53 N.J.R. 1774(a)

VOLUME 53, ISSUE 20, OCTOBER 18, 2021
RULE PROPOSALS

Reporter
53 N.J.R. 1774(a)
NJ - New Jersey Register  >  2021  >  OCTOBER  >  OCTOBER 18, 2021  >  RULE PROPOSALS  >  LAW AND PUBLIC SAFETY -- DIVISION OF CONSUMER AFFAIRS

Interested Persons Statement 

INTERESTED PERSONS 
Interested persons may submit comments, information or arguments concerning any of the rule proposals in this issue until the date indicated in the proposal. Submissions and any inquiries about submissions should be addressed to the agency officer specified for a particular proposal. 
The required minimum period for comment concerning a proposal is 30 days. A proposing agency may extend the 30-day comment period to accommodate public hearings or to elicit greater public response to a proposed new rule or amendment. Most notices of proposal include a 60-day comment period, in order to qualify the notice for an exception to the rulemaking calendar requirements of  N.J.S.A. 52:14B-3. An extended comment deadline will be noted in the heading of a proposal or appear in a subsequent notice in the Register. 
At the close of the period for comments, the proposing agency may thereafter adopt a proposal, without change, or with changes not in violation of the rulemaking procedures at      N.J.A.C. 1:30-6.3. The adoption becomes effective upon publication in the Register of a notice of adoption, unless otherwise indicated in the adoption notice. Promulgation in the New Jersey Register establishes a new or amended rule as an official part of the New Jersey Administrative Code. 
Agency


LAW AND PUBLIC SAFETY > DIVISION OF CONSUMER AFFAIRS > CHARITIES REGISTRATION UNIT

Administrative Code Citation


Proposed Amendments: N.J.A.C. 13:48-4.1, 4.3, 5.1, and 5.3
Text

  Donor Disclosures
Authorized By: New Jersey Division of Consumer Affairs, Sean Neafsey, Acting Director.
Authority: N.J.S.A. 45:17A-18 et seq., specifically 45:17A-21.b.
Calendar Reference: See Summary below for explanation of exception to calendar requirement.

Submit written comments by December 17, 2021, to:

Sean Neafsey
Acting Director
New Jersey Division of Consumer Affairs
124 Halsey Street
PO Box 45027
Newark, New Jersey 07101

or electronically at:

http://www.njconsumeraffairs.gov/Proposals/Pages/default.aspx.

The agency proposal follows:

Summary
On July 1, 2021, in   Americans for Prosperity Foundation v. Bonta, 141   S.Ct. 2373 (2021), the United States Supreme Court ruled unconstitutional a California regulation requiring charitable organizations to file with the state Attorney General's Office a copy of their Internal Revenue Service (IRS) Form 990 Schedule B (Schedule B) when renewing their annual registrations. Schedule B is a form that requires tax-exempt organizations to disclose the names and addresses of major donors. The United States Supreme Court held that California's Schedule B reporting requirement violated the right to free association protected by the First Amendment to the United States Constitution.   Id. at 2389.  

New Jersey's Charitable Registration and Investigation Act, at N.J.S.A. 45:17A-23, generally requires charitable organizations to file registration statements with the New Jersey Attorney General, unless they are exempt from registration requirements pursuant to N.J.S.A. 45:17A-26. The Division of Consumer Affairs' (Division) rules at N.J.A.C. 13:48, in turn, require registrants to file either Schedule B or, for an organization that did not include a Schedule B with its most recent IRS filing, an equivalent schedule of donors (donor schedule). In light of the U.S. Supreme Court's decision in   Americans for Prosperity Foundation v. Bonta, the Division has determined that the requirement for charitable organizations to file Schedule B or a donor schedule as part of the initial and renewal registrations can no longer be enforced. Accordingly, the Division is proposing amendments to its rules to no longer require the submission of a Schedule B or a donor schedule. Pending the adoption of the proposed amendments, the Division will not be taking enforcement action based on the failure to include Schedule B or a donor schedule in such registrations and will deem any charitable organizations that were previously deemed non-compliant solely because they failed to submit Schedule B or an equivalent donor schedule to be in compliance with registration requirements.  

