solicitation; or
3. A person hired by or on behalf of a charitable organization solely to prepare applications for grants or materials for use by a person specified in subsection 1 or 2 in a solicitation.
Sec. 7 "Solicitation" means a request for a contribution to a charitable organization that is made by:
1. Mail;
2. Commercial carrier;
3. Telephone, facsimile or other electronic device; or
4. A face-to-face meeting.
The term includes solicitations which are made from a location within this state and solicitations which are made from a location outside of this state to persons located within this state.
Sec. 8 A person, in planning, conducting or executing a solicitation, shall not:
1. Make any claim or representation concerning a contribution which directly, or by implication, has the capacity, tendency or effect of deceiving or misleading a person acting reasonably under the circumstances. Omission of a material fact shall be deemed to be equivalent to a false, misleading or deceptive claim or representation if the omission, when considering what has been said or implied, has or would have the capacity, tendency or effect of deceiving or misleading a person acting reasonably under the circumstances.
2. Represent that the contribution is tax deductible under the Internal Revenue Code, if the contribution is not tax deductible.
3. Make a solicitation without first obtaining all required local licenses, registrations and permits.
4. Use a name, symbol or statement which is so closely related or similar to the name, symbol or statement of another charitable organization, governmental entity or other person that the use thereof would tend to confuse or mislead the person being solicited.
5. State or imply that the person on whose behalf the solicitation is made is a charitable organization or that the proceeds of the solicitation will be used for charitable purposes if the person is not a charitable organization or the proceeds will not be so used.
6. State or imply that any goods or services offered in connection with the solicitation have sponsorship, approval, characteristics, ingredients, uses or benefits that the goods or services do not have.
7. State or imply that the person making the solicitation has the sponsorship or approval of, or a status, affiliation or other connection with the charitable organization that he does not have.
8. State or imply that the charitable organization will receive for its use an amount of money from the contributions solicited which is greater than the amount reasonably estimated to be received by the charitable organization.
9. State or imply that any part of the contribution solicited will be given or donated to any other person or organization unless that person or organization has consented in writing to the use of his name before the solicitation is made. The written consent of an organization must be signed by at least two authorized officers, directors or trustees of the organization.
10. State or imply that the contribution solicited will be used for tickets or other opportunities for admission into an event that will be donated to another person or organization, unless the charitable organization or professional fund-raiser:
(a) Has first obtained a written statement from the person or organization to whom the tickets or other opportunities for admission will be donated which states that the person or organization will accept the donated tickets or opportunities for admission and indicates the specific number of tickets and opportunities for admission that the person or organization will accept; and
(b) Solicits for and accepts no more donations than required to provide the actual number of total commitments specified in the written statements pursuant to paragraph (a).
A written statement of acceptance executed pursuant to paragraph (a) by a person or organization does not, by itself, constitute written consent of that person or organization to use his name in the solicitation.
11. Fail, at the time that the solicitation is made, to make the disclosures required by section 9 of this act.
12. Fail to make records available to the attorney general upon his request as required pursuant to section 10 of this act.
13. Fail to submit records and information to the attorney general as required pursuant to section 11 of this act.
Sec. 9 1. At the time of making a solicitation, a charitable organization, a professional fund-raiser and any other person making a solicitation on behalf of a charitable organization shall disclose:
(a) The legal name of the charitable organization.
(b) A full and fair description of the charitable purpose for which the solicitation is being made.
(c) If requested by the person being solicited, the name and the address or telephone number of a representative of the charitable organization to whom inquiries may be addressed.
(d) If requested by the person being solicited, the source from which a financial statement of the charitable organization may be obtained. A financial statement provided to the person being solicited pursuant to this paragraph must be consistent with the annual financial report described in subsection 1 of section 11 of this act. The financial statement must disclose the assets, liabilities, revenues, expenses and account balances of the charitable organization for the preceding fiscal year. The expenses of the charitable organization must be separated into expenses for services provided by the organization, administrative costs and costs of fund-raising.
2. In addition to the information required to be disclosed pursuant to subsection 1, a professional fund-raiser shall, at the time of making a solicitation, disclose:
(a) A clear and conspicuous statement that the solicitation is being made by a professional fund-raiser;
(b) The name of the professional fund-raiser; and
(c) If requested by the person being solicited, the percentage of the money, if any, contributed to the charitable organization which will be used by the charitable organization, and the fee to be paid or the percentage of the money, if any, which is designated for payment to the professional fund-raiser, as appropriate.
Sec. 10 1. Before a charitable organization uses the services of a professional fund-raiser, the charitable organization must execute a written contract with the professional fund-raiser. The charitable organization shall maintain a copy of the contract for at least 3 years after the date on which the contract terminates.
2. The contract between a charitable organization and a professional fund-raiser must include:
(a) The legal name and address of the charitable organization.
