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The Charitable Solicitation Model Act was published in 1986 by the National Association of Attorneys General Committee on Trusts and Solicitations and The National Association of State Charity Officials (NASCO) and The Private Sector Advisory Group.  These groups came together to draft this model act to stand as a standardized guideline for the state by state regulation of the solicitation of charitable donations from the public.  Though each state has its own regulations, this model act serves as the root source for nearly all such state laws.

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A Model Act Concerning the Solicitation of Funds for Charitable Purposes

Prepared by
The National Association of Attorneys General Committee on Trusts and Solicitations
Joseph I. Lieberman, Chairman

and
The National Association of State Charity Officials
Ed J. Edgerton, President

and
The Private Sector Advisory Group
John J. Schwartz, Chairman

A MODEL ACT CONCERNING THE SOLICITATION OF FUNDS FOR CHARITABLE PURPOSES

  • Section 1. Definitions
  • Section 2. Annual Registration Requirement for Charitable Organizations
  • Section 3. Annual Financial Report; Audit Requirement
  • Section 4. Exemptions
  • Section 5. Requirements for Fund Raising Counsel
  • Section 6. Registration, Contract and Disclosure Requirements for Paid Solicitors
  • Section 7. Charitable Sales Promotions
  • Section 8. Point-of-Solicitation Disclosure Requirements for Charities
  • Section 9. Agreements, Registration Forms, Reports, and Other Documents to be Public Records
  • Section 10. Fiscal Records; Inspection; Retention
  • Section 11. Exchange of Information with other States
  • Section 12. Rules and Regulations
  • Section 13. Examination of Books, Records and Witnesses
  • Section 14. Penalty for Non-Compliance
  • Section 15. Substitute Service upon Secretary of State
  • Section 16. Deceptive Actions or Practices and Failing to Comply with the Requirements of this Statute Declared Unlawful
  • Section 17. Suspension and Revocation of Registration; Penalties; Enforcement
  • Section 18. Charitable Organizations Deemed Fiduciaries
  • Section 19. Severability

Private Sector Advisory Group To The Model Solicitations Law Project of the National Association of
Attorneys General (NAAG) and National Association of State Charity Officials (NASCO)

A Summing Up 

October 20, 1986

In December 1986 NAAG is expected, for the first time, to recommend to its members adoption of a model act concerning solicitation of funds for charitable purposes.

This model act is the outcome of a two-and-a-half year project conducted by NAAG, with representa-tives of NASCO. It is also the outcome of more than two years of work by representatives of charitable organizations, the fund-raising profession, and the legal and accounting professions, plus donor representa-tives, who together comprised the Private Sector Advisory Group to the NAAG/NASCO project.

Throughout the period, the Advisory Group conveyed its suggestions, concerns, recommendations, and reactions to the regulators. The model act that NAAG will consider in December is for different from what it might have been without this input.

Chair of the NAAG Charitable Trust and Solicitation Committee, under whose auspices the model law project was conducted, is Joseph I. Lieberman, attorney general of the State of Connecticut The regulator’s Task Forces on Fund Raisers and on Charities, which worked on the project, were headed respectively by David Ormstedt, assistant attorney general of Connecticut, and Kevin Suffern, director, Division of Public Charities, Commonwealth of Massachusetts.

At the invitation of Attorney General Lieberman, John J. Schwartz, president of the American Associ-ation of Fund-Raising Counsel, undertook to chair a Private Sector Advisory Group to the NAAG/NASCO project. Mr. Schwartz invited James Greenfield, director, fund development, The Cleveland Clinic Founda-tion, to lead the Advisory Group’s Task Force on Fund Raisers, and Mrs. Marion Fremont-Smith, lawyer and Board member of INDEPENDENT SECTOR, to lead the Group’s Task Force on Charities. Both accepted and served throughout the entire project period.

The Advisory Group sought to be as widely representative as possible. When additional private-sector concerns were brought to the Group’s attention, spokespersons for those concerns were invited to serve on the Group. Subcommittees of the Task Forces were free to invite additional persons to meet with them, and several did, in order to make sure that the fullest possible spectrum of private sector concerns was presented.

At its final meeting on October 7, 1986 the Private Sector Advisory Group expressed its support for the model act, with certain very specific reservations.

The Advisory Group was pleased that two-thirds of the main provisions of the very first drafts (excluding technical sections related to enforcement and implementation of the act) were virtually identical with the provisions of model laws developed by the American Association of Fund-Raising Counsel and the National Health Council, and with formal recommendations made by the Advisory Group in advance of the first NAAG/NASCO draft. These provisions are still in the final draft. Further, NAAG/NASCO accepted 59 additional recommended changes that are included in the final draft.

The draft clearly identifies the role of the professional fund-raising manager. In this connection, the Group recommended a basic concept which has been incorporated in the model act: that a distinction should be made between fund raisers who have custody of funds and those who do not. Fund raisers who do have custody of some or all the funds raised are subject to more rigorous record-keeping and reporting requirements than “Fund Raising Counsel,” who, by definition, do not solicit contributions and do not employ any compensated person to solicit contributions.

Two other provisions that could be helpful to both charities and fund raisers are (a) the requirement that contracts between charities and fund raisers be in writing and be filed with the state, and (b) the requirement that fund raisers make certain reports to charities. In some cases this will mean that charities and fund raisers will have a more businesslike relationship.

On the other hand, the Advisory Group’s resolution supporting the proposed model act contains one strong objection and five concerns regarding certain sections of the act.

The objection is to Section 6, Subsection (e)(1)(B) of the proposed law, which requires point-of-solicitation disclosure by paid solicitors of summary financial information in the form of a single percentage figure. Similar provisions in the current North Carolina and Maine laws were recently held to be unconstitutional by courts in those states, These decisions are being appealed, In spite of the prospect of litigation, NAAG/NASCO has so far felt the subsection should be retained in the model act.

