Assemblyman Jim Frazier (D-Oakley) has recently submitted AB 2855 which takes aim at how non-profits disclose their financials to the public. Non-profits have come out against the bill calling it a duplication of effort and will create a financial burden for them.
Assemblyman Frazier, who has ran on the campaign slogan “People Before Politics” has placed the bill in two separate committees where it is currently under review.
According to the Bill:
This bill would require an Internet Web site produced by, or on behalf of, a charity to contain an Internet Web page that includes a disclosure of the charity’s administrative overhead expenses and a copy of the charity’s most recent Internal Revenue Service Form 990 filing and would further require each Internet Web page on the Internet Web site to contain a direct link to that financial disclosures Internet Web page, as specified. The bill would also require a document produced by, or on behalf of, a charity for solicitation for charitable purposes to include a disclosure statement indicating the percentage of the charity’s funding spent on those administrative overhead expenses, as specified. As a violation of these requirements would be a crime, this bill would impose a state-mandated local program.
Under the bill, if a non-profit does not comply with his suggested reporting system, including dictating “font size” on a website, the Franchise Tax Board may suspend or revoke the charity’s exemption from the taxes imposed by the Corporation Tax Law.
The California Association of Nonprofits, a statewide alliance of over 10,000 organizations, calls AB 2855 “a bad bill for nonprofits” and says it places duplicative and unnecessary requirements on nonprofits, and then imposes penalties that are far out of proportion.
They wrote a letter of opposition to Assemblyman Frazier on March 23, 2016 stating the bill does not solve any problems, but creates burdens for the vast majority of non-profits. A portion of the letter says:
These provisions are duplicative and burdensome, both for nonprofits and the state. For example, the IRS Form 990 is already a public and readily available document, and the Attorney General’s office maintains a public Registry of Charities that provides information about whether a nonprofit is complying with state rules. Overhead expenses are not necessarily a negative. For example, overhead includes necessary costs that charities incur including utilities, insurance, legal compliance and health care benefits. And while a high overhead percentage could theoretically be cause for concern, it is also that case that organizations like PTAs and food pantries often have high overhead percentages merely by virtue of their high reliance on volunteers.
While we share your concern about transparency for donors, we feel the existing requirements work well for donors seeking such information. Many, many small nonprofits don’t even have web sites and many others who do already provide access to the information that AB 2855 seeks to compel. While it is not clear what problems AB 2855 would solve, it does strike us that it would create problems for the vast majority of charities which are well-run and conscientious
The California Association of Nonprofits are asking all non-profits across the state to reach out to Assemblyman Frazier’s office in opposition of this bill.
This bill comes after Assemblyman Frazier and his wife Janet Frazier announced late last year they were divorcing. Janet Frazier and their daughter now run the family non-profit “The Network of Care” which under the law will feel the burden of the reporting requirements.
Assemblyman Frazier has also been vocal to many political insiders about targeting a specific non-profit in his district with a bill targeting non-profit pay as a way to embarrass some who he believes takes home too much money. The statements Frazier has made have been corroborated by several sources, who out of fear of retaliation from Frazier, did not want to be identified.
(editors note: when we questioned Assemblyman Frazier on this bill and the damage it could put on non-profits more than a month ago, he and his office stopped communicating with this publication. It was at this point where we published an editorial on political bullying and hinted at this bill becoming a reality.)
According to a Sacramento lobbyist, who spoke on condition of anonymity, spoke with Assemblyman Frazier’s staff on why this bill was moving forward. The lobbyist was told that the Assemblyman had a beef with a certain individual in his district and was targeting that individual for the failure of one of his bills which he is now taking personally.
“After the failure of the bill, Frazier has since made threats, but that apparently is his known tactic when he does not get what he wants,” said the lobbyist. “The buzz around the capital is that non-profits are against this bill and calling it petty and punitive. It’s sad, rather than doing the right thing, the assemblyman is simply creating a lot of negative energy based on vendettas and instead should simply just let things go.”
Lisa McBride, founder and executive director of the Special Kids Foundation, says she was shocked and disappointed Assemblyman Frazier has brought this bill forward after he was once a huge champion for the non-profit.
“Why on earth would any person with an ounce of compassion, or empathy try to make our quest to support the families in our community who are challenged like we are more cumbersome, more challenging, and frankly, more work?” explained McBride. “This is disgusting. We are also paying members of Cal Nonprofits, and are grateful that they understand this bill and have the insight to speak out in support of us, as to the honest intent we all share to do good in our community for those who need a hand. What a bitter disappointment, it’s just so how disillusioning.”
David Miller, a republican challenging Frazier for his assembly seat this fall, said off the top of the head, he can think of several non-profits in Contra Costa and Solano Counties who would be vehemently opposed to the bill. He noted that government should be making it easier for non-profits to serve the public, not create more burdens.
“I am confident that all non-profit organizations in general, are working in the public’s behalf. It is in the best interest of the Legislature to not try to legislate non-profits, both large and small, because of the constant and selfless good work they do,” said Miller. “One can only surmise, and I really hope I’m wrong, now that Assemblyman Frazier who regrettably is divorcing his wife, isn’t just doing this to simplify ways of keep tabs on how his wife administers their family non-profit, which doesn’t deserve this kind of state scrutiny, and I can think of literally hundreds of others that don’t either.”
At this time, its unclear if Assembly Speaker Anthony Rendon supports or opposes the bill, however, prior to his election in the State Assembly in 2012, Rendon led Plaza de la Raza Child Development Services, Inc., a nonprofit provider of comprehensive child development and social and medical services to over 2,300 children and families offered through thirty-five child development centers located throughout Los Angeles County. Before working at Plaza, Rendon served as the Interim Executive Director of the California League of Conservation Voters from 2008 to 2009.
Here is a look at the AB 2855
Section 17510.86 is added to the Business and Professions Code, to read:
(a) An Internet Web site produced by, or on behalf of, a charity that operates, or engages in the solicitation for charitable purposes of funds or other property, in this state shall comply with both of the following:
(1) The Internet Web site shall contain a financial disclosures Internet Web page, which shall include both of the following:
No reimbursement is required by this act pursuant to Section 6 of Article XIII B of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIII B of the California Constitution.