(b) The legal name and address of the professional fund-raiser.
(c) A statement of the charitable purposes for which solicitations will be made.
(d) A statement of the respective obligations of the charitable organization and the professional fund-raiser.
(e) A statement of the minimum percentage, if any, of contributions received which will be remitted to or retained by the charitable organization. The stated percentage must include the amount which the charitable organization will use as payment of its costs of fund-raising.
(f) A statement of the percentage, if any, of the contributions received which will be remitted to the professional fund-raiser as compensation for his services. The stated percentage must include the amount which the professional fund-raiser will be reimbursed as payment for the costs which he incurs for the solicitation of contributions. If the compensation of the professional fund-raiser is not contingent upon the number or monetary value of contributions received, the compensation must be expressed as a reasonable estimate of the percentage of the contributions expected to be received, and the contract must clearly disclose the bases upon which the estimate is made.
(g) The dates on which the contract becomes effective and terminates and the approximate beginning and ending dates of each campaign of solicitations to be conducted pursuant to the contract.
(h) A description of each campaign of solicitations which the professional fund-raiser is to conduct pursuant to the contract.
3. The professional fund-raiser shall maintain for not less than 3 years after the date on which a campaign of solicitations is completed:
(a) If known, the name and address of each donor and the date and amount of his contribution;
(b) The name and address of each person soliciting contributions on behalf of the professional fund-raiser and the charitable organization, and the amount of the compensation, if any, paid to each such person; and
(c) A record of all expenses incurred by the professional fund-raiser on behalf of the charitable organization in the course of the campaign of solicitations.
4. Upon the request of the attorney general, the charitable organization and the professional fund-raiser shall make available for inspection by the attorney general their records relating to the activities of the campaign of solicitations, including those records which must be kept pursuant to this section. The records must be made available for inspection not later than 5 working days after the date on which the attorney general makes the request for inspection.
Sec. 11 1. Not later than 3 months after the end of its fiscal year, a charitable organization shall submit to the attorney general:
(a) An annual financial report which contains:
(1) A balance sheet;
(2) Statements which indicate the gross revenue of the charitable organization, including statements of revenue, expenses and changes in its account balances;
(3) The amount of money received by the charitable organization during the previous fiscal year from its campaigns of solicitations and other fund-raising activities;
(4) The amount of expenditures for supplies, equipment, goods, services, programs, activities and other expenses; and
(5) A detailed list of the salaries and wages paid and expenses allowed to each officer and employee of the charitable organization.
(b) The names of the members of the board of directors, if applicable.
(c) The names and titles of the officers of the charitable organization, if applicable.
(d) The name of each professional fund-raiser under contract with the charitable organization during the previous fiscal year, including the name and address of the professional fund-raiser and the amount of money paid to the professional fund-raiser as compensation for his services for fund-raising during the previous fiscal year.
2. In lieu of an annual financial report described in subsection 1, a charitable organization may submit a copy of its most recent Form 990 and Schedule A which the charitable organization filed with the Internal Revenue Service.
3. Records submitted to the attorney general pursuant to this section must be made available for inspection by the public at the office of the attorney general.
Sec. 12 1. The attorney general:
(a) Shall enforce the provisions of this chapter.
(b) May investigate suspected violations of the provisions of this chapter.
(c) May institute proceedings on behalf of this state for injunctive relief, civil penalties as provided in section 21 of this act, restitution, appointment of a receiver, or such other equitable relief as the attorney general deems appropriate for the violation of the provisions of this chapter.
2. A district attorney in this state:
(a) With the permission of the attorney general, may institute proceedings in the name of the State of Nevada for any violation of the provisions of this chapter; and
(b) At the direction of the attorney general, shall institute proceedings in the name of the State of Nevada for any violation of the provisions of this chapter.
Sec. 13 1. The attorney general may conduct an investigation to determine whether a person, either directly or indirectly, has violated, is violating or is about to violate any of the provisions of this chapter.
2. If the attorney general has reason to believe that any person, either directly or indirectly, has violated, is violating or is about to violate any of the provisions of this chapter, the attorney general may:
(a) Issue a subpoena to require the testimony of any person;
(b) Issue a subpoena to require the production of any documents; or
(c) Administer an oath or affirmation to any person providing testimony pursuant to a subpoena.
3. A subpoena issued pursuant to this section must be served in the manner provided in the Nevada Rules of Civil Procedure.
Sec. 14 1. If the attorney general has reasonable cause to believe that a person has information or is in possession, custody or control of any document or other tangible evidence relevant to an investigation for violation of any provision of this chapter, he may issue in writing and cause to be served upon that person, before bringing any action concerning such a violation or suspected violation, an investigative demand to:
(a) Appear and be examined under oath;
(b) Answer written interrogatories under oath; or
(c) Produce the document or other tangible evidence for inspection and copying.