The concerns are as follows:

  1. that the potential exists for misinterpretation of the definition of “solicit” and “paid solicitor” in Section 1, whereby a direct-mail fund-raising counsel could incorrectly be classified as a paid solicitor;
  2. that Section 4, Exemptions, does not include exemptions for organizations that confine their solicitations to persons other than the general public;
  3. that Section 4, Exemptions, does not adequately address the problems faced by organizations that solicit in more than one state and that solicit from only a small number of persons in any particular state (e.g. 500) or raise annually no more than a minimal amount in a particular state (e.g., less than $25, 000), whether or not the organization has paid staff;
  4. that Section 5 requires contracts between charitable organizations and fund raisers to be filed prior to the performance of services by the fund-raising counsel, rather than allowing for a grace period in which the fund-raising counsel can perform services;
  5. that Section 17 does not adequately relieve the burden of multi-state filing requirements. (The act does touch on reciprocity – acceptance by states of comparable filings in other states – but as a possibility only.)

After noting the objection and the five concerns, the resolution goes on to recommend that, with the above qualifications, NAAG and NASCO take all appropriate actions to encourage their members to introduce the proposed model act in their respective states. Further, the resolution recommends that all interested private sector organizations join together to support the model act at the state level, taking into consideration the stated qualifications, and to inform state legislators and regulators about the charitable community in general and about the realities of charitable accountability in particular.

Pursuant to this lost recommendation, members of the Private Sector Advisory Group, acting as individuals, agreed to form a national organization on charitable accountability, with Edward Van Ness as chair. Anyone interested in joining or learning more about this organization is invited to get in touch with John J. Schwartz, at the American Association of Fund-Raising Counsel, 25 West 43 Street, New York, NY 10036, or Edward Van Ness, National Health Council, 622 Third Avenue, New York, NY 10017-6765.

The private sector and the state regulators have come a long way in improving their understanding of each other’s needs and problems. This process, carried on for more than two and a half years by the Private Sector Advisory Group with NAAG/NASCO, now moves to the states.

If the model law draft is accepted by NAAG in December 1986, it will, in due course, be introduced in most if not all states. Representatives of the private sector in each state should try to be sure they are made aware that the proposed act has been introduced into the legislature, They can be alert to opportunities to testify at hearings on the bill, and they should be sure they know of any changes made or proposed at the state level.

When private sector representatives testify at hearing on the model law, they will be building, at least in part, on a foundation laid during more than 30 months by the Advisory Group. This foundation, however, is only a beginning. The enduring structure of better understanding of the not-for-profit private sector by legislators, regulators, and the public remains to be built. There is no better place to start than in the several states. The Private Sector Advisory Group hopes it leaves behind some materials the builders can use.

John J. Schwartz
Chair

RESOLUTION 

Passed October 7, 1986

By The Private Sector Advisor Group to The NAAG/NASCO Model Solicitations Law Project

WHEREAS, there is a need for uniform, fair, and effective state legislation regarding charitable solicitations; and

WHEREAS, the NAAG/NASCO Model Solicitations Law Project Committee and the Private Sector Advisory Group have worked over the last two and one half years to develop a model charitable solicitations law to meet this need; and

WHEREAS, the Private Sector Advisory Group has reviewed the August 26, 1986 draft of model legislation as revised by the NAAG/NASCO Model Solicitations Law Project Committee at its meeting in San Antonio, Texas on September 23, 1986;

NOW, THEREFORE, BE IT RESOLVED, that the Private Sector Advisory Group to the NAAG/NASCO Model Solicitations Law Project:

1. SUPPORTS the proposed Model Act Concerning the Solicitation of Funds for Charitable Organizations with the following qualifications:

a. A strong OBJECTION to Section 6, Subsection (e)(1)(B) which requires point of solicitation disclosure by Paid Solicitors of summary financial information in the form of a single percentage figure; and

b. A CONCERN that the potential exists for misinterpretation of the definition of “Solicit” and “Paid Solicitor” in Section 1 whereby a direct mail fund-raising counsel could incorrectly be classified as a paid solicitor; and

c. A CONCERN that Section 4, “Exemptions”, does not include exemptions for organizations that confine their solicitations to persons other than the general public; and

d. A CONCERN that Section 4, “Exemptions”, does not adequately address the problems faced by organizations soliciting in more than one state that solicit only from a small number of persons in any particular state (e.g., no more than 500) or raise annually no more than a minimal amount in any particular state (e.g., less than $25,000), whether or not the organization has paid staff; and

e. A CONCERN with Section 5 which requires that contracts between charitable organizations and fund-raising counsel be filed prior to the performance of services by the fund-raising counsel rather than allowing for a grace period after the contract is made; and

f. A CONCERN that Section 11 does not adequately relieve the burden of multi-state filing requirements; and

2. RECOMMENDS, with the above qualifications, that NAAG and NASCO take all appropriate actions to encourage their members to introduce the proposed Model Act in every state; and

3. RECOMMENDS that all interested private sector organizations join together to support the Model Act at the state level, taking the above qualifications into consideration, and to inform state legislators and regulators about the charitable community in general and about the realities of charitable accountability in particular.


Annotations that were not part of the original Model Act are indicated in square brackets. In particular, some provisions of the Model Act have been ruled unconstitutional by the U.S. Supreme Court.


