MISSISSIPPI LEGISLATURE
2018 Regular Session
To: Accountability, Efficiency, Transparency
By: Representative Wilson
AN ACT TO REGULATE NONPROFIT ORGANIZATIONS WHOSE FUNDING CONSISTS OF FIFTY PERCENT OR MORE OF PUBLIC MONIES ON AN ANNUAL BASIS; TO REQUIRE CERTAIN REGISTRATION OF SUCH ORGANIZATIONS WITH THE SECRETARY OF STATE; TO REQUIRE CERTAIN AUDITED FINANCIAL STATEMENTS AND ANNUAL REPORTS; TO PROVIDE FOR ENFORCEMENT; TO PROVIDE FOR PUNISHMENT OF KNOWING AND WILLFUL VIOLATIONS; AND FOR RELATED PURPOSES.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MISSISSIPPI:
SECTION 1. (1) Every nonprofit organization whose funding consists of fifty percent (50%) or more of public monies on an annual basis, whether federal, state or local, shall file a registration statement with, and pay a filing fee of Fifty Dollars ($50.00), to the Secretary of State. A registration statement that contains false, misleading, deceptive or incomplete information or documentation shall not be considered sufficient. The registration statement shall be on forms prescribed by the Secretary of State and shall contain the following information and such other information that the Secretary of State may require by rule:
(a) The name of the organization and the name or names under which it intends to operate;
(b) The names and addresses of the officers, directors, trustees and chief executive officer of the organization;
(c) The addresses of the organization and any offices in this state. If the organization does not maintain a principal office, the name and address of the person having custody of its financial records;
(d) Where and when the organization was legally established, the form of its organization and its tax-exempt status;
(e) The purpose for which the organization and the purpose or purposes for which the public monies will be used;
(f) The date on which the fiscal year of the organization ends;
(g) Whether the organization or any of its present officers, directors, executive personnel or trustees have ever had a license or registration denied, suspended, revoked or enjoined by any court or other governmental authority in this state or any other state;
(h) Whether the organization has voluntarily entered into an assurance or voluntary discontinuance or agreement with any jurisdiction or federal agency or officer;
(i) The names and addresses of any professional fundraisers or fund-raising counsel who are acting or have agreed to act on behalf of the organization;
(j) Copies of contracts between organizations and professional fundraisers or fund-raising counsel relating to financial compensation or profit to be derived by the professional fundraisers or fund-raising counsel. If any such contract is executed after filing of a registration statement, a copy thereof shall be filed within ten (10) days of the date of execution;
(k) The board, group or individual having final authority over the distribution, custody and use of public monies received;
(l) A financial report as required by Section 3 of this act;
(m) With the initial registration only, a copy of the current charter, articles of incorporation, agreement of association, instrument of trust, constitution, or other organizational instrument and a copy of the bylaws of the organization; and
(n) With the initial registration or, if after registration, within thirty (30) days after its receipt, a copy of any federal tax exemption determination letter, any correspondence rescinding the organization's tax-exempt status, or any notification from the Internal Revenue Service of any challenge to or investigation of the organization's continued entitlement to federal tax exemption.
(2) The registration statement shall be signed and sworn to under penalties of perjury by the president or other authorized officer and the chief fiscal officer of the organization.
(3) The Secretary of State shall issue a certificate of registration to an organization once the Secretary of State determines that such organization has complied with all provisions of this chapter. No organization required to be registered under this section shall receive public monies without a valid certificate of registration.
(4) (a) Such registration shall remain in effect until the time for annual renewal. An organization shall renew registration by filing forms prescribed by the Secretary of State and paying the Fifty Dollar ($50.00) renewal fee on or before the fifteenth day of the fifth month following the close of the organization's taxable year.
(b) The Secretary of State pursuant to Section 2 of this act may promulgate rules to provide for extensions of the due date for filing of the annual renewal required by this section and may impose an administrative penalty against any organization which fails to comply with this section within the time prescribed, or fails to furnish such additional information as is requested by the Secretary of State within the required time.
