HOUSE OF REPRESENTATIVES

H.B. NO.

1119

THIRTY-FIRST LEGISLATURE, 2021

H.D. 2

STATE OF HAWAII

 

 

 

 

 

 

A BILL FOR AN ACT

 

 

RELATING TO CHARITABLE ORGANIZATIONS.

 

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 


SECTION 1. The legislature finds that dark money is defined as funds raised for the purpose of influencing elections by nonprofit organizations that are not required to disclose the identities of their donors. Dark money can come from organizations, such as social welfare organizations granted tax exempt status under 501(c)(4) of the Internal Revenue Code that are not required to disclose their donors. This results in a lack of transparency that fails to inform the public about who is trying to influence an election. Although dark money can come in through different tax exempt organizations, this Act attempts to address only dark money donated through the 501(c)(4) organizations.

The legislature further finds that to be tax exempt as a social welfare organization described in section 501(c)(4) of the Internal Revenue Code, an organization must not be organized for profit and must be operated exclusively to promote social welfare. According to the Internal Revenue Service, to be operated exclusively to promote social welfare, an organization must operate primarily to further the common good and general welfare of the people of the community, such as by bringing about civic betterment and social improvements. The promotion of social welfare does not include direct or indirect participation or intervention in political campaigns on behalf of or in opposition to any candidate for public office.

However, the Internal Revenue Service states that a social welfare organization may engage in some political activities, so long as that is not the organization's primary activity. This means that an organization can use 49.99 per cent of its funds to engage in political activity and still maintain its tax exempt status, all while hiding its donors' involvement in political campaigning. Furthermore, the Internal Revenue Service is not currently authorized to use any funds to investigate these activities in order to ensure compliance. This allows 501(c)(4) organizations to engage in and spend unregulated amounts of money on political activity without any consequences or oversight, conceivably well above the political activity percentage threshold allowed.

While the State does not have the authority to revoke federal tax exempt status by the Internal Revenue Service, the State should be given oversight into 501(c)(4) organizations that operate in Hawaii to ensure that the majority of each 501(c)(4) organization's operations and spending are focused on social welfare and not political activities. The State may then submit its findings to the Internal Revenue Service and the public.

The purpose of this Act is to promote transparency by tax exempt social welfare organizations by requiring 501(c)(4) organizations that donate or contribute to noncandidate committees, engage in electioneering communications, or provide an endorsement for or against a candidate register with the campaign spending commission and file organizational and financial reports.

SECTION 2. Chapter 11, Hawaii Revised Statutes, is amended by adding three new sections to be appropriately designated and to read as follows:

"11-A Social welfare organizations; organizational reporting requirements. (a) All social welfare organizations shall file an organizational report with the commission. The social welfare organization organizational report shall include:

(1) The full name of the social welfare organization, which shall incorporate the full name of the sponsoring entity, if any; provided that an acronym or abbreviation may be used in other communications if the acronym or abbreviation is commonly known or clearly recognized by the general public; provided further that the social welfare organization's name shall not include the name of a candidate;

(2) The social welfare organization's address, including website address, if any;

(3) The date the social welfare organization was organized;

(4) The area, scope, or jurisdiction of the social welfare organization;

(5) The name and address of the social welfare organization's sponsoring entity; provided that if the social welfare organization does not have a sponsoring entity, the social welfare organization shall specify the trade, profession, or primary interest of contributors to the social welfare organization;

(6) The name, address, telephone number, occupation, and principal place of business of the principal officer of the social welfare organization;

(7) The name, address, telephone number, occupation, and principal place of business of the treasurer and any other officers of the social welfare organization;

(8) The name, address, telephone number, occupation, and principal place of business of the custodian of the books and accounts of the social welfare organization;

(9) Written acceptance of appointment by the principal officer and treasurer of the social welfare organization;

(10) A certification of the statement by the principal officer and the treasurer of the social welfare organization; and

(11) The name, address, occupation, and employer of each donor who has contributed an aggregate amount of more than $100 since the last election and the amount and date of deposit of each contribution.

(b) Any change in information previously reported in the organizational report, with the exception of subsection (a)(11), shall be electronically filed with the commission within ten days of the change being brought to the attention of the principal officer or treasurer of the social welfare organization.

11-B Social welfare organizations; reports. (a) The treasurer of a social welfare organization shall file preliminary, final, and supplemental reports that disclose the following information:

(1) The social welfare organization's name and address;

(2) The cash on hand at the beginning of the reporting period and election period;

(3) The reporting period and election period aggregate totals for each of the following categories:

(A) Contributions received;

(B) Contributions made;

(C) Expenditures; and

(D) Other receipts;

(4) The cash on hand at the end of the reporting period; and

(5) The surplus or deficit at the end of the reporting period.