NATIONAL ASSOCIATION OF ATTORNEYS GENERAL*

A MODEL ACT CONCERNING THE SOLICITATION OF FUNDS FOR CHARITABLE PURPOSES **

Section 1. Definitions 

(a) “Charitable organization” means:

(1) Any person determined by the Internal Revenue Service to be a tax exempt organization pursuant to section 501(c)(3) of the Internal Revenue Code; or

(2) Any person who is or holds himself out to be established for any benevolent, educational, philanthropic, humane, scientific, patriotic, social welfare or advocacy, public health, environmental conservation, civic or other eleemosynary purpose or for the benefit of law enforcement personnel, firefighters, or other persons who protect the public safety, or any person who in any manner employs a charitable appeal as the basis of any solicitation or an appeal which has a tendency to suggest there is a charitable purpose to any such solicitation.

(b) “Person” means an individual, corporation, association, partnership, trust, foundation or any other entity however styled.

(c) “Solicit” and “solicitation” mean the request directly or indirectly for money, credit, property, financial assistance, or other thing of any kind or value on the plea or representation that such money, credit, property, financial assistance, or other thing of any kind or value, or any portion thereof, will be used for a charitable purpose or benefit a charitable organization. Without limiting the scope of the foregoing, these words shall include the following methods of requesting or securing such money, credit, property, financial assistance or other thing of value:

(1) Any oral or written request;

(2) the making of any announcement to the press, over the radio or television or by telephone or telegraph concerning an appeal or campaign by or for any charitable organization or purpose;

(3) the distribution, circulation, posting or publishing of any handbill, written advertisement or other publication which directly or by implication seeks to obtain public support;

(4) the sale of, offer or attempt to sell, any advertisement, advertising space, book, card, tag, coupon, device, magazine, membership, merchandise, subscription, flower, ticket, candy, cookies or other tangible item in connection with which any appeal is made for any charitable organization or purpose, or where the name of any charitable organization is used or referred to in any such appeal as an inducement or reason for making any such sale, or when or where in connection with any such sale, any statement is made that the whole or any part of the proceeds from any such sale will be used for any charitable purpose or benefit any charitable organization.

A solicitation shall be deemed to have taken place whether or not the person making the same receives any contribution.

(d) “Charitable purpose” means:

(1) Any purpose described in Internal Revenue Code section 501(c)(3); or

(2) Any benevolent, educational, philanthropic, humane, scientific, patriotic, social welfare or advocacy, public health, environmental conservation, civic or other eleemosynary objective, or an objective that benefits law enforcement personnel, firefighters, or other persons who protect the public safety.

(e) “Contribution” means the grant, promise or pledge of money, credit, property, financial assistance or other thing of any kind or value in response to a solicitation. It does not include bona fide fees, dues or assessments paid by members, provided that membership is not conferred solely as consideration for making a contribution in response to a solicitation.

(f) “Fund raising counsel” means a person who for compensation plans, manages, advises, consults, or prepares material for, or with respect to, the solicitation in this state of contributions for a charitable organization, but who does not solicit contributions and who does not employ, procure, or engage any compensated person to solicit contributions. No lawyer, investment counselor or banker who advises a person to make a contribution shall be deemed, as a result of such advice, to be a fund raising counsel. A bona fide salaried officer, employee or volunteer of a charitable organization shall not be deemed to be a fund raising counsel.

[In the Model Act, a “fund raising counsel” does not engage in solicitation but may still at some time have custody or control of contributions. Many states have modified this definition to specify that this person also never has such custody or control, sometimes defining this more stringent definition as “fundraising consultant.“]

(g) “Paid solicitor” means a person who for compensation performs for a charitable organization any service in connection with which contributions are, or will be, solicited in this state by such compensated person or by any compensated person he employs, procures, or engages, directly or indirectly to solicit. No lawyer, investment counselor or banker who advises a person to make a charitable contribution shall be deemed, as the result of such advice, to be a paid solicitor. A bona fide salaried officer employee or volunteer of a charitable organization shall not be deemed to be a paid solicitor.

(h) “Commercial Co-venturer” means a person who for profit is regularly and primarily engaged in trade or commerce other than in connection with soliciting for charitable organizations or purposes and who conducts a charitable sales promotion.

(i) “Charitable Sales Promotion” means an advertising or sales campaign, conducted by a commercial co-venturer, which represents that the purchase or use of goods or services offered by the commercial co-venturer will benefit, in whole or in part, a charitable organization or purpose.

Section 2. Annual Registration Requirement for Charitable Organizations 

(a) Every charitable organization, except those granted exemption in section 4 of this act, which intends to solicit in this state or have contributions solicited in this state on its behalf by other charitable organizations, commercial co-venturers, or paid solicitors shall, prior to any solicitation, file a registration statement with the ____________ upon a form prescribed by the Said registration statement shall be refiled on or before the fifteenth day of the fifth calendar month after the close of each fiscal year in which such charitable organization solicited in this state. The ____________ shall examine each registration to determine whether the applicable requirements of this section relating to the same are satisfied. The ____________ shall notify the charitable organization within ten days of its receipt of any deficiencies therein, otherwise it shall be deemed approved as filed. No charitable organization required to be registered under this section shall solicit prior to registration.

(b) A registration statement shall be signed and sworn to under penalties of perjury by two authorized officers including the chief fiscal officer of the charitable organization and shall contain the following information:

(1) The name of the organization and the purpose for which it was organized;

(2) the address and telephone number of the organization and the address and telephone number of any offices in this state or, if the organization does not maintain an office, the name, address and telephone number of the person having custody of its financial records;

(3) the names and theaddresses of the officers, directors and trustees and the principal salaried officers;

(4) an annual financial report for the organization’s immediate preceding fiscal year as required under section 3(a);

(5) if required by section 3(b), the audited financial statement prescribed therein;

(6) whether the organization is authorized by any other governmental authority to solicit contributions;

(7) whether the organization has ever had its registration denied, suspended, revoked or enjoined by any court or other governmental authority;

(8) the charitable purpose or purposes for which the contributions to be solicited shall be used;

(9) the name or names under which it intends to solicit contributions;

(10) the names of the persons within the organization who shall have final responsibility for the custody of the contributions;

(11 ) the names of the persons within the organization responsible for the final distribution of the contributions; and

(12) such other information as the ____________ may require.

