MODEL PROTECTION OF CHARITABLE ASSETS ACT APPROVED

By Michael O'Brien, CPA - Senior Accountant

During the 2011 National Conference of Commissioners on Uniform State Laws in July, the Model Protection of Charitable Assets Act (the Model Act) was approved by the Uniform Law Commission. This law replaces the Uniform Supervision of Trustees Charitable Purposes Act, passed in 1954.

At its most basic, the Model Act gives state Attorney Generals an inventory of information about the charitable assets held by the states not for profit organizations. While its approval does not mean the act will be implemented in your state, it does serve as a model for regulation of not for profit organizations.

According to the description provided by the Uniform Law Commission, "The Model Act will articulate and confirm the role of the state Attorney General in protecting charitable assets."

The significant action items of the act are as follows:

• The attorney general's authority in most states is broad and this Act will not limit or narrow that authority, while providing in many states the first clear statutory articulation of that authority.
• The law seeks to clarify the role of Attorney General with an inventory of basic inventory of information without "overburdening" charities with reporting requirements.
• Anyone who holds or administers more than $5,000 in charitable assets must register basic information about the organization and file an annual report with the state as well as notify the state of any "life events" such as a merger, dissolution or disposition of assets.
• It would also allow charity regulators to conduct investigations of covered entities under vague and very poorly defined standards, and without court supervision or guaranteed First Amendment protections of speech and Fourth Amendment protections against unreasonable searches and seizures.
• The Model Act asks the tax-exempt organization to report transactions and legal proceedings while providing registration and annual reports of charities.

The goal of the Model Act, and the rationale for the approval, is increased transparency in future donations which in turn should promote confidence in the public to continue or expand on donations. The hope is the improved confidence will help these not for profit organizations who are being monitored by the Uniform Law Commission, however, the effects of any additional reporting requirements are yet to be determined.

To learn more about the Model Act, visit the Uniform Law Commission website.