Subchapter 4 of the Division's rules addresses short form registration. Short form registration is available to charitable organizations that meet certain qualifications set forth at N.J.A.C. 13:48-4.1(a), including receipt of gross contributions greater than $ 10,000, but not in excess of $ 25,000, during a fiscal year. A charitable organization that qualifies for short form registration must submit to the Attorney General a complete copy of its most recent IRS filing(s), including all schedules and statements. This requirement is set forth at N.J.A.C. 13:48-4.1(b)7, for short form initial and renewal registration statements, and at N.J.A.C. 13:48-4.3(a)8, for the registrant's annual financial report that must accompany the short form registration statement. The Division is proposing to amend N.J.A.C. 13:48-4.1(b)7 and 4.3(a)8 to exclude Schedule B from the general schedule submission requirement. The Division proposes to delete N.J.A.C. 13:48-4.3(a)9, which requires a charitable organization that did not file a Schedule B with the IRS to submit a donor schedule and corresponding donation information. The Division also proposes to delete N.J.A.C. 13:48-4.3(b), which excepts charitable organizations that filed IRS Form 990-N from the donor schedule requirement at N.J.A.C. 13:48-4.3(a)9, because the elimination of the donor schedule requirement at paragraph (a)9 will render that exception moot.

  
The Division proposes identical amendments to the corresponding provisions at Subchapter 5, which governs long form registration. As with short form registration, N.J.A.C. 13:48-5.1(b)5 requires a long form registrant to submit its most recent IRS filing(s), including all schedules and statements, with initial and renewal registration statements. The Division proposes to amend N.J.A.C. 13:48-5.1(b)5 to exclude Schedule B from the general schedule submission requirement. The Division also proposes to delete N.J.A.C. 13:48-5.3(b)5, which requires a long form registrant that did not file a Schedule B with the IRS to submit a donor schedule and corresponding donation information. The Division also proposes to delete N.J.A.C. 13:48-5.3(c), which excepts organizations that filed an IRS Form 990-N from the donor schedule requirements at paragraph (b)5, because the deletion of paragraph (b)5 will render this exception moot. As a result of the deletion of subsection (c), the Division proposes to amend recodified N.J.A.C. 13:48-5.3(e) to update the citations to other rules referenced in the provision.  

The Division has determined that the comment period for this notice of proposal shall be 60 days. Therefore, pursuant to N.J.A.C. 1:30-3.3(a)5, this notice is excepted from the rulemaking calendar requirement.  

Social Impact   
The proposed amendments will have a negative impact on society in that the Division will no longer have access to information in charitable organizations' annual registration statements, which the Division has previously identified as necessary to effectively regulate charitable organizations. Nonetheless, the proposed amendments are warranted in light of the U.S. Supreme Court's decision in   Americans for Prosperity Foundation v. Bonta. 

 
Economic Impact  
The proposed amendments are expected to have, at most, an insubstantial economic impact on charitable organizations. The Division does not believe that its existing requirements to report donor information to the Division have had any economic impact on those charitable organizations that are required to report the names and addresses of their contributors to the Internal Revenue Service on Schedule B. The economic impact of the Division's existing donor schedule rules on other charitable organizations has not been substantial because those organizations are still required by the Internal Revenue Service to keep this information in their books and records. Therefore, eliminating the Division's donor reporting rules is not likely to have a substantial economic impact on any charitable organizations.  

Federal Standards Statement  
A Federal standards analysis is not required because the proposed amendments do not exceed any Federal requirements. In addition, the proposed amendments are warranted in light of the U.S. Supreme Court's decision in   Americans for Prosperity Foundation v. Bonta.  

Jobs Impact  
The Division does not anticipate that the proposed amendments will increase or decrease jobs in the State.  

Agriculture Industry Impact  
The Division does not anticipate that the proposed amendments will have any impact on the agriculture industry in the State. 

 
Regulatory Flexibility Analysis  
If, for the purposes of the Regulatory Flexibility Act, N.J.S.A. 52:14B-16 et seq., any of the 34,516 charitable organizations registered with the Division are considered "small businesses," then the following analysis applies. The economic impact on small businesses will be the same as that described in the Economic Impact statement. The Division does not anticipate that the proposed amendments will require charitable organizations to employ professional services. The proposed amendments do not impose any compliance, recordkeeping, or reporting requirements.  
[page=1775]     

Housing Affordability Impact Analysis  
The proposed amendments will have an insignificant impact on the affordability of housing in New Jersey and there is an extreme unlikelihood that the proposed amendments would evoke a change in the average costs associated with housing because the proposed amendments eliminate a filing requirement associated with the registration of charitable organizations.  

Smart Growth Development Impact Analysis  
The proposed amendments will have an insignificant impact on smart growth and there is an extreme unlikelihood that the proposed amendments would evoke a change in housing production in Planning Areas 1 or 2, or within designated centers, under the State Development and Redevelopment Plan in New Jersey, because the proposed amendments eliminate a filing requirement associated with the registration of charitable organizations.  