(c) With the initial registration only, every charitable organization required to be registered shall also file with the ____________ the following:

(1) a copy of the charitable organization’s charter, articles of organization, agreement of association, instrument of trust, constitution or other organizational instrument, and by-laws;

(2) a statement setting forth the place where and the date when the organization was legally established, the form of its organization and its tax exempt status attaching copies of federal or state tax exemption determination letters.

(d) Every charitable organization registered with the ____________ shall file with the copies of any federal or state tax exemption determination letters received after the initial registration within 30 days after receipt, and any amendments to its organizational instrument within 30 days after adoption.

(e) Every charitable organization required to register shall pay a fee of ____________ dollars with each registration.

Section 3. Annual Financial Report; Audit Requirement 

(a) Every charitable organization required to register with the ____________ shall file an annual financial report. The annual financial report shall include: a balance sheet; a statement of support, revenue, expenses and changes in fund balance; a statement of functional expenses at least broken into program, management and general, and fund raising; and such other information as the ____________ may require. The ____________ shall prescribe the form of the report and shall prescribe standards for its completion which shall be in accordance with generally accepted accounting principles except to the extent otherwise prescribed by the ____________. The ____________may accept under such conditions as the ____________ may prescribe a copy or duplicate original of financial statements, reports or returns filed by the charitable organization with the Internal Revenue Service or another state having requirements similar to the provisions of this act. A charitable organization whose gross revenue, excluding government grants, does not exceed ____________ thousand dollars shall not be required to file an annual financial report. Said ____________ thousand dollar gross revenue amount may hereafter be adjusted by regulation.

(b) The annual financial report of every charitable organization which received more than thousand dollars in gross revenue during its most recently completed fiscal year shall be accompanied by an audited financial statement prepared in accordance with generally accepted accounting principles which has been examined by an independent certified public accountant for the purpose of expressing an opinion thereon. Said ____________ thousand dollar audit requirement may hereafter by adjusted by regulation.

Section 4. Exemptions 

The following shall not be required to file a registration statement:

(a) Persons that are exempt from filing a federal annual information return pursuant to Internal Revenue Code section 6033(a)(2)(A)(i) and (iii) and Internal Revenue Code section 6033(a)(2)(C)(i).

(b) Political parties, candidates for federal or state office and political action committees required to file financial information with federal or state elections commissions.

(c) Charitable organizations which do not intend to or do not actually raise or receive gross revenue, excluding government grants, in excess of ____________ thousand dollars during a fiscal year or do not receive contributions from more than ten persons during a fiscal year, if all of their functions, including solicitation, are carried on by persons who are unpaid for their services and if no part of their assets or income inures to the benefit of, or is paid to, any officer or member; provided, if the gross revenue, excluding government grants, whether accrued or received during any fiscal year, exceeds ____________ thousand dollars, or if the charitable organization shall receive contributions from more than ten persons during any fiscal year, it shall, within thirty days after the date thereof, register with and report to the ____________ as required by sections 2 and 3.

Section 5. Requirements for Fund Raising Counsel 

(a) There shall be a contract between a charitable organization and a fund raising counsel which shall be in writing and shall be filed by the fund raising counsel with the ____________ prior to the performance by the fund raising counsel of any material services pursuant to it. The contract shall contain such information as will enable the ____________ to identify the services the fund raising counsel is to provide, including whether the fund raising counsel will at any time have custody of contributions.

(b) A fund raising counsel who at any time has custody of contributions from a solicitation shall also comply with each of the following:

(1) Register with the ____________. Applications for registration or re-registration shall be in writing, under oath, in the form prescribed by the ____________ and shall be accompanied by a fee in the amount of ____________ dollars. The application shall contain such information as the ____________ shall require. Each registration is valid for one year and may be renewed for additional one year periods upon application and payment of the fee.

(2) He shall, at the time of making application for registration and renewal of registration, file with and have approved by the ____________ a bond, in which the fund raising counsel shall be the principal obligor in the sum of ____________ thousand dollars with one or more responsible sureties whose liability in the aggregate as such sureties will at least equal that sum. The fund raising counsel shall maintain the bond in effect as long as the registration is in effect. The bond, which may be in the form of a rider to a larger blanket liability bond, shall run to the state and to any person who may have a cause of action against the principal obligor of the bond for any liabilities resulting from the obligor’s conduct of any activities subject to this act or arising out of a violation of this act or any regulation adopted pursuant to this act.

(3) Within 90 days after a solicitation campaign has been completed, and on the anniversary of the commencement of a solicitation campaign lasting more than one year, the fund raising counsel shall account to the charitable organization with whom it has contracted for all contributions collected and expenses paid. The accounting shall be in writing, shall be retained by the charitable organization for three years, and shall be available to the ____________ upon request.

(4) Each contribution collected by the fund raising counsel shall, in its entirety and within five days of its receipt, be deposited in an account at a bank or other federally insured financial institution. The account shall be in the name of the charitable organization with whom the fund raising counsel has contracted and the charitable organization shall have sole control of all withdrawals from the account.

(5) The fund raising counsel shall maintain during each solicitation campaign and for not less than three years after its completion, the following records:

(A) A record of all contributions at any time in the custody of the fund raising counsel, including the name and address of each contributor and the date and amount of the contribution, provided that the ____________ shall not disclose this information except to the extent necessary for investigative or law enforcement purposes; and

(B) The location and account number of all bank or other financial institution accounts in which the fund raising counsel has deposited revenue from the solicitation campaign.

