Laws & Regulations
Links to topics below
- Notice of Amendments to Regulations
- Section 100-Telephone Number Changes and Contact Information Updates, pdf
- California Law On Charitable Solicitations - Business and Professions Code Sections 17510 - 17510.95
- California Law on the Supervision of Trustees and Fundraisers for Charitable Purposes - Government Code sections 12580-12599.8.
- California Regulations on the Supervision of Trustees and Fundraisers for Charitable Purposes - Title 11, Division 1, Chapter 4, sections 300-316., pdf
- California Regulations on Nonprofit Corporations Relating to Transactions Requiring Notice to or Approval by Attorney General - Title 11, Chapter 15, sections 999.1-999.5, pdf
- California Regulations on Administrative Enforcement of the Supervision of Trustees and Fundraisers for Charitable Purposes Act – Title 11, Division 1, Chapter 15, Sections 999.6-999.9.5., pdf
Nonprofit Integrity Act of 2004 FAQ
The Nonprofit Integrity Act of 2004 amended existing law, including the Supervision of Trustees and Fundraisers for Charitable Purposes Act (Government Code sections 12580-12599.7), which requires registration and annual reporting by all charitable corporations, unincorporated associations, trustees, and other legal entities holding property for charitable purposes, commercial fundraisers for charitable purposes, fundraising counsel for charitable purposes, and commercial coventurers, over which the Attorney General has enforcement or supervisory powers. The Nonprofit Integrity Act of 2004 did not alter the range of persons and entities that are subject to the registration and reporting requirements.
The law’s application is not limited to entities that are tax exempt under section 501(c)(3) of the Internal Revenue Code, which pertains to charities. With certain limited exceptions, the law applies to any person holding money or property for charitable purposes. This includes entities that are tax exempt under other subsections of section 501(c), entities that are not tax exempt, and for-profit entities, if, apart from their general purposes, they hold assets for charitable purposes. If, for example, a social club or fraternal organization holds a fundraising event for a charitable purpose, such as creation of a college scholarship fund, the moneys it collects are held as a charitable trust and it is subject to the law.
The law applies to all foreign charitable corporations (corporations formed under the laws of other states) doing business or holding property in California for charitable purposes. Doing business in California includes soliciting donations in California by mail, by advertisements in publications, or by any other means from outside of California that satisfy the constitutional "minimum contacts" test. Other examples of doing business in California include engaging in any of the following activities in California: holding meetings of the board of directors or corporate members here, maintaining an office here, having officers or employees who perform work here, and/or conducting charitable programs here.
In general, if a foreign charity´s sole contact with California is that it makes grants to persons, programs or charitable organizations located in California, or maintains financial accounts or investments at an office of a financial institution located in California, it is not considered to be doing business in California for purposes of compliance with Government Code section 12580 et seq.
The law applies to all commercial fundraisers for charitable purposes who solicit charitable donations, including donations of salvageable personal property, in California, or who receive any funds, assets, or property as a result of a solicitation in this state for charitable purposes, or who employ any compensated person to solicit, receive, or control funds, assets, or property for charitable purposes here.
The law applies to all fundraising counsel for charitable purposes who for compensation plan, manage, advise, counsel, consult, or prepare material for any charitable solicitation in this state.
(Government Code sections 12581, 12582, 12582.1, 12583, 12586(a), 12599(a), 12599.1(a); Business and Professions Code section 17510.)
"Gross revenue" under that section is the same as "total revenue," which currently appears on Line 12 of IRS Form 990 for public charities and Line 12, column (a) for private foundations. Follow instructions for IRS Form 990 and 990-PF, Part I, Line 12.
Yes. Follow instructions for IRS Form 990, Part I, Line 1.
Income from special events will be treated as reported on IRS Form 990. Follow instructions for IRS Form 990, Part I, Lines 9a through 9c.
The statute does not provide for an exemption for such donations. Follow instructions for IRS Form 990, Part I, Line 1.
No; the statute is not retroactive, although the Attorney General has the power, under investigative powers conferred by other statutory provisions, to require production of such financial statements.
The audited financial statement and notes to the statement must be released to the public. The management letter is not part of the audited financial statement and is not required to be released to the public.
No. The statute does not provide for an extension of time.
The audit committee may include persons who are not members of the board, but may not include any members of the staff of the corporation, including the president or CEO or the treasurer or CFO. (Government Code 12586(e)(2).)
The committee may consist of a single member.
Corporations Code section 5212 provides that the board may appoint one or more committees that, to the extent provided by resolution of the board or in the bylaws (and with certain reservations), shall have all the authority of the board.
Government Code section 12586(e)(2) states that, subject to supervision by the board, the audit committee shall recommend to the board the retention and termination of the independent auditor and may negotiate the auditor’s compensation. With respect to those functions, the audit committee does not have all the authority of the board because section 12586(e)(2) expressly makes the powers of the audit committee "subject to the supervision of the board of directors." Section 12586(e)(2) controls over section 5212 because it is more specific. For all other responsibilities outlined in subsection (e)(2), the audit committee does function as a section 5212 committee if all of the committee members are members of the board. If, however, the audit committee includes a non-board member, all of the committee’s actions are subject to the supervision of the board.
Regardless of how the audit committee is constituted and regardless of what functions it performs, a director must perform the duties of a director in compliance with the provisions of Corporations Code section 5231.
The organization may wait until the occurrence of one of the events set forth in the statute to conduct its initial review of compensation. Those events are the hiring of the officer, the renewal or extension of the term of the officer's employment, and the modification of the officer´s compensation.
This compensation review requirement does not supersede the existing fiduciary duties of officers, directors, and trustees in managing charitable organizations. They have a continuing duty to pay compensation to officers and directors that does not exceed what is fair and reasonable to the organization, and may incur personal liability for paying excessive compensation. Therefore, the payment of excessive compensation at any time is a violation of the law. (Government Code section 12586(g); Corporations Code section 5235.)
No. As stated above, however, the members of the board of directors have a continuing duty to pay compensation that does not exceed what is fair and reasonable to the charity. Moreover, if a staff member actually performs the duties and functions of a president or CEO or a treasurer or CFO, a charity may not avoid the compensation review required by the Act by giving that person a different job title. (See California Code of Regulations, title 11, section 312.1., pdf)
- Penal Code section 320.5, pdf
- Nonprofit Raffle Program Regulations - Title 11, Division 1, Chapter 4.6, sections 410-426, pdf
Nonprofit Hospital Transactions
- Amendments to Regulations Regarding Nonprofit Health Facility Transactions
(Title 11, Chapter 15, Section 999.5)
- California Law on Nonprofit Hospital Transactions - Corporations Code section 5914 et seq., pdf
- California Regulations on Nonprofit Hospital Transactions - Title 11, Chapter 15, section 999.5, pdf