Racial and Ethnic Community Criminal Justice and Public Safety Impact  
The Division has evaluated this rulemaking and determined that it will not have an impact on pretrial detention, sentencing, probation, or parole policies concerning adults and juveniles in the State. Accordingly, no further analysis is required.  

Full text of the proposal follows (additions indicated in boldface   thus; deletions indicated in brackets [thus]):  

SUBCHAPTER 4.    REGISTRATION OF CHARITABLE ORGANIZATIONS--SHORT FORM REGISTRATION  
13:48-4.1    Short form registration  

(a) (No change.)  
(b) Information required for the initial and renewal short form registration statement shall include the following:  
1.-6. (No change.)  
7. A complete copy of the charitable organization's most recent Internal Revenue Service filing(s), including, but not limited to, Form 990, Form 990EZ, Form 990PF and Form 990T (with schedule A) if the organization filed any one or more of these forms during the most recent fiscal year being reported. All schedules and statements shall be included, except for Schedule B;  
8.-13. (No change.)  
(c)-(f) (No change.)  

13:48-4.3    Financial reports  
(a) A charitable organization filing a short form registration or a short form renewal shall file an accompanying annual financial report on a form prescribed by the Attorney General. The financial report form shall include the following:  
1.-7. (No change.)  
8. A complete copy of the charitable organization's most recent Internal Revenue Service filings including, but not limited to, Form 990, Form 990EZ, Form 990PF, and Form 990T (with schedule A), if the organization filed any one or more of these forms during the most recent fiscal year. All schedules and statements shall be included, except for Schedule B;   and   
[9. If a charitable organization's Internal Revenue Service filing under (a)8 above did not include a completed schedule B, a schedule of every contributor who, during the organization's previous tax year, gave the charitable organization, directly or indirectly, money, securities, or any other type of property totaling $ 5,000 or more. In determining the total amount, separate and independent gifts of less than $ 1,000 can be disregarded. The schedule shall include:  
i. The name and address of each contributor;  
ii. The total amount each contributor gave; and  
iii. For noncash property contributions, a description of the noncash property given, fair market value of the noncash property, and the date the noncash property was received by the charity; and]  
[10.]   9. (No change in text.)  
[(b) Charitable organizations that filed an Internal Revenue Service Form 990-N are not required to provide the information required pursuant to (a)9 above.]  

SUBCHAPTER 5.    REGISTRATION OF CHARITABLE ORGANIZATIONS--LONG FORM REGISTRATION  

13:48-5.1    Long form registration  
(a) (No change.)  
(b) Information required for the initial and renewal long form registration statement shall include the following:  
1.-4. (No change.)  
5. A complete copy of the charitable organization's most recent Internal Revenue Service filings including, but not limited to, Form 990, Form 990EZ, Form 990PF, and Form 990T (with schedule A) if the organization filed any one or more of these forms during the most recent fiscal year being reported. All schedules and statements shall be included, except for Schedule B;  
6.-17. (No change.)  
(c)-(f) (No change.)  
13:48-5.3    Financial reports; audits  
(a) (No change.)  
(b) Information required for the financial report shall include the following:  
1.-2. (No change.)  
3. A statement of functional expenses classified into:  
i.-ii. (No change.)  
iii. Fund raising;   and  
4. A statement of cash flows[; and].  
[5. If a charitable organization's Internal Revenue Service filing under N.J.A.C. 13:48-5.1(b)5 did not include a completed schedule B, a schedule of every contributor who, during the organization's previous tax year, gave the charitable organization, directly or indirectly, money, securities, or any other type of property totaling $ 5,000 or more. In determining the total amount, separate and independent gifts of less than $ 1,000 can be disregarded. The schedule shall include:  
i. The name and address of each contributor;  
ii. The total amount each contributor gave; and  
iii. For noncash property contributions, a description of the noncash property given, fair market value of the noncash property, and the date the noncash property was received by the charity.  
(c) Charitable organizations that filed an Internal Revenue Service Form 990-N are not required to provide the information required pursuant to (b)5 above.]  
Recodify existing (d) and (e) as   (c)   and   (d) (No change in text.)  
[(f)]   (e) For the purpose of determining if an audit is required pursuant to [(d)]   (c) above, a charitable organization's gross revenue shall not include one-time bequests, fund raising campaigns for capital property in a single fiscal year, the value of services performed by volunteers, or items purchased by other entities for the use of the charitable organization where ownership of the item is retained by the original purchaser.  
Recodify existing (g) and (h) as   (f)   and   (g) (No change in text.)