(c) No person shall act as a fund raising counsel without first complying with the requirements of this Section.

(d) The ____________ shall examine each fund raising counsel contract and registration application to determine whether the applicable requirements of this act relating to the same are satisfied. The ____________ shall notify the fund raising counsel within ten days of its receipt of any deficiencies therein, otherwise it shall be deemed accepted as filed.

Section 6. Registration, Contract and Disclosure Requirements for Paid Solicitors 

(a) A paid solicitor shall register with the ____________ prior to engaging in any solicitation. Applications for registration or re-registration shall be in writing, under oath, in the form prescribed by the ____________ and shall be accompanied by a fee in the amount of ____________ dollars. The application shall contain such information as the ____________ shall require. Each registration is valid for one year and may be renewed for additional one year periods upon application and payment of the fee.

[In Riley v. National Federation of the Blind of North Carolina, 487 U.S. 781 (1988) the U.S. Supreme Court ruled that the registration requirement in (a) was invalid because it did not provide that the licensor will, within a specified brief period, either issue a license or go to court, and therefore infringes on the First Amendment right of paid solicitors to free speech.]

(b) A paid solicitor shall, at the time of making application for registration and renewal of registration, file with and have approved by the ____________ a bond, in which the paid solicitor shall be the principal obligor in the sum of ____________ thousand dollars, with one or more responsible sureties whose liability in the aggregate as such sureties will at least equal that sum. The paid solicitor shall maintain the bond in effect as long as the registration is in effect. The bond, which may be in the form of a rider to a larger blanket liability bond, shall run to the state and to any person who may have a cause of action against the principal obligor of the bond for any liabilities resulting from the obligor’s conduct of any activities subject to this act or arising out of a violation of this act or any regulation adopted pursuant to this act.

(c) Prior to the commencement of each solicitation campaign the paid solicitor shall file with the a completed “Solicitation Notice” on forms prescribed by the The Solicitation Notice shall include a copy of the contract described in subsection (d) of this section, the projected dates when soliciting will commence and terminate, the location and telephone number from where the solicitation will be conducted, the name and residence address of each person responsible for directing and supervising the conduct of the campaign, a statement as to whether the paid solicitor will at any time have custody of contributions, and a full and fair description of the charitable program for which the solicitation campaign is being carried out. The charitable organization on whose behalf the paid solicitor is acting shall certify that the Solicitation Notice and accompanying material are true and complete to the best of its knowledge.

(d) (1) There shall be a contract between a paid solicitor and a charitable organization which shall be in writing, shall clearly state the respective obligations of the paid solicitor and the charitable organization and shall state the amount of the gross revenue from the solicitation campaign that the charitable organization will receive. Said amount shall be expressed as a fixed percentage of the gross revenue or as a reasonable estimate of the gross revenue, subject to and in accordance with the provisions of paragraphs (2), (3) and (4) of this subsection.

(2) If the compensation of the paid solicitor is contingent upon the number of contributions or the amount of revenue received from the solicitation campaign, the stated amount shall be expressed as a fixed percentage of the gross revenue;

(3) If the compensation of the paid solicitor is not contingent upon the number of contributions or the amount of revenue received, the stated amount shall be a reasonable estimate, expressed as a percentage of the gross revenue, and the contract shall clearly disclose the assumptions upon which the estimate is based. The stated assumptions shall be based upon all of the relevant facts known to the paid solicitor regarding the solicitation to be conducted by the paid solicitor. If the stated amount is a reasonable estimate, rather than a fixed percentage of the gross revenue, the contract shall also provide that the charitable organizationis guaranteed a percentage of the gross revenue which is no less than the reasonable estimate less ten percent of the gross revenue.

(4) The stated percentages required by this section shall exclude any amount which the charitable organization is to pay as expenses of the solicitation campaign, including the cost of merchandise or services sold or events staged.

(e) A paid solicitor shall be responsible for complying with, or for causing compliance with, each of the following requirements:

(1) Prior to orally requesting a contribution, or contemporaneously with a written request for a contribution, it shall be clearly and conspicuously disclosed at the point of solicitation:

(A) The name of the paid solicitor as on file with the ____________ and that the solicitation is being conducted by a “paid solicitor.

(B) That the charitable organization will receive the fixed percentage of the gross revenue or the reasonable estimate expressed as a percentage of the gross revenue, as identified in subsection (d) of this section.

[Requirement (B) was ruled unconstitutional by the U.S. Supreme Court in Riley v. National Federation of the Blind of North Carolina, 487 U.S. 781 (1988) .]

(2) In the case of a solicitation campaign conducted orally, whether by telephone or otherwise, a written confirmation shall be sent to each person who has contributed or pledged to contribute, within five days after that person has been solicited, which shall include a clear and conspicuous disclosure of the information required by paragraph (1) of this subsection.

(3) It shall not be represented that any part of the contributions received will be given or donated to any other charitable organization unless such organization has consented in writing to the use of its name, prior to the solicitation. The written consent shall be signed by any two authorized officers, directors or trustees of the charitable organization.

(4) It shall not be represented that tickets to events will be donated for use by another, unless the following requirements have been met:

(A) The paid solicitor shall have commitments, in writing, from charitable organizations stating that they will accept donated tickets and specifying the number of tickets they are willing to accept; and

(B) No more contributions for donated tickets shall be solicited than the number of ticket commitments received from charitable organizations,

(f) Within 90 days after a solicitation campaign has been completed, and on the anniversary of the commencement of a solicitation campaign lasting more than one year, the paid solicitor and the charitable organization shall file with the ____________ a joint financial report for the campaign, including gross revenue and an itemization of all expenses incurred. The report shall be completed on a form prescribed by the ____________. The report shall be signed by an authorized official of the paid solicitor and an authorized official from the charitable organization and they shall certify, under oath, that it is true to the best of their knowledge.