(5) Every registered organization shall notify the Secretary of State within thirty (30) days of any change in the information required to be furnished by such organization under this act.
(6) In no event shall a registered organization continue to receive public monies after the date such organization should have filed, but failed to file, a renewal and the financial report in accordance with the requirements of this act.
(7) If any local, county or area division of an organization is supervised and controlled by a superior or parent organization, incorporated, qualified to do business, or doing business within this state, such local, county or area division shall not be required to register under this section if the superior or parent organization files a registration statement on behalf of the local, county or area division in addition to or as part of its own registration statement. If a registration statement has been filed by a superior or parent organization in accordance with this act, it shall file the annual report required under Section 3 of this act on behalf of the local, county or area division in addition to or as part of its own report, but the accounting information required under Section 3 of this act shall be set forth separately and not in consolidated form with respect to every local, county or area division which raises or expends more than Twenty-five Thousand Dollars ($25,000.00).
(8) Any registered organization which for any reason opts not to renew its registration must, upon the expiration of its registration, provide to the Secretary of State a final report including the following, in addition to such other information the Secretary of State may require by rule:
(a) For domestic organizations which have dissolved pursuant to the Mississippi Nonprofit Corporation Act;
(i) All financial statements and reports required by Section 3 of this act;
(ii) Articles of dissolution and certified minutes reflecting the dissolution;
(iii) A list of officers and trustees of the corporation, including their addresses and telephone numbers; and
(iv) A statement signed by an officer of the corporation providing details of the final distribution of assets.
(b) For all other organizations, foreign or domestic, which opt not to renew for any other reason:
(i) All financial statements and reports required by Section 3 of this act; and
(ii) A statement signed by an officer of the organization certifying that the organization has ceased receiving public monies within the state.
SECTION 2. The Secretary of State shall have the authority to:
(a) Promulgate rules of procedure and regulations necessary for the administration of this act, subject to the provisions of the Mississippi Administrative Procedures Law.
(b) Honor written requests from an interested person for interpretative opinions regarding registration and exemptions from registration.
(c) Publish and disseminate information to the public concerning persons subject to this act.
(d) Perform any other functions and duties which may be necessary to carry out the provisions of this act.
SECTION 3. (1) Every nonprofit organization registered pursuant to Section 1 of this act that shall receive in any fiscal year contributions in excess of Twenty-five Thousand Dollars ($25,000.00) shall file a financial statement for its most recently completed fiscal year with the Secretary of State. The financial statement shall be filed along with the registration statement required by Section 1 of this act and any renewals or final report thereafter. The financial statement shall include a balance sheet and statement of income and expense and shall be consistent with forms furnished by the Secretary of State clearly setting forth the following: gross receipts and gross income from all sources, broken down into total receipts and income from each separate project or source; cost of administration; cost of solicitation; cost of programs designed to inform or educate the public; total net amount disbursed or dedicated for each major purpose, charitable or otherwise. The statement shall be signed by the president or other authorized officer and the chief fiscal officer of the organization, and shall be accompanied by an opinion signed by an independent certified public accountant that the financial statement therein fairly represents the financial operations of the organization in sufficient detail to permit public evaluation of its operations. The financial statement shall be accompanied by any and all forms required to be filed by a charitable organization with the United States Internal Revenue Service.
(2) Every organization registered pursuant to Section 1 of this act, regardless of the amount of the contributions received in any fiscal year, shall file an annual report as required by the Secretary of State.
(3) The Secretary of State pursuant to Section 2 of this act may promulgate rules to provide for extensions of the due date for filing of the financial statements required by this chapter and may impose an administrative penalty against any organization which fails to comply with this section within the time prescribed, or fails to furnish such additional information as is requested by the Secretary of State within the required time.
SECTION 4. (1) The Secretary of State shall deny, suspend or revoke a registration or an exemption for the following reasons:
(a) The application for registration or renewal is incomplete.
(b) The application or renewal fee (where applicable) has not been paid.
(c) A document filed with the Secretary of State contains one or more false or misleading statements or omits material facts.
