Exempt Organizations Advisory - DC Nonprofit Corporation Oversight Legislation Reintroduced

On February 9, the DