California AG: New Forms for Charities & Fundraisers

Effective February 1, 2020, the California Attorney General’s Registry of Charitable Trusts will require charities and professional fundraisers to use new and amended forms. These new forms are now available on the AG Registry Forms webpage and may be used now (as of the date of this post).

Significant changes to the forms include:

  • Charities with annual revenue under $50,000 must file the CT-TR-1 treasurer’s report annually;
  • The RRF-1 annual registration renewal form now requires that charities report noncash donations;
  • The CT-1 initial registration form now requires additional information such as dbas and prior enforcement actions; and
  • Changes were also made to the professional fundraiser forms and the raffle forms.

Form CT-1 – Initial Registration Form

Among the key changes is a question about relationships with other entities:

Is the organization under common control, does it have a close connection with, or is it related to, any other nonprofit or for-profit organization or trust? If yes, identify by name, address, and telephone.

“Common control” means you and one or more other organizations or trusts have: (1) a majority of directors, officers, or trustees appointed or elected by the same organization(s) or individuals, (2) a majority of directors, officers, or trustees consisting of the same individuals. Common control also occurs when you and one or more organizations have a majority ownership interest in a corporation, partnership, or trust. “Ownership” means voting power in a corporation, profits interest in a partnership, or beneficial interest in a trust.

“Close connection” means any of the following relationships between organizations: (1) control of one organization by another through common directors, officers, or trustees or through authority to approve budgets or expenditures; (2) coordination or sharing of operations as to facilities, programs, employees, or other activities; or (3) common persons exercising substantial influence over the organizations.

“Related to” an organization means to control or be controlled by an organization. “Control” means (1) to have the power (by the organization or through one or more officers, directors, trustees or agents) to remove and replace (or to appoint, elect, or approve or veto the appointment or election of) the majority of another organization’s directors or trustees, or a majority of members who elect a majority of another organization’s directors or trustees; (2) to own more than 50% of a stock corporation; (3) to own more than 50% of the profits or capital interests or is managing partner, general partner, or managing member of a partnership or LLC; or (4) to own more than 50% of the beneficial interest in a trust.

Another key new question is the one about DBAs also known as fictitious business names:

List all DBAs and names of the organization uses or has used.

For fiscal sponsor organizations, this likely requires all names used for comprehensive (Model A) fiscally sponsored projects.

There are also a set of questions about directors and officers of the organization for which the registrant will need to check before completing:

Are any officers, directors, trustees, or employees related by blood, marriage or adoption? If yes, identify by name, title and relationship.

Has the organization or any of its officers, directors, or trustees been the subject of a court or administrative proceeding in any state regarding any solicitation or registration? If yes, please explain on a separate sheet.

Have any of the organization’s officers, directors, or trustees been convicted of any crime involving the misuse or misappropriation of funds, or any crime involving deception in the operation of a charity? If yes, identify by name and title.

Form RRF-1 – Annual Registration Renewal Fee Report

Among the key changes are:

  • The requirement to list all DBAs and names the organization uses or has used.

This is the same request for information in the Form CT-1, and, again, for fiscal sponsor organizations, this likely requires all names used for comprehensive (Model A) fiscally sponsored projects.

  • The requirement to state the amount of noncash contributions received.

The instructions provide: “Common examples are donations of food, clothing, equipment, pharmaceutical and medical supplies. Noncash contributions exclude contributions made by cash, check, electronic funds transfer, debit card, credit card, or payroll deduction. For charities reporting to the IRS it is the amount reported to the IRS Form 990, Part VIII, line 1g.”

  • The removal of the question: “During this reporting period, did non-program expenditures exceed 50% of gross revenue?”

This is a helpful recognition by the AG of the overhead myth and how a question like the one removed could help propagate such myth.

  • An expansion of a question about whether the services of a commercial fundraiser or fundraising counsel were used to also include whether the services of a commercial coventurer used?

A commercial coventurer is (a) a person or organization who, for profit, is primarily engaged in a business other than in connection with raising funds for charitable purposes; (b) raises money for charities by giving the charity a certain percentage from the sale of goods or services; and (c) represents to the public that the purchase or use of its goods or services will benefit a charitable organization.

  • The requirement to report whether, at the end of the reporting period, whether the organization held restricted net assets, while reporting negative unrestricted net assets?

This question simply facilitates the required disclosure under California Government Code Section 12599.8, which became effective on January 1, 2013. See New California Law Affecting Fiscal Sponsors (2/19/13).

  • The former requirement that the Form RRF-1 be signed by an authorized officer was changed to require the signature of an authorized agent.

An authorized agent may be the president or chief executive officer, treasurer or chief financial officer of a public benefit corporation; or a trustee if the organization is a trust; or other authorized agent of the organization. Copies or electronic signatures are acceptable. This change now allows an ED not identified as an officer in the Bylaws or a director (board member) be authorized to sign and submit the Form RRF-1.

Form CT-TR-1 – Annual Treasurer’s Report

Most charitable organizations whose total revenue for the fiscal year is under $50,000 must file Form CT-TR-1 and Form RRF-1 with the Attorney General’s Office. Exempted from this filing requirement are private foundations (because they must file IRS Form 990-PF with the Form RRF-1) and organizations that are exempt from the registration requirements, including religious organizations, schools, hospitals, and government agencies.

The proposed changes to the California regulations and forms generally require from IRS e-Postcard (Form 990-N) filers Form CT-TR-1, which is essentially a simple balance sheet and statement of revenues and expenses, including the compensation of directors and officers.