(d) The applicant or registrant has violated or failed to comply with any provisions of this chapter or any rule or order thereunder.
(e) Any applicant, registrant, officer, director, or partner of the applicant or registrant, or any agent or employee thereof who has been convicted of a felony or a misdemeanor involving misrepresentation, misapplication or misuse of the money or property of another maintains a position where he or she has access to or control over the funds of the nonprofit organization registered pursuant to Section 1 of this act.
(f) The applicant or registrant has engaged in the use or employment of dishonesty, fraud, deception, misrepresentation, false promise or false pretense.
(g) The applicant or registrant has had the authority to engage in charitable or fund-raising activities denied, revoked or suspended by the Secretary of State or any other state or jurisdiction.
(h) The applicant or registrant has been convicted of any criminal offense committed in connection with the performance of activities regulated under this act or any criminal offense involving untruthfulness or dishonesty or any criminal offense relating adversely to the registrant's or applicant's fitness to perform activities regulated by this act. For the purposes of this paragraph, a plea of guilty, non vult, nolo contendere or any other similar disposition of alleged criminal activity shall be deemed a conviction.
(i) Any applicant, registrant, officer, director, or partner of the applicant or registrant, or any agent, volunteer or employee thereof, who has been convicted under federal or state law of any criminal offense involving acts against children maintains a position where he or she is in close contact with children.
(j) Any officer, director, partner, employee, agent or volunteer has accrued three (3) or more unremediated citations issued by the Secretary of State pursuant to this section.
(k) The applicant or registrant has engaged in other forms of misconduct as may be determined by the rules adopted by the Secretary of State.
(2) The Secretary of State shall notify the applicant or licensee of his intent to deny, suspend or revoke a license. The notification shall contain the reasons for the action and shall inform him of his right to request an administrative hearing within thirty (30) days of receipt of the notification. The denial, suspension or revocation shall become effective thirty (30) days after receipt of the notification unless a request for an administrative hearing is received by the Secretary of State before the expiration of the thirty (30) days. If a hearing is requested and the denial, suspension or revocation is upheld, the denial, suspension or revocation shall become effective upon the service of the final administrative decision on the applicant or licensee.
(3) Registration shall become effective no later than noon of the thirtieth day after a completed application is filed, if no denial order is in effect and no proceeding is pending under this chapter. The Secretary of State may, by rule or order, specify an earlier effective date, and the Secretary of State may, by order, defer the effective date until noon of the thirtieth day after the filing of any amendment.
(4) Whenever it appears to the Secretary of State that any person has engaged in or is about to engage in any act or practice constituting a violation of any provision of this chapter or any rule or order hereunder, he may, in his discretion, seek one or more of the following remedies in addition to other remedies authorized by law:
(a) Issue a cease and desist order, with or without a prior hearing against the person or persons engaged in the prohibited activities, directing them to cease and desist from further illegal activity;
(b) Administratively dissolve or seek the judicial dissolution of a domestic corporation that is a nonprofit organization registered pursuant to Section 1 of this act, or revoke the certificate of authority of a foreign corporation that is a nonprofit organization registered pursuant to Section 1 of this act; or
(c) Issue an order imposing an administrative penalty up to a maximum of Twenty-five Thousand Dollars ($25,000.00) for each offense, each violation to be considered as a separate offense in a single proceeding or a series of related proceedings;
(d) For the purpose of determining the amount or extent of a sanction, if any, to be imposed under paragraph (b) or (c) of this subsection, the Secretary of State shall consider, among other factors, the frequency, persistence and willfulness of the conduct constituting a violation of this chapter or a rule promulgated thereunder or an order of the Secretary of State, the number of persons adversely affected by the conduct, and the resources of the person committing the violation.
(5) In addition to the above remedies, the Secretary of State may issue a citation to any person engaging in any act or practice constituting a violation of any provision of this chapter or any rule or order hereunder. The Secretary of State shall establish rules providing remediation of certain citations, and the decision whether to allow such remediation will be within the Secretary of State's discretion.
