Prohibits certain individuals from receiving compensation from public charities; requires reasonable compensation when allowed; establishes the state board training

Summary of provisions

Section 1 adds a new subdivision 14 to Section 63 of the executive law which allows the prosecution of all actions in connection with section 728 of the not-for-profit corporation law.

Section 2 amends sub-paragraph 12 of paragraph a of section 202 of the not-for-profit corporation law to include section 727 of this chapter when defining compensation.

Section 3 amends paragraph a of section 717 of the not-for-profit corporation law to include language that any compensation provided to directors, officers, employees and other agents of the corporation shall be reasonable and, where applicable, is subject to section 727 of the not-for-profit corporation law.

Section 4 amends paragraph a of section 719 of the not-for-profit corporation law adding a new sub-paragraph 6 that reads "the provision of excessive compensation to directors, officers, employees and other agents of the corporation in violation of section 727, where applicable.

Section 5 amends paragraph d of section 719 of the not-for-profit corporation law to add a new subparagraph 6 to read that upon reimbursement to the corporation of the amount of any excessive compensation provided in violation of section 727 to be subrogated to the rights of the corporation against a director, officer, employee or other agent who received excessive compensation.

Section 6 amends clauses A and B of subparagraph 1 of paragraph A of section 720 of the not-for-profit corporation law to include the failure to perform or any other duties including violations of section 727 pursuant to section 717.

Section 7 amends the not-far-profit corporation law to include a new section 727 that defines the compensation of executives, compensation, executive and family member. It also requires that compensation exchanged by a not-for-profit corporation for the performance of services by an executive must be reasonable consider factors including but not limited to: compensation levels at similar situated organizations; availability of similar services in the geographic area of the applicable service provider; current compensation surveys by independent outside consultants or entities

and actual written offers from similar institutions competing for the services of the applicable executive.

Section 7 also requires that if a not-for-profit corporation receives over twenty-five thousand dollars from the state the corporation must annually submit completed internal revenue service form 990 or a comparable form developed to the state and filed with the Attorney General and these forms shall be publicly available upon request and if the organization maintains a website it shall be posted on the organizations website.

The Commissioners of Developmental Disabilities, Mental Health, Alcoholism and Substance Abuse Service, Children and Family Services, Health, Criminal Justice Services and the Director of the Office of the Aging shall jointly develop a form for use by these not-for-profit corporations who are not required by federal law to complete an Internal Revenue Service form 990. This form will not require more information than what is required on the 990 form. The Commissioners will also promulgate regulations and establish a uniform procedure for reviewing submitted forms and if determining compensation to be excessive and in violation of the standards established in this section, referring such cases to the Attorney General for further inquiry.

Section 8 amends the not-for-profit corporation law adding a new section 728 which requires a written policy on various aspect of the board, its composition and voting rights. All written policies shall be available for review by the Attorney General upon request.

Justification

The majority of the Not-for-Profits in our State are complying with Internal Revenue Service standards for executive compensation. In addition there are a large number of organization executives that are under-compensated for their dedication and service to our State's residents. Unfortunately there are few egregious actors who have skirted current law and have utilized public funding for excessive personal gain.

This legislation is intended to close current loopholes in State law and provide a streamlined and fair system across the board for all not-for-profit corporations in New York State while also providing safeguards that can be reviewed by State Agencies, the Attorney General and the public.

Legislative history

New Bill.

Fiscal implications

Minimal.

Effective date

This act shall take effect on the 180th day after it shall have become law; provided the Commissioners of the Office of People with Developmental Disabilities, Mental Health, Alcoholism and Substance Abuse Services, Children and Family Services, Health, Criminal Justice Services and the Director of the office of Aging immediately take the necessary

steps to ensure that forms and regulations required in section seven of the act are in place on the effective date; and provided, further, the authority to promulgate regulations and make rules is derived from an express or implicit statutory grant provided by the legislature, all agencies and divisions and Departments of the State are prohibited from promulgating regulations and making rules or that otherwise address the extent and nature of a provider's administrative costs and executive compensation, except as required and necessary to implement the provision of section six of this act.