(g) (1) The paid solicitor shall maintain during each solicitation campaign and for not less than three years after its completion, the followingrecords:

(A) The name and, if known to the paid solicitor, the address of each person pledging to contribute together with the dateand amount of the pledge, provided that the ____________ shall not disclose this information except to the extent necessary for investigative or law enforcement purposes;

(B) The name and residence address of each employee, agent, or other person, however styled, involved in the solicitation;

(C) A record of all contributions at any time in the custody of the paid solicitor;

(D) A record of all expenses incurred by the paid solicitor for which the charitable organization is liable for payment; and

(E) The location and account number of all bank or other financial institution accounts in which the paid solicitor has deposited revenue from the solicitation campaign.

(2) If the paid solicitor sells tickets to an event and represents that tickets will be donated for use by another, the paid solicitor shall also maintain for the same period as specified in paragraph (I ) of this subsection:

(A) The name and address of those contributors donating tickets and the number of tickets donated by each contributor; and

(B) The name and address of all organizations receiving donated tickets for use by others, including the number of tickets received by each organization.

(3) All records described in this subsection shall be available for inspection by the ____________ upon request.

(h) Each contribution in the custody of the paid solicitor shall, in its entirety and within five days of its receipt, be deposited in an account at a bank or other federally insured financial institution. The account shall be in the name of the charitable organization with whom the paid solicitor has contracted and the charitable organization shall have sole control of all withdrawals from the account.

(i) Any material change in any information filed with the ____________ pursuant to this section shall be reported in writing to the ____________ within seven days after the change occurs.

(j) The ____________ shall examine each paid solicitor registration application and Solicitation Notice to determine whether the applicable requirements of this chapter relating to the same are satisfied. The ___________ shall notify the paid solicitor within ten days of its receipt of any deficiencies therein, otherwise it shall be deemed approved as filed.

Section 7. Charitable Sales Promotions 

(a) Every charitable organization which agrees to permit a charitable sales promotion to be conducted by a commercial co-venturer on its behalf shall file with ____________ a notice of such promotion prior to its commencement within this state. Such notice shall state the names of the charitable organization and commercial co-venturer, that they will conduct a charitable sales promotion, and the date such promotion is expected to commence.

(b) Every charitable organization which agrees to permit a charitable sales promotion to be conducted in its behalf shall, prior to the commencement of the charitable sales promotion within this state, obtain a written agreement from the commercial co-venturer which shall be available to the upon request. The agreement shall be signed by an authorized representative of the charitable organization and the commercial co-venturer and it shall include, at a minimum, the following:

(1) The goods or services to be offered to the public;

(2) The geographic area where, and the starting and final date when, the offering will be made;

(3) The manner in which the charitable organization’s name will be used, including the representation to be made to the public as to the actual or estimated dollar amount or percent per unit of goods or services purchased or used that will benefit the charitable organization;

(4) If applicable, the maximum dollar amount that will benefit the charitable organization;

(5) The estimated number of units of goods or services to be sold or used;

(6) A provision for a final accounting on a per unit basis to be given by the commercial co-venturer to the charitable organization and the date by which it will be made;

(7) A statement that the charitable sales promotion is subject to the requirements of this act; and

(8) The date by when and the manner in which the benefit will be conferred on the charitable organization.

(c) The final accounting for the charitable sales promotion is to be kept by the commercial co-venturer for three years after the final accounting date and shall be available to the upon request.

(d) The commercial co-venturer shall disclose in each advertisement for the charitable sales promotion the dollar amount or percent per unit of goods or services purchased or used that will benefit the charitable organization or purpose. If the actual dollar amount or percent cannot reasonably be determined prior to the final date of the charitable sales promotion, the commercial co-venturer shall disclose an estimated dollar amount or percent. Any such estimate shall be reasonable and shall be based upon all of the relevant facts known to the commercial co-venturer and the charitable organization regarding the charitable sales promotion.

Section 8. Point-of-Solicitation Disclosure Requirements for Charities 

Every charitable organization soliciting in this state shall include the following disclosures at the point of solicitation:

(a) The name, address and telephone number of the charitable organization.

(b) A full and fair description of the charitable program for which the solicitation campaign is being carried out; and, if different, a full and fair description of the programs and activities of the organization on whose behalf the solicitation campaign is being carried out.

(c) That a financial statement disclosing assets, liabilities, fund balances, revenue and expenses for the preceding fiscal year will be provided upon request. Expenses in said statement shall at least be broken down into program services, management and general, and fund raising. Such financial statement shall be consistent with the annual financial report required by Section 3.

Registration statements, applications, reports, contracts, or agreements of charitable organizations, fund raising counsel, commercial co-venturers and paid solicitors, and all other documents and information required to be filed under this act, or by the ____________, shall be public records in the office of the ____________ and shall be open to the public for inspection at such times as the ____________ may prescribe.

Section 9. Agreements, Registration Forms, Reports, and Other Documents to be Public Records 

Registration statements, applications, reports, contracts, or agreements of charitable organizations, fund raising counsel, commercial co-venturers and paid solicitors, and all other documents and information required to be filed under this act, or by the ____________, shall be public records in the office of the ____________ and shall be open to the public for inspection at such times as the _____________ may prescribe.

Section 10. Fiscal Records; Inspection; Retention 

Every fund raising counsel, commercial co-venturer, paid solicitor, and charitable organization shall keep true records as to such activities as may be covered by this act in such form as will enable them accurately to provide the information required by this act. Upon demand such records shall be made available to the ____________ for inspection. Such records shall be retained for a period of at least three years after the end of the period of registration to which they relate.