(6) Whenever it appears to the Secretary of State or Attorney General that any person has engaged in or is about to engage in any act or practice constituting a violation of any provision of this act or any rule or order thereunder, either official may, in his discretion, take any or all of the following actions: bring an action in chancery court to obtain a temporary restraining order or injunction to enjoin the acts or practices and enforce compliance with this act or any rule or order thereunder; collect administrative penalties imposed under this section; or obtain on behalf of a nonprofit organization the return or repayment of any property or consideration received as public monies in violation of law. Upon a proper showing of a permanent or temporary injunction, restraining order or writ of mandamus shall be granted and a receiver or conservator may be appointed for the defendant or the defendant's assets. In addition, upon a proper showing, the court may enter an order of rescission, restitution or disgorgement directed to any person who has engaged in any act constituting a violation of any provision of this act or any rule or order thereunder. In addition the court may impose a civil penalty up to a maximum of Twenty-five Thousand Dollars ($25,000.00) for each offense, and each violation shall be considered as a separate offense in a single proceeding or a series of related proceedings. The court may not require the Secretary of State or Attorney General to post a bond.
(7) Any person aggrieved by a final order of the Secretary of State may obtain a review of the order in the Chancery Court of the First Judicial District of Hinds County, Mississippi, by filing in the court, within thirty (30) days after the entry of the order, a written petition praying that the order be modified or set aside, in whole or in part. A copy of the petition shall be forthwith served upon the Secretary of State and thereupon the Secretary of State shall certify and file in court a copy of the filing and evidence upon which the order was entered. When these have been filed, the court has exclusive jurisdiction to affirm, modify, enforce or set aside the order, in whole or in part.
SECTION 5. Any nonprofit organization registered pursuant to Section 1 of this act but does not maintain an office within the state, shall be subject to service of process by designating a registered agent pursuant to Section 79-35-1, et seq., upon which process may be served in the State of Mississippi, or if no designation has been made and service cannot be made on the entity, then service of process shall be upon the Secretary of State of Mississippi.
SECTION 6. Every nonprofit organization registered pursuant to Section 1 of this act, shall keep true and correct books and records of solicitation activities that are covered by this act, or any rule or order adopted under this act. All such books and records shall be open to inspection at all reasonable times by the Secretary of State or the Attorney General, or their duly authorized representatives. The records shall be retained for a period of at least three (3) years.
SECTION 7. (1) It is the duty of the district attorneys and county prosecuting attorneys of this state to prosecute all violations of the provisions of this act. In addition, actions for violations of this act may be prosecuted by the Attorney General.
(2) This act shall not be construed to limit or restrict the exercise of the powers or the performance of the duties of the Attorney General which he otherwise is authorized to exercise or perform under any other provision of law by statute or otherwise except the rendering of interpretative opinions in accordance with this act which shall be limited to the Secretary of State.
(3) It shall be a violation of this act for any person:
(a) To misrepresent:
(i) The purpose or beneficiary of any public monies; or
(ii) The purpose or nature of a nonprofit organization registered pursuant to Section 1 of this act.
(b) To use or exploit the fact of registration so as to lead the public to believe that such registration constitutes an endorsement or approval by the state;
(c) To use the name of a nonprofit organization registered pursuant to Section 1 of this act, or to display any emblem, device or printed matter belonging to or associated with a nonprofit organization without the express written permission of the nonprofit organization registered pursuant to Section 1 of this act;
(d) To make any false or misleading statement on any document required by this act or any rule or order thereunder;
(e) To fail to comply with the requirements of this act or any rule or order thereunder;
(f) To commit any unfair or deceptive act or practice; to employ any device, scheme or artifice to defraud; to engage in any act, practice or course of business which operates or would operate as a fraud or deceit upon any person; or to obtain money or property by means of any false pretense, representation or promise;
(g) To refuse or fail, after notice, to produce any records required to be kept under this act, or any rule or order promulgated thereunder;
(h) To benefit, directly or indirectly, from any transaction in which an economic benefit is provided by a nonprofit organization registered pursuant to Section 1 of this act where the value of the benefit provided by the organization exceeds the fair market value of the consideration received by the organization.
