Relates to the classification of type-C not-for-profit corporations

Sections 2 and 3 of the bill amend NFPCL §§ 113 and 114, respectively, 10 conform with the proposed amendment to NFPCL . 201 eliminating the Type C classification of not-for-profit corporations.

Section 4 of the bill amends NFPCL § 201 to eliminate the Type C classification of not-for-profit corporations and to provide that a Type B corporation may be formed for any lawful business purpose to achieve a lawful public or quasi-public objective. NFPCL § 201 is also amended provide that any corporation currently designated as Type C will be deemed to be a Type B corporation.

Section 5 of the bill amends NFPCL § 402 to conform with the proposed amendment to NFPCL § 201 eliminating the Type C classification of not-for-profit corporations and to clarify that a Type B Corporation formed for any lawful business purpose or purposes must include a statement in its certificate of incorporation describing the lawful public or quasi-public objective each business purpose will achieve.

Sections 6 through 8 of the bill amend NFPCL §§ 510, 804 and 907, respectively, to conform with the proposed amendment to NFPCL § 201 eliminating the Type C classification of not-for-profit Corporations.

Section 9 of the bill amends NFPCL § 908 to remove provisions regarding Type C corporations and to permit Type B corporations to merge or consolidate into a business Corporation.

Sections 10 through 13 of the bill amend NFPCL §§ 1001, 1002, 1003 and 1012 to conform with the proposed amendment to NFPCL § 201 eliminating the Type C classification of not-for-profit corporations.

Section 14 of the bill amends NFPCL § 1304 to remove provisions regarding Type C corporations and to clarify that a Type B corporation authorized to pursue any lawful business purpose or purposes in this State must include a statement in its application for authority describing the lawful public or quasi~public objective each business purpose will achieve.

Section 15 of the bill amends NFPCL § 1321 to clarify that provisions currently applicable to Type C corporations will now be applicable to Type B corporations authorized to pursue any lawful business purpose or purpose in this State.

Section 16 of the bill amends NFPCL § 1411 to provide that a local development corporation will be a Type B corporation,

Section 17 of the bill provides for an immediate effective date.

Existing law

Currently, the NFPCL provides that a not-for-profit corporation may be formed for a purpose which is "not for pecuniary profit or financial gain" and which is permitted under the NFPCL. NFPCL § 201 provides the purposes for which a not-for-profit corporation may be formed. These purposes ate classified as either Type A, B, C or D. The certificate of incorporation of a not-for-profit corporation must include the corporation's Type. Under current law, Type C corporations may be formed for any lawful business purpose to achieve a lawful public or quasi public objective. The NFPCL generally utilizes this classification system in applying regulatory provisions related to the filing of amendments, mergers and dissolutions to not-for-profit corporations.

Prior legislative history

This is a new proposal.

Statement in support

Use of the "Type" classification system is unique to New York law. This system unnecessarily complicates the formation and regulation of not-for-profit corporations. The formation of new corporations is often delayed due to the inclusion of an incorrect statement of Type in the proposed certificate of incorporation. Additionally,the Department of State has been advised by practitioners that not-for-profit corporations classified as "Type C" frequently encounter difficulties in receiving an IRS tax exemption as a result of such classification. This proposal would simplify the current classification system by combining the "Type C" and "Type B" classes of not-for-profit corporations into a new "Type B" classification. Elimination of the "Type C" classification will encourage and simplify the formation of not-for-profit corporations in New York State.

Budget implications

None noted.

Effective date

This act shall take effect immediately.