Section 11. Exchange of Information with other States 

The ____________ may exchange with the appropriate authority of any other state or of the United States information with respect to charitable organizations, fund raising counsel, commercial co-venturers and paid solicitors. The ____________ may accept information filed by a charitable organization with the appropriate authority of another state or of the United States in lieu of the information required to be filed by the charitable organization in accordance with the provisions of this act if such information is substantially similar to the information required under this act.

Section 12. Rules and Regulations 

The ____________ shall from time to time formulate such reasonable rules and regulations as may be necessary to interpret or to carry out the provisions of this act and such rules and regulations shall thereafter govern all such matters.

Section 13. Examination of Books, Records and Witnesses 

(a) The ____________, whenever it has reason to believe a person has violated or is violating the provisions of this act, or has filed any document required under this act which contains false or misleading information, may conduct an investigation to determine whether in fact such person has violated or is violating said provisions, or has filed any false or misleading information. In conducting such investigation, the ____________ may:

(1) take testimony under oath;

(2) examine or cause to be examined any documentary material of whatever nature relevant to such alleged violations or false or misleading information; and

(3) require attendance during such examination of documentary material of any person having knowledge of the documentary material and take testimony under oath or acknowledgment in respect of any such documentary material. Such testimony and examination shall take place in the county where such person resides or has a place of business or, if the parties consent or such person is a non-resident or has no place of business within this state, in county.

(b) Notice of the time, place and cause of such taking of testimony, examination or attendance shall be given by the ____________ at least ten days prior to the date of such taking of testimony or examination.

(c) Service of any such notice may be made by:

(1) delivering a duly executed copy thereof to the person to be served or to a partner or to any officer or agent authorized by appointment or by law to receive service of process on behalf of such person;

(2) delivering a duly executed copy thereof to the principal place of business in this state of the person to be served; or

(3) mailing by registered or certified mail a duly executed copy thereof addressed to the person to be served at his principal place of business in this state or if said person has no place of business in this state, to the last address of such person known to the ____________.

(d) Each such notice shall:

(1) state the time and place for the taking of testimony or the examination and the name and address of each person to be examined, if known, and if the name is not known, a general description sufficient to identify him or the particular class or group to which he belongs;

(2) state the statute and section thereof, if any, the alleged violation of which is under investigation and state the general subject matter of the investigation;

(3) describe the class or classes of documentary material to be produced thereunder with reasonable specificity, so as fairly to indicate the material demanded;

(4) prescribe a return date within which the documentary material is to be produced; and

(5) identify the members of the ____________ staff to whom such documentary material is to be made available for inspection and copying.

(e) No such notice shall contain any requirement which would be unreasonable or improper if contained in a subpoena duces tecum issued by a court of this state; or require the disclosure of any documentary material which would be privileged or which for any other reason would not be required by a subpoena duces tecum issued by a court of this state.

(f) Any documentary material or other information produced by any person pursuant to this section shall not, unless otherwise ordered by a court for good cause shown, be disclosed to any person other than the authorized agent or representative of the ____________ unless with the consent of the person producing the same.

(g) The ____________ court for the county of ____________ or for any county in which any person served in accordance with this section resides or has-his usual place of business may, at any time prior to the date specified in the notice, or within twenty-one days after the notice has been served, whichever period is shorter, upon motion for good cause shown, extend such reporting date or modify or set aside the notice provided for in this section.

Section 14. Penalty for Non-Compliance 

(a) A person upon whom a notice is served pursuant to the provisions of section 13 shall comply with the terms thereof unless otherwise provided by the order of a court of this state. Any person who fails to appear, or with intent to avoid, evade, or prevent compliance, in whole or in part, with any civil investigation under this chapter, removes from any place, conceals, withholds, or destroys, mutilates, alters, or by any other means falsifies any documentary material in the possession, custody or control of any person subject to any such notice, or knowingly conceals any relevant information, shall be assessed a civil penalty of not more than five thousand dollars.

(b) The ____________ may file in the _____________ court of the county in which such person resides or has his principal place of business, or in the ____________court of ____________ county if such person is a non-resident or has no principal place of business in this state, and serve upon such person, in the same manner as provided in section 13, a petition for an order of such court for the enforcement of this section and section 13. Any disobedience of any final order entered under this section by any court shall be punished as a contempt thereof.

Section 15. Substitute Service upon Secretary of State 

Any charitable organization, fund raising counsel, commercial co-venturer, or paid solicitor having its principal place of business other than within this state, or organized under and by virtue of the laws of a foreign state, which is subject to the provisions of this act, shall be deemed to have irrevocably appointed the Secretary of State as its agent upon whom may be served any summons, subpoena duces tecum or other process directed to such charitable organization, fund raising counsel, commercial co-venturer, paid solicitor, or any partner, principal officer or director of any of them, in any action or proceeding brought under the provisions of this act.. Service of such process upon the Secretary of State shall be made by personally delivering to and leaving with him a copy thereof at his office in the city of ____________and such service shall be sufficient service; provided notice of such service and a copy of such process shall be forthwith sent by said Secretary to such charitable organization, fund raising counsel, commercial co-venturer, paid solicitor, or other person to whom it is directed by registered mail, with return receipt requested at the last address known to said Secretary.

Section 16. Deceptive Actions or Practices and Failing to Comply with the Requirements of this Statute Declared Unlawful 

The following acts and practices are hereby declared unlawful as applied to the planning, conduct or execution of any solicitation or charitable sales promotion:

(a) Operating in violation of, or failing to comply with, any of the requirements of sections 2-18, inclusive, of this act.

(b) Utilizing any unfair or deceptive acts or practices. In deciding whether an act or practice is unfair or deceptive within the meaning of this subsection, definitions, standards and interpretations relating thereto under the (state consumer protection act) shall apply.

