Nonprofit registration bill sent to Governor for signature

At 10:15 p.m. on Friday, April 25, in a crowded State Capitol conference room, a legislative conference committee co-chaired by Senator Brian Taniguchi and Representative Robert Herkes passed a bill proposed by the Attorney General. It would require nonprofits with more than $25,000 in annual revenue that solicit funds in Hawaii to register, file annual financial reports and pay annual fees. The measure, SB3171 SD2 HD2 CD1, now goes to the Governor.

The mandatory annual fees would range from $25 for organizations with annual revenues between $25,000 and $50,000 up to $750 for those that bring in more than $5 million. The fees would go into a special fund used for four additional staff positions in the AG's office for nonprofit oversight and enforcement. The bill includes additional enforcement powers, such as subpoenas, investigative hearings and court orders.

Small nonprofits with annual revenues of less than $25,000, religious corporations, PTAs, hospitals, accredited schools and nonprofits that do not solicit contributions would be exempt from the new provisions.  

If signed, the act would take effect this year on July 1. Hawaii nonprofits not exempted would have until Jan. 1, 2009, to file a Universal Registration Statement. While registration would be done once, financial reports would be required annually. The annual IRS Form 990 will be accepted from organizations that file them.

Organizations that have more than $25,000 but are eligible to file the IRS Form 990N "electronic postcard" would be required to make an annual financial report using a form prescribed by the AG's office.

AUDITS REQUIRED FROM LARGER NONPROFITS – An annual financial audit performed by an independent CPA would be required from nonprofits with annual revenues exceeding $500,000. The AG's office and the Senate had agreed to higher threshold, $1 million, but the House insisted on the lower amount. Audits, financial reports and fees would be due on or before the IRS Form 990 or Form 990EZ is required to be filed.

The Hawaii Alliance of Nonprofit Organizations had supported the intent of the bill but argued for a one-year delay to allow nonprofits to deal with the added time and expense of new IRS forms and regulations that are already in effect for the 2008 tax year. These include an expanded Form 990 that has been completely redesigned for the first time in 30 years and new, more rigorous, auditing standards.

HANO successfully argued to delay the registration deadline for Hawaii charities until Jan. 1, 2009, to keep confidential sensitive information in the registration statement, to substitute the IRS Form 990 or Form 990EZ for any other annual financial, to delay annual report filings and fee payments until the IRS Form 990 deadline and other technical changes.

The bill also includes changes in the registration and reporting of professional fundraisers and a prohibition on contracting with unregistered fundraising solicitors.