2. The demand must:
(a) Be served upon the person in the manner required for service of process in this state or by certified mail with return receipt requested. An employee of the attorney general may personally serve the demand.
(b) State the section or sections of this chapter alleged to have been violated and the general nature of the investigation.
(c) Describe the class or classes of documents or other tangible evidence with sufficient definiteness to permit them to be fairly identified.
(d) Contain a copy of the written interrogatories, if any.
(e) Prescribe a time at which the person must appear to testify, or within which to answer the written interrogatories or produce the documents or other tangible evidence. Inspection of documentary material or other tangible evidence may be carried out at the place where the documents or evidence are located if the production of the material would be burdensome to the person being investigated or if preferred by the attorney general.
(f) Specify a place for the taking of testimony or the production of evidence and identify the person who is to take custody of the document or other tangible evidence for the purposes of inspection or copying.
3. A written investigative demand may not require the submission of any privileged documentary material or testimony.
Sec. 15 Any procedure, testimony taken, document or other tangible evidence produced, or answer made pursuant to section 14 of this act must be kept confidential by the attorney general before the institution of any action pursuant to the provisions of this chapter for the alleged violation of those provisions under investigation, unless:
1. Confidentiality is waived by the person upon whom the written investigative demand is made; or
2. Disclosure is authorized by the district court.
Sec. 16 If a person refuses to comply in whole or in part with a written investigative demand served on him, any district court of the State of Nevada, upon application of the attorney general, may issue an order requiring compliance. Failure to obey an order of the court issued pursuant to this section constitutes contempt of court.
Sec. 17 1. If a natural person refuses to make a written answer, testify or produce evidence pursuant to a written investigative demand on the ground that he may be incriminated thereby, any district court of the State of Nevada, upon the ex parte application of the attorney general, may order, in the name of the State of Nevada, that the natural person be released from all liability to be prosecuted or punished because of the testimony or other evidence he may be required to provide.
2. Except as otherwise provided in subsection 3, an order of immunity issued pursuant to this section is forever a bar to prosecution against the natural person for any offense shown in whole or in part by the testimony or other evidence which he is required to provide.
3. Immunity obtained pursuant to this section does not:
(a) Exempt any person from prosecution for perjury committed in the giving of his testimony; or
(b) Prevent the attorney general or a civil litigant from instituting civil proceedings against any person who violates the provisions of this chapter.
Sec. 18 If a person refuses to testify, produce evidence or answer after being granted immunity from prosecution pursuant to section 17 of this act, the attorney general may apply to any district court for an order to compel the person to testify, produce evidence or answer. Failure to obey an order of the court issued pursuant to this section constitutes contempt of court.
Sec. 19 Each public officer and his deputies, assistants, clerks, subordinates and employees shall render and furnish all the information in his possession and assistance within his power relating to an investigation carried out pursuant to the provisions of this chapter to the attorney general, his deputy or other designated representative, when so requested.
Sec. 20 1. The attorney general may accept an assurance of discontinuance of any violation of the provisions of this chapter. The assurance may include a stipulation for the payment of money to this state by the alleged violator, including, but not limited to, payment for the costs of investigation, for the costs of instituting the action or proceeding and for the restitution of any money or property acquired as a result of the violation.
2. Proof by a preponderance of evidence of a violation of an assurance given pursuant to subsection 1 constitutes prima facie evidence of a violation of the applicable statutes for the purpose of any civil action or proceeding brought thereafter by the attorney general, whether the action or proceeding is a new action or a subsequent motion or petition in a pending action or proceeding.
Sec. 21 1. Regardless of whether actual injury has occurred, if the court finds that a trustee, director, supervisor, professional fund-raiser, or other person who is paid by a charitable organization and whose duties include conducting solicitations, has negligently violated the provisions of this chapter, the court may impose on that person a civil penalty not to exceed $2,500 for each violation.
2. Regardless of whether actual injury has occurred, if the court finds that any person has intentionally, willfully, wantonly or maliciously violated the provisions of this chapter, the court may impose on that person a civil penalty not to exceed $5,000 for each violation.
3. If a person violates a court order or an injunction issued by a court as a result of a violation of this chapter, the court may, upon the complaint of the attorney general or district attorney, impose a civil penalty not to exceed $15,000 for each violation.
4. Upon the finding that a person has violated the provisions of this chapter, the court may order the person to pay attorney's fees and costs incurred in enforcing those provisions.
5. Any civil penalties, attorney's fees, costs or other amounts collected must be deposited in the state general fund.
Sec. 22 Nothing in this chapter precludes other available remedies.
Sec. 23 The amendatory provisions of this act apply only to solicitations by or on behalf of a charitable organization which occur on or after October 1, 1997.
Sec. 24. The provisions of subsection 1 of NRS 354.599 do not apply to any additional expenses of a local government that are related to the provisions of this act.