(c) Utilizing any representation that implies the contribution is for or on behalf of a charitable organization, or utilizing any emblem, device, or printed matter belonging to or associated with a charitable organization, without first being authorized in writing to do so by the charitable organization.

(d) Utilizing a name, symbol or statement so closely related or similar to that used by another charitable organization that the use thereof would tend to confuse or mislead a solicited person.

(e) Misrepresenting or misleading anyone in any manner to believe that the person on whose behalf a solicitation or charitable sales promotion is being conducted is a charitable organization or that the proceeds of such solicitation or charitable sales promotion will be used for charitable purposes if such is not the fact.

(f) Misrepresenting or misleading anyone in any manner, to believe that any other person sponsors, endorses or approves such solicitation or charitable sales promotion when such other person has not given consent in writing to the use of his name for these purposes.

(g) Utilizing or exploiting the fact of registration so as to lead any person to believe that such registration in any manner constitutes an endorsement or approval by the state.

(h) Representing directly or by implication that a charitable organization will receive a fixed or estimated percentage of the gross revenue from a solicitation campaign greater than that identified in section 6(d) and section 6(e)(1)(B).

Section 17. Suspension and Revocation of Registration; Penalties; Enforcement 

(a) The registration of any charitable organization, fund raising counsel, or paid solicitor which makes a false statement in any registration statement, annual report or other information required to be filed by the ____________ or by sections 2, 3, 5 or 6 of this act, or which otherwise violates any provision of this act, may be suspended or revoked by the ____________.

(b) Any suspension or revocation of a registration under the provisions of this act are subject to appeal pursuant to (state administrative procedures act).

(c) (i) Upon a finding by the ____________ that any person has engaged in or is engaging in any act or practice declared unlawful by section 16, or has failed to comply with any of the provisions of sections 2, 3, 5, 6, 7, 8 or 10 of this act, the ____________ may assess a civil penalty against the violator of not more than one thousand dollars for each act, practice or omission and an additional penalty of not more than twenty-five dollars for each day during which such act, practice or omission continues.

(ii) The ____________ shall, before assessing a civil penalty, provide the person against whom the penalty is to be assessed a hearing in accordance with the provisions of (the state administrative procedures act).

(iii) It shall be an affirmative defense to the assessment of a civil penalty under this subsection that the violator acted pursuant to a good faith misunderstanding concerning the requirements of this act.

(d) The ____________ may, in addition to all other actions authorized by law, bring an action to enjoin and prosecute all acts or practices declared unlawful pursuant to this act.

(e) Upon a finding that any person has engaged in or is engaging in any act or practice declared unlawful by this act, the court may make any necessary order or judgment including but not limited to injunctions, restitution, awards of reasonable attorneys’ fees and costs of investigation and litigation and may award to the state civil penalties up to $10,000 for each violation of this act. No such order shall require the payment of civil penalties until the process of appeal has been exhausted. In ordering injunctive relief, the ____________ shall not be required to establish irreparable harm but only a violation of statute or that the requested order promotes the public interest. It shall be an affirmative defense to the assessment of civil penalties under this subsection that the defendant acted pursuant to a good faith misunderstanding concerning the requirements of this act.

(f) In the case of a failure by a charitable organization, fund raising counsel, commercial co-venturer or paid solicitor to comply with the registration, financial reporting, record keeping and bonding requirements of sections 2, 3, 5, 6, 7 and 10, unless it is shown such failure is due to reasonable cause, and after notice and demand by the ____________ in the same manner as prescribed in section 13(c) and, if applicable, section 15, there may be awarded to the state by the court a civil penalty of $10.00 each day during which such failure continues but the total amount imposed under this subsection on any person shall not exceed five thousand dollars.

(g) Any charitable organization, fund raising counsel, commercial co-venturer or professional solicitor, their agents or any other person who violates the terms of an injunction or other order entered under this section shall in addition to all other remedies, forfeit and pay to the state a civil penalty of not more than $10,000 for each violation which may be recovered in a civil action brought by the. Each separate violation of such an order shall be a separate offense, except that in the case of a violation through continuing failure or neglect to obey said order, each day of continuance of such failure or neglect shall be deemed a separate offense.

(h) No charitable organization may indemnify an officer, employee, or director for any costs, fees, restitution, fines, or penalties assessed against that individual by the court pursuant to subsections (e), (f), or (g) of this section unless the individual is determined by the court to have conducted himself in good faith and reasonably believed the conduct was in or not opposed to the best interests of the charitable organization.

(i) In any case where the ____________ has authority to institute an action or proceeding under sections 16 or 17, in lieu thereof, it may accept an assurance of discontinuance of any method, act or practice in violation of this act from any person alleged to be engaged or to have been engaged in such method, act or practice. Such assurance may, among other terms, include a stipulation for the voluntary payment by such person of the costs of investigation, or of an amount to be held in escrow pending the outcome of an action or as restitution to aggrieved persons, or both. Any such assurance of discontinuance shall be in writing and be filed with the court of ____________ county. Matters thus closed may at any time be reopened by the ____________ for further proceedings in the public interest. Evidence of a violation of such assurance shall be prima facie evidence of a violation of this chapter in any subsequent proceeding brought by the ____________.

Section 18. Charitable Organizations Deemed Fiduciaries 

Every person soliciting, collecting, or expending contributions for charitable purposes, and every officer, director, trustee and employee of any such person concerned with the solicitation, collection, or expenditure of such contributions, shall be deemed to be a fiduciary and acting in a fiduciary capacity.

Section 19. Severability 

If any provisions of this act or the application of such provisions to any person, body or circumstances shall be held invalid, the remainder of this act or the application of such provisions to persons, bodies, or circumstances other than those as to which it shall have been held invalid shall not be affected thereby.

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