Nonprofit Corporation Legislative Summary: 2011
The 2011 Sixty-second Legislative Assembly adopted three bills that amended laws governing nonprofit corporations and charitable solicitation. The full text of each of these bills (HB 1315, HB 1334, and SB 2174) is available for viewing on the Secretary of State’s website at www.nd.gov/sos. Click on the lobbying and legislative link in the left side menu and then scroll down to legislative acts. The respective bills are summarized below:
House Bill 1315 (effective August 1, 2011):
This bill amended subsection 1 of Section 50-22-04 of the North Dakota Century Code, which is the chapter pertaining to the registration and reporting required of charitable organizations soliciting contributions.
- The bill enables the Secretary of State to authorize a permanent extension for filing the annual charitable solicitation report and renewal for those organizations with a fiscal year ending within three months of the standard September 1 filing date. Upon receipt of a written request for an extension, the filing date then becomes a “standing” extension to apply to successive years until an alternate submission date is requested.
- The filing date cannot be extended beyond December 1 of any year.
House Bill 1334 (effective July 1, 2011):
This bill created a new subsection to section 57-39.2-04 of the North Dakota Century Code, which is the chapter pertaining to sales tax.
- The bill exempts from taxation those gross monies received from memberships and admission and entrance fees to activities and events organized and operated by nonprofit social and recreational organizations organized under section 501(c)(7) of the Internal Revenue Code [26 U.S.C. 501(c)(7)] and operated solely by non-salaried officers and staff. It applies to taxable events occurring after June 30, 2011.
Senate Bill 2174 (effective July 1, 2011):
This 87-page bill was drafted by the Secretary of State’s office in collaboration with a committee from the State Bar Association of North Dakota. It includes provisions pertaining to the laws administered by the Secretary of State for the various business entities established and registered under state law with the agency.
Many of the provisions in the bill were not substantive in nature. For consistency and clarity purposes In Chapter 10-33 of the North Dakota Century (the nonprofit corporations chapter), some of the amendments changed existing text throughout the chapter to match how the terminology was defined in the chapter’s opening definition section (N.D.C.C. § 10-33-01). Since all of the various business entities have identical provisions, some of the changes were identical to those that amended the respective chapters for the other business entity types.
Beginning in section 40 of SB 2174 on page 48 through section 61 on page 69, the changes were specific to nonprofit corporations. Some of those sections are summarized below.
- Section 41 amended N.D.C.C. § 10-33-06 and makes it clear that only members with voting rights are allowed to vote on certain issues.
- Section 42 amended N.D.C.C. § 10-33-10 to require a proposed nonprofit corporation name to be submitted in letters or characters of the English language; in addition to researching existing names of record, the Secretary of State is also required to research existing trademarks and service marks on record to determine the availability of a proposed corporate name and whether the submitted name is deceptively similar to one already of record; and to secure the name of a nonprofit corporation when the origination documents are filed with a later effective date.
- Section 43 clarifies that only the members who have a right to vote on certain issues are the members with voting rights.
- Section 45 provides that the remaining directors, if they have the power to elect or appoint directors, may appoint as many directors as are needed to increase the number of serving directors to the number required in the bylaws (or to the statutory minimum of three).
- Section 47 provides that the notice of a board of directors meeting must contain the substance of a proposed amendment to the articles of incorporation but otherwise need not state the purpose of the meeting unless the articles or bylaws require doing so.
- Section 53 makes clear that unless the articles or bylaws provide otherwise, any number of offices may be held by the same individual.
- Section 55 makes clear the unlimited authority of the nonprofit corporation to indemnify its directors, officers or employees.
- Section 57 provides for the procedures by which a nonprofit corporation may sell, lease, transfer, dispose of or grant a security interest in substantially all of its property and assets.