(4) It shall be a violation of this act for any nonprofit organization registered pursuant to Section 1 of this act:
(a) To engage in any financial transaction which is not related to the accomplishment of a nonprofit purpose, or which jeopardizes or interferes with the ability of the nonprofit organization registered pursuant to Section 1 of this act to accomplish a nonprofit purpose;
(b) To expend an unreasonable amount of money for solicitation or management;
(c) To use the name which is the same as or confusingly similar to the name of another nonprofit organization unless the latter organization shall consent in writing to its use;
(d) To represent itself as being associated with another nonprofit organization without the express written acknowledgment and endorsement of such other nonprofit organization;
(e) To fail to comply with any provisions of this act or any rule or order thereunder;
(f) To employ as an officer, director, partner, employee, agent or volunteer, any person who has accrued three (3) or more unremediated citations issued by the Secretary of State pursuant to this act;
(g) To employ as an officer, director, partner, employee or agent any person who has been convicted of a felony or misdemeanor involving misrepresentation, misapplication or misuse of the money or property of another, in a capacity where that person has access to or control over the funds of the nonprofit organization registered pursuant to Section 1 of this act;
(h) To employ as an officer, director, partner, employee, volunteer or agent any person who has been convicted under federal or state law of any criminal offense involving acts against children, where such position will bring the person into close contact with children; or
(i) To apply the nonprofit organization registered pursuant to Section 1 of this act's funds or assets for private inurement or excess benefits which exceed the fair market value of the property or services received in return from directors, officers, or those persons who are deemed disqualified persons or insiders under applicable federal law for tax-exempt organizations.
SECTION 8. Either the Secretary of State or Attorney General, in his discretion: (a) may make such public or private investigations within or outside of this state as deemed necessary by the Secretary of State or Attorney General to determine whether any person has violated or is about to violate any provision of this chapter or any rule or order hereunder, or to aid in the enforcement of this act or in the prescribing of rules and forms hereunder; (b) may require or permit any person to file a statement in writing, under oath or otherwise, as to all the facts and circumstances concerning the matter to be investigated; and (c) may publish information concerning any violation of this act or any rule or order hereunder.
For the purpose of any investigation or proceeding under this act, the Secretary of State or Attorney General, or any designated officer may administer oaths and affirmations, subpoena witnesses, compel their attendance, take evidence, and require the production of any books, papers, correspondence, memoranda, agreements, or other documents or records which the Secretary of State or Attorney General deems relevant or material to the inquiry.
SECTION 9. The Secretary of State may enter into reciprocal agreements with a like authority of any other state or states for the purpose of exchanging information made available to the Secretary of State or to such other like authority.
The information contained in or filed with any registration application, renewal or report may be made available to the public under such rules as the Secretary of State prescribes. Information in the possession of, filed with or obtained by the Secretary of State in connection with any investigation or examination under this act shall be confidential and exempt from the requirements of the Mississippi Public Records Act of 1983. No such information may be disclosed by the Secretary of State or any of his officers or employees unless necessary or appropriate in connection with a particular investigation or proceeding under this act or for any law enforcement purpose.
SECTION 10. Any person who knowingly and willingly violates the provisions of this act shall be guilty of a misdemeanor and, upon conviction, shall be punished by a fine not exceeding Two Thousand Dollars ($2,000.00) or by imprisonment in the county jail for not more than one (1) year or both. In connection with any solicitation, any person employing a device, scheme or artifice to defraud; or engaging in any act, practice or course of business which operates or would operate as a fraud or deceit upon any person, or obtaining money or property by means of any false pretense, representation or promise shall be guilty of a felony and, upon conviction, shall be punished by a fine not exceeding Twenty-five Thousand Dollars ($25,000.00) or imprisoned not more than five (5) years, or both. No indictment or information may be returned under this act more than five (5) years after the alleged violation.
SECTION 11. This act shall take effect and be in force from and after July 1, 2018.