The California Attorney General recently issued modifications to the proposed regulations governing the dissolution of charitable entities. As part of the rulemaking process, stakeholders were invited to submit written comments on the revised provisions. Below is the comment we submitted, focusing on practical implications for nonprofits navigating the dissolution and foreign registration requirements.
“We submit this comment on the Notice of Modifications to the Proposed Regulations related to the Dissolution of Charitable Entities initially noticed on December 20, 2024.
The modified text throughout the proposed regulations (e.g., §332(c)(6), (d)(5), (e)(6), (f)(5), (i)(3), (j)(3), and §333(a)(3), (b)(7)) requires that “the final Form RRF-1 and IRS Form 990 must be filed with the Registry no later than 4 months 15 days from the date the letter waiving objections is issued.” We are concerned this deadline may not be workable in practice. The date the waiver is issued does not necessarily align with the Secretary of State’s process for filing the Certificate of Dissolution, and in many cases, organizations are not yet wound up at that point and may require additional months before they are prepared to file their Certificate of Dissolution.
In addition, under IRS rules, the due date for an organization’s final Form 990 is calculated as 4 months and 15 days from the termination date, which is the date the organization files its Certificate of Dissolution with the Secretary of State. Aligning the Form RRF-1 deadline with this IRS framework—as has traditionally been the case—would reduce confusion, avoid inconsistent filing obligations, and better reflect the realities of the winding-up process.
We respectfully recommend that the Department revise the deadline to run from the date of dissolution with the Secretary of State, rather than from the date the waiver is issued.
The proposed regulations also implicitly include a requirement that a registered foreign nonprofit corporation maintain its registration with the Registry as long as it has charitable assets received from Californians. This would be an incredibly burdensome and impractical data point for nonprofits to track. It assumes that foreign nonprofit corporations must vet the state residency of each donor (which regularly changes over time for a great many donors) at the time of each donation and track all funds from Californians separate from the funds from donors from other states. If other states adopted similar regulations, the tracking and accounting burdens would be enormous, and the great majority of foreign nonprofit corporations would likely ignore the requirement or continue to renew their registration with the California Registry even if they had no physical presence in California and minimal contacts with California donors. We respectfully recommend that the Department eliminate this implicit requirement.”
Excerpts from the Modified Proposed Regulations
Section 433(c)(6): “The final Annual Registration Renewal Fee Report (“Form RRF-1”) and Internal Revenue Service Form 990 of the corporation must be filed with the Registry no later than 4 months 15 days from the date the letter waiving objections is issued.”
Section 333(a): “A foreign nonprofit corporation must provide the following to withdraw its registration with the Registry of Charities and Fundraisers: (1) A letter signed on behalf of the corporation by an authorized director or by an attorney for the corporation containing: … (C) A statement regarding the corporation’s charitable assets held in California, or received from California donors, with the following information: … ii. If the corporation has charitable assets that were received from Californians, a detailed plan for transferring those assets to another California charity or charities, including an explanation of how the proposed recipient or recipients have the same or similar charitable purposes as the foreign corporation withdrawing its registration, whether the assets are restricted in use or purpose, and the amount to be distributed to each California charity, or an explanation as to why those assets should not be transferred to another California charity and the amount at issue ….”