CHAPTER V CHARITABLE USES AND PURPOSES

New York Attorney General’s response to comments received about the state’s new fund-raising regulations

Assessment of Public Comment

The Attorney General received only one timely comment, from the New York State Bankers Association, to the Notice of Revised Rulemaking published on September 25, 2002 in the New York State Register. Untimely comments were received from the Alden Central School District, American Foundation for Aids Research, Association for the Blind and Visually Impaired the Association of Fundraising Professionals, A Better Chance, Cardinal Hayes Home for Children, Cayuga/Seneca Community Action Agency, Inc., Center for Reproductive Law and Policy, Center for Social and Emotional Education, The City University of New York, the Direct Marketing Association NonProfit Federation, Domican Sisters of Hope, the EPTL-SCPA Legislative Advisory Committee, Grand Street Settlement, Hawthorne Valley School, Helen Keller Worldwide, Inner City Scholarship Fund, Jewish Women’s Foundation of New York, Laudick Brown & Associates, The Leukemia & Lymphoma Society, March of Dimes, National Health Council, National Multiple Sclerosis Society-New York Chapter, The New Interdisciplinary School, New York City Ballet, New York Public Interest Research Group, NonProfit Coordinating Committee of New York, Nonprofit Finance Fund, Partnership with Children, The Pederson-Krag Center, Prep for Prep, Project FIND, Prospect Park Alliance, Public Citizen Litigation Group, Roman Catholic Diocese of Rochester, Self-Help for Women with Breast and Ovarian Cancer, The Stony Brook School, Trinity School, Washburn Partners, and the Wildlife Conservation Society.

The Attorney General has exercised his discretion to consider all comments timely and untimely. In the future, only timely comments limited to proposed regulations will be considered. There follows summaries of the comments and descriptions of proposed revisions to the proposed regulations in response thereto or explanations as to why revisions are not proposed.

Section 91.2(b)(2)(i)(j) – Comment – Untimely objections were made to the requirement in this section and similar sections that registrants file a list of the banks and other institutions holding their assets. The Attorney General previously rejected this objection when timely made in response to the Notice of Proposed Rule Making published in the New York State Register.

Response – No revisions were made. As previously stated in the Attorney General’s prior Assessment of Public Comment, this information is essential to facilitate the Attorney General’s oversight responsibilities.

Section 91.2(b)(2)(iii) – Comment – This section appears to make registration requirements applicable to institutions, such as banks, which act as custodians of a trustees’ assets but are not trustees as that term is defined in Article 8 of the EPTL.. Response – Section 91.2(b)(2)(iii) makes clear that this section applies only to trustees required to register as defined in section 90.1.

Section 91.2(b)(2)(iii)(o) and similar provisions throughout the proposed regulations – Comment – The proposed regulations could be construed to require registrants to provide the Attorney General with information concerning unrelated organizations and the personal holdings of individual officers and directors of registered charities.

Response – Section 91.2(b)(2)(iii)(o) and similar provisions throughout the regulations have been revised to make clear that the information required to be submitted by registrants is limited to that concerning nonprofit and/or for-profit legal entities which the registrant controls, is controlled by or with which the registrant is under common control.

Section 91.3(g) – Comment – Suggests that the threshold for exemption from filing annual reports pursuant to the EPTL should be raised from $25,000 to $50,000 in income and assets.

Response – No revisions were made. The $25,000 threshold is statutory in EPTL § 8-1.4(q).

Section 92.2(d) – Comment – Objects to the requirement that registrants not required to file form 990 and its attachments with the Internal Revenue Service (IRS) file such forms with the Attorney General.

Response – No revisions were made. This comment was previously made and rejected. The Attorney General has eliminated the New York form (CHAR002) and adopted IRS form 990 for all filers. Rather than burdening IRS non-filers with rarely used forms for which no software is readily available, adoption of form 990 allows all filers to avail themselves of the available 990 software, makes filings with the State of New York and many other states consistent and will speed compliance with electronic filing when implemented.

Section 92.2(b)(20) – Comment – The requirement to provide the names and addresses of other governmental agencies with which the registrant is registered is burdensome and duplicative of §§ 92.2(b)(21) & (22).

Response – No revisions were made. This comment was previously made and rejected. Information concerning the other jurisdictions in which registrants conduct activities and use charitable funds raised in New York is necessary to the Attorney General’s oversight. The information required by §§ 92.2(b)(21) & (22) concerns disciplinary proceedings and is not duplicative of that required by § 92.2(b)(20).

Section 92.2(d) – Comment – Objection to filing Schedule B (contributors’ list) to the 990 and other schedules because filing risks disclosure of confidential information.

Response – No revisions were made. This comment was previously made and rejected. The Executive Law requires filing of IRS form 990 and its schedules. New York Law exempts contributors’ lists from disclosure, and such lists are routinely removed when filed financial reports are provided to the public. See Public Officers Law § 89(2) and EPTL § 8-1.4(l). The latter provides, “The attorney general shall withhold from public inspection copies of any report filed with any other governmental agency of this state or of the United States and required by law to be kept confidential by such agency.”

Section 92.3 – Comment – The requirement to submit both CHAR497 and IRS Form 990 is redundant and the CHAR497 should contain only non-duplicative information. Objection was also made to the requirement that non-990 filers file 990s as a substitute for a CHAR002 which has been abolished.

Response – No revisions were made. This comment was previously made and rejected. Whether or not a registrant must file a 990 with the IRS, a financial report must be filed with the Attorney General. By adopting IRS form 990 in lieu of New York form CHAR002, the Attorney General has made uniform the filing requirements for all registrants and not added to the requirements applicable to any registrant.

Section 92.3(c) – Comment – Objection was made to the Attorney General’s requirement that organizations duly authorized to file consolidated reports must file separate statements for constituent organizations. The regulations do not specify the circumstances under which consolidated reports will not be permitted.

Response – No revisions were made. This comment was previously made and rejected. Executive Law § 172-b.4(a), as amended by Chapter 43 of the Laws of 2002, provides that “upon prior written authorization by the attorney general” a registered charitable organization and one or more of its affiliates may submit a consolidated report. Under generally accepted accounting principles, organizations can file consolidated returns only on the basis of the financial statements of their constituent organizations. For management and other purposes, chief financial officers routinely both breakout and consolidate the financial statements of parents, subsidiaries and other consolidating affiliates. It is the intent of the Attorney General generally to grant such authorization for affiliates that wish to file consolidated financial statements. However, in appropriate cases, the Attorney General must be able to examine the financial activities of each constituent organization.

Section 93.3(a) – Comment – Objectants misconstrued the proposed regulations and objected to the perceived requirement that the first report of a trustee registering pursuant to EPTL must be submitted within four and one-half months after the end of the first fiscal year.

Response – No revisions were made. As provided by section 8-1.4 of the EPTL, entities only required to register pursuant to EPTL must file their first reports within six months of the end of the fiscal year. See §91.3(a).

Section 94.2(b) – Comment – The required schedules concerning fund raisers that are required to be filed by charities with which they contract require information duplicative of that contained in contracts required to be filed.

Response – The schedules required to be filed by charities concerning their fundraising contracts have been modified to require summary information only.

Section §95.2(b)(1), (2) & (3) – Comment – The requirement that fund raisers disclose their residence addresses and Social Security numbers violates privacy.

Response – The requirement to provide a residence address has been changed to require the primary residence or business address at which the fund raiser may be regularly located. Article 5 of New York Tax Law requires the disclosure of fund raisers’ Social Security numbers which are generally exempt from disclosure to the public thereunder and under Article 6-A of the Public Officers Law.

Section 95.4(b) – Comment – The regulations requiring comparative bids limit the capacity of charities to engage professional fund raisers and interfere with charities’ internal management.

Response – The requirement to secure competitive bids has been temporarily eliminated from the proposed regulations. The Attorney General is continuing his review of the issues raised in the objections to proposed Section 95.4(b).

Section 95.5 – Comment – The information required to be included in fund raisers’ interim and closing statements is excessive, is highly sensitive and exceeds that required by IRS or any other jurisdiction. Many fund raisers have multiple clients and would have to submit many interim and closing statements.

Response – No revisions were made. This comment was previously made and rejected. The information required – the income and expenditures of fundraising professionals – is that mandated by the Executive Law. Such information is necessary for the Attorney General’s oversight and to inform the public. Standard business practice requires that fund raisers maintain data for each client and, therefore, reporting it to the Attorney General does not require the maintenance of any additional records.

Copyright © 2003 The Chronicle of Philanthropy