Relates to compensation of executives of certain not-for-profit corporations

Summary of provisions

Section 1 adds a new subdivision 14 to Section 63 of the Executive Law which allows the Attorney General to prosecute all actions in connection with section 728 of the Not-For-Profit Corporation Law.

Section 2 amends the Not-For-Profit Corporation Law to include within the powers of a governing board the setting of compensation of execu- tives based on section 727.

Section 3 amends paragraph a of section 717 of the Not-For-Profit Corpo- ration Law to include language that any compensation provided to direc- tors, 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 section 719 of Not-For-Profit Corporation Law to include establishing reasonable compensation within the duties of direc- tors and officers, and may be held liable for breaching this duty.

Section 5 amends section 719 of the Not-For-Profit Corporation Law to require the repayment of the amount of any excessive compensation provided in violation of section 727.

Sections 6 and 7 amends section 720 of the Not-For-Profit Corporation Law to include violations of section 727 within actions that may be brought against directors or officers.

Section 8 amends the Not-For-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 organiza- tions; 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. These provisions are in addition to the Federal IRS requirements.

Section 8 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 compa- rable 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, Alcohol- ism 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 corpo- rations 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 9 amends the Not-For-Profit Corporation Law by 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 addi- tion there are a large number of organization executives that are under-compensated for their dedication and service to our State's resi- dents. 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

2013-14: S.4783-A Rules / A.2120-A Governmental Operations 2011-12: S.6930 Finance/ A.10733 Government Operations

Fiscal implications

Minimal.

Effective date

This act shall take effect on the one hundred eightieth day after it shall have become a law; provided, however, that the commissioners of the offices for 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 for the aging shall immediately take the necessary actions to ensure that forms and regulations required by section eight of this act are in place on such effective date; and provided, further, whereas the authority to promulgate regulations and make rules is derived from an express or implicit statutory grant provided by the legislature, all agencies, divisions and departments of the state are hereby prohibited from promulgating regulations and making rules pursuant to section 8.38 of title 9 of the official compilation of the New York Codes, Rules and Regulations, 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 provisions of section six of this act.