(b) Schedules filed with the reports shall include the following additional information:

(1) The amount and date of deposit of each contribution received and the name, address, occupation, and employer of each contributor making a contribution aggregating more than $100 during an election period, which was not previously reported; provided that if all the information is not on file, the contribution shall be returned to the contributor within thirty days of deposit;

(2) The amount and date of each contribution made and the name and address of the candidate, candidate committee, or noncandidate committee to which the contribution was made;

(3) All expenditures, including the name and address of each payee and the amount, date, and purpose of each expenditure; provided that:

(A) Expenditures for advertisements or electioneering communications shall include the names of the candidates supported, opposed, or clearly identified;

(B) Expenditures for consultants, advertising agencies and similar firms, credit card payments, salaries, and candidate reimbursements shall be itemized to permit a reasonable person to determine the ultimate intended recipient of the expenditure and its purpose;

(C) Independent expenditures shall include the name of any candidate supported, opposed, or clearly identified; and

(D) The purpose of an independent expenditure shall include the name of the candidate who is supported or opposed by the expenditure, and whether the expenditure supports or opposes the candidate;

(4) For social welfare organizations making only independent expenditures, certification that no expenditures have been coordinated with a candidate, candidate committee, or noncandidate committee, or any agent of a candidate, candidate committee, or noncandidate committee;

(5) The amount, date of deposit, and description of other receipts and the name and address of the source of each of the other receipts;

(6) A description of each durable asset, the date of acquisition, value at the time of acquisition, and the name and address of the vendor or contributor of the asset; and

(7) The date of disposition of a durable asset, value at the time of disposition, method of disposition, and name and address of the person receiving the asset.

(c) The treasurer of a social welfare organization shall file a late contribution report as provided in section 11-338 if the committee receives late contributions from any person aggregating more than $500 or makes late contributions aggregating more than $500.

(d) For purposes of this section, "electioneering communication" means the same as defined in section 11-341.

11-C Time for social welfare organizations to file preliminary, final, and supplemental reports. (a) The filing dates for preliminary reports are:

(1) Ten calendar days prior to a primary, special, or nonpartisan election;

(2) Ten calendar days prior to a general election; and

(3) October 1 of the year of a general election.

Each preliminary report shall be current through the fifth calendar day prior to the filing of the report.

(b) The filing date for the final primary report is twenty calendar days after the primary, initial special, or initial nonpartisan election. The report shall be current through the day of the applicable election.

(c) The filing date for the final election period report is thirty calendar days after a general, subsequent special, or subsequent nonpartisan election. The report shall be current through the day of the applicable election.

(d) The filing dates for supplemental reports are:

(1) January 31; and

(2) July 31 after an election year.

The report shall be current through December 31 for the report filed on January 31 and current through June 30 for the report filed on July 31."

SECTION 3. Section 11-302, Hawaii Revised Statutes, is amended by adding a new definition to be appropriately inserted and to read as follows:

""Social welfare organization" means a non-profit organization operated exclusively to promote social welfare that donates or contributes money to a noncandidate committee, engages in electioneering communications, or provides an endorsement for or against a candidate and is recognized as a charitable or otherwise tax-exempt organization under section 501(c)(4) of the Internal Revenue Code of 1986, as amended."

SECTION 4. Section 11-321, Hawaii Revised Statutes, is amended to read as follows:

1. By amending its title and subsections (a) to (c) to read:

"[[]11-321[]] Registration of candidate committee [or], noncandidate committee, or social welfare organization. (a) Each candidate committee [or], noncandidate committee, or social welfare organization shall register with the commission by filing an organizational report as set forth in section 11-322 [or], 11-323, or 11-A, as applicable.

(b) Before filing the organizational report, each candidate committee [or], noncandidate committee, or social welfare organization shall mail or deliver an electronic filing form to the commission.

(c) The electronic filing form shall include a written acceptance of appointment and certification of each report, as follows:

(1) A candidate committee shall file a written acceptance of appointment by the chairperson and treasurer and a certification by the candidate and treasurer of each filed report; [or]

(2) A noncandidate committee shall file a written acceptance of appointment by the chairperson and treasurer and a certification by the chairperson and treasurer of each filed report[.]; or

(3) A social welfare organization shall file a written acceptance of appointment by the principal officer and treasurer and a certification by the principal officer and treasurer of each filed report."

2. By amending subsection (g) to read:

"(g) The organizational report for a noncandidate committee or a social welfare organization shall be filed within ten days of receiving contributions or making or incurring expenditures of more than $1,000, in the aggregate, in a two-year election period; provided that within the thirty-day period prior to an election, a noncandidate committee or social welfare organization shall register by filing an organizational report within two days of receiving contributions or making or incurring expenditures of more than $1,000, in the aggregate, in a two-year election period."

SECTION 5. Section 11-331, Hawaii Revised Statutes, is amended to read as follows:

"11-331 Filing of reports, generally. (a) Every report required to be filed by a candidate or candidate committee shall be certified as complete and accurate by the candidate and treasurer.

(b) Every report required to be filed by a noncandidate committee shall be certified as complete and accurate by the chairperson and treasurer.

(c) Every report required to be filed by a social welfare organization shall be certified as complete and accurate by the principal officer and treasurer.

[(c)] (d) All reports required to be filed under this part shall be filed on the commission's electronic filing system.

[(d)] (e) For purposes of this part, whenever a report is required to be filed with the commission, "filed" means that a report shall be filed with the commission's electronic filing system by the date and time specified for the filing of the report by:

(1) The candidate or candidate committee of a candidate who is seeking election to the:

(A) Office of governor;

(B) Office of lieutenant governor;

(C) Office of mayor;

(D) Office of prosecuting attorney;

(E) County council;

(F) Senate;

(G) House of representatives; or

(H) Office of Hawaiian affairs; [or]

(2) A noncandidate committee required to be registered with the commission pursuant to section 11-323[.]; or

(3) A social welfare organization required to be registered with the commission pursuant to section 11‑A.

[(e)] (f) To be timely filed, a committee's reports shall be filed with the commission's electronic filing system on or before 11:59 p.m. Hawaiian standard time on the filing date specified.

[(f)] (g) All reports filed under this part are public records and shall be made available for public inspection on the commission's website in a searchable database."

SECTION 6. Section 11-338, Hawaii Revised Statutes, is amended to read as follows:

"11-338 Late contributions; late expenditures; report. (a) The candidate, authorized person in the case of a noncandidate committee that is a party, or treasurer in the case of a candidate committee [or], other noncandidate committee, or social welfare organization that, within the period of fourteen calendar days through four calendar days prior to any election, makes contributions aggregating more than $500, or receives contributions from any person aggregating more than $500, shall file a late contribution report by means of the commission's electronic filing system on or before the third calendar day prior to the election.

(b) The late contribution report shall include the following information:

(1) Name, address, occupation, and employer of the contributor;

(2) Name of the candidate, candidate committee, [or] noncandidate committee, or social welfare organization making or receiving the contribution; provided that, for noncandidate committees or social welfare organizations making only independent expenditures, if a late contribution greater than $5,000 in the aggregate is received from an entity other than an individual, for-profit business entity, or labor union, then the report shall include:

(A) The internet address where the contributing entity's disclosure report can be publicly accessed, if the contributing entity is subject to any state or federal disclosure reporting requirements regarding the source of the contributing entity's funds;

(B) The name, address, occupation, and employer of each funding source of more than $100 in the aggregate to that contributing entity; or

(C) An acknowledgment that the contributing entity is not subject to any state or federal disclosure reporting requirements regarding the source of the contributing entity's funds;

(3) The amount of the contribution received;

(4) The amount of the contribution made;

(5) The contributor's aggregate contributions to the candidate, candidate committee, [or], noncandidate committee[;], or social welfare organization; and

(6) The purpose, if any, to which the contribution will be applied, including, for contributions to a noncandidate committee[,] or social welfare organization, the name of any candidate supported, opposed, or clearly identified.

(c) A noncandidate committee or social welfare organization that makes independent expenditures in an aggregate amount of more than $500 within the period between fourteen and four calendar days prior to any election shall file a late expenditure report by means of the commission's electronic filing system on or before the third calendar day prior to the election. The late expenditure report shall include the following information for each expenditure:

(1) The amount and date made;

(2) The vendor name, address, and contact information; and

(3) The purpose, including the name of any candidate supported, opposed, or clearly identified by the expenditure.

(d) A late contribution report or late expenditure report filed pursuant to this section shall be in addition to any other report required to be filed by this part."

SECTION 7. In codifying the new sections added by section 2 of this Act, the revisor of statutes shall substitute appropriate section numbers for the letters used in designating the new sections in this Act.

SECTION 8. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 9. This Act shall take effect on July 1, 2060.



 

Report Title:

Social Welfare Organizations; Registration; Reporting; Campaign Spending Commission

 

Description:

Clarifies that social welfare organizations granted tax exempt Requires social welfare organizations granted tax exempt status under 501(c)(4) of the Internal Revenue Code that donate or contribute to noncandidate committees, engage in electioneering communications, or provide an endorsement for or against a candidate to register with the campaign spending commission and file organizational and financial reports. Effective 7/1/2060. (HD2)

 

 

 

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