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AB-1404 Nonprofit sponsors: reporting obligations.(2019-2020)

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Date Published: 09/06/2019 07:46 PM
AB1404:v93#DOCUMENT

Amended  IN  Senate  September 06, 2019
Amended  IN  Senate  August 30, 2019
Amended  IN  Senate  July 11, 2019
Amended  IN  Senate  June 27, 2019
Amended  IN  Senate  June 17, 2019
Amended  IN  Assembly  March 19, 2019

CALIFORNIA LEGISLATURE— 2019–2020 REGULAR SESSION

Assembly Bill
No. 1404


Introduced by Assembly Member Santiago

February 22, 2019


An act to add Part 12 (commencing with Section 10850) to Division 2 of Title 1 of the Corporations Code, relating to nonprofits.


LEGISLATIVE COUNSEL'S DIGEST


AB 1404, as amended, Santiago. Nonprofit sponsors: reporting obligations.
Existing law, the Nonprofit Corporation Law, regulates the organization and operation of nonprofit public benefit corporations, nonprofit mutual benefit corporations, and nonprofit religious corporations, including, but not limited to, health care service plans. That law requires a nonprofit public benefit corporation to furnish annually to its members a report that includes the assets and liabilities of the corporation, revenue or receipts of the corporation, and the expenses or disbursements of the corporation.
This bill would require a nonprofit sponsor to make specified annual disclosures publicly available by posting those disclosures on the nonprofit sponsor’s public internet website in the same location where it posts copies of its annual report. The bill would require these disclosures to be made at the conclusion of each taxable year for which the nonprofit sponsor files an Internal Revenue Service Form 990. The bill would require these disclosures to include information about the total amount of deferred compensation allocated by the nonprofit sponsor, the amount and type of compensation paid to or allocated on behalf of each listed person, as defined, receiving deferred compensation allocated by the nonprofit sponsor, whether taxes were paid on the deferred compensation, and the applicable agreement or legal document governing the deferred compensation. The bill would require this information to be reported in pay scales, as prescribed. The bill would define a “nonprofit sponsor” to mean a nonprofit corporation that operates or controls a health facility, operates or controls a facility that provides similar health care to a health facility, or contracts to provide or arrange for the provision of medical services. is a licensed health care service plan pursuant to the Knox-Keene Health Care Service Plan Act of 1975. The bill would require the nonprofit sponsor to make the disclosures within 30 days of the conclusion of nonprofit sponsor filing an Internal Revenue Service Form 990 for the nonprofit sponsor’s taxable year. The bill would authorize the Attorney General to enforce these provisions against a nonprofit sponsor that fails to disclose the required documents in a complete, timely, or accurate manner.
This bill would require a nonprofit sponsor to certify that the information it discloses is true and correct. By requiring the certification of information, this bill would expand the existing crime of perjury and impose a state-mandated local program.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: YES  

The people of the State of California do enact as follows:


SECTION 1.

 Part 12 (commencing with Section 10850) is added to Division 2 of Title 1 of the Corporations Code, to read:

PART 12. Reporting Obligations Regarding Deferred Compensation Allocated by Nonprofit Sponsors to For-Profit Recipients

10850.
 This part applies to nonprofit sponsors that allocate deferred compensation to any listed person at a recipient for profit.

10851.
 For the purposes of this part:
(a) “Allocate” means to hold, reserve, designate, provide, use, or intend to use assets, whether or not the assets are held in trust, legally segregated, or restricted.
(b) “Deferred compensation” means a pension, profit-sharing, share bonus, share purchase, share option, savings, thrift, and other retirement, incentive, and benefit plans, trusts, insurance, or any other form of deferred compensation or retirement benefits for any listed person, for whom the compensation is described in audited financials, bond documents, Internal Revenue Service Form 990s, or other official disclosures as exempt from the Employee Retirement Income Security Act of 1974 (29 U.S.C. Sec. 1001 et seq.), as amended (ERISA), such as by indicating that the benefits or arrangements are “not subject to ERISA” or “non-ERISA.”
(c) “Listed person” means an individual or entity that is a current or former officer, director, employer, or trustee of a recipient for profit, or an individual who is or was employed by, contracted with, or a partner in any recipient for profit, provided the individual has over two hundred fifty thousand dollars ($250,000) one million dollars ($1,000,000) in reportable compensation.
(d) “Nonprofit sponsor” means a nonprofit corporation that is defined in Section 5046 and does one or more of the following:
(1) Operates or controls a health facility, as defined in Section 1250 of the Health and Safety Code.
(2) Operates or controls a facility that provides similar health care to a health facility, as defined in Section 1250 of the Health and Safety Code.

(3)Contracts to provide or arrange for the provision of medical services.

(3) Is a health care service plan licensed pursuant to the Knox-Keene Health Care Service Plan Act of 1975 (Chapter 2.2 (commencing with Section 1340) of Division 2 of the Health and Safety Code).
(e) “Recipient for profit” means any for-profit entity that employs, contracts with, comprises a partnership of, or otherwise uses the services of any listed person for which the nonprofit sponsor allocates deferred compensation.
(f) “Reportable compensation” means compensation from recipient for-profits and related or affiliated entities, including, but not limited to, base compensation, bonus and incentive compensation, and other nontaxable benefits, as reported on any of the following:
(1) Internal Revenue Service Form W-2, Box 1 or 5, whichever amount is greater, or Box 11.
(2) Internal Revenue Service Form 1099-MISC, Boxes 6 and 7.
(3) Internal Revenue Service Form 1065, Schedule K-1, Box 14.

10852.
 (a) Notwithstanding, and in addition to, any other law, a nonprofit sponsor subject to this part under Section 10850 shall make the following annual disclosures publicly available by posting on the nonprofit sponsor’s public internet website in the same location where it posts copies of its annual report. These disclosures shall be made at the conclusion of each taxable year for which the nonprofit sponsor files an Internal Revenue Service Form 990. These disclosures shall include all of the following:
(1) The total amount of deferred compensation allocated by the nonprofit sponsor.
(2) (A) For each listed person receiving deferred compensation allocated by a nonprofit sponsor, the total amount and type of the compensation paid to or allocated on behalf of each listed person, and reportable compensation, including base compensation, bonus and incentive compensation, other reportable compensation, and other nontaxable benefits.
(B) The information under subparagraph (A) shall be reported in pay scales showing the number of listed persons in each scale, without names or titles identified. The first scale shall include listed persons earning two hundred fifty thousand dollars ($250,000) to one million dollars ($1,000,000) to one million five hundred thousand dollars ($500,000) ($1,500,000) in base compensation. Each subsequent pay scale shall increase by two hundred fifty thousand dollars ($250,000) until the one-million-dollar ($1,000,000) pay scale. Each pay scale after the one-million-dollar ($1,000,000) one-million-five-hundred-thousand-dollar ($1,500,000) pay scale shall increase by five hundred thousand dollars ($500,000).
(C) For purposes of this paragraph, “pay scale” has the same definition as in Section 432.3 of the Labor Code.
(3) Whether taxes were paid on the deferred compensation.
(4) The applicable plan document, summary plan description, trust agreement, and any other agreement or legal document governing the deferred compensation.
(b) The nonprofit sponsor subject to this part shall make the disclosures required pursuant to this section within 30 days of the conclusion of nonprofit sponsor filing an Internal Revenue Service Form 990 for the nonprofit sponsor’s taxable year.
(c) A nonprofit sponsor subject to this part shall certify that the information it discloses pursuant to this section is true and correct.
(d) The Attorney General may enforce these provisions against a nonprofit sponsor that fails to disclose the required documents in a complete, timely, or accurate manner.

SEC. 2.

 The provisions of this part are severable. If any provision of this part or its application is held invalid, that invalidity shall not affect other provisions or applications that can be given effect without the invalid provision or application.

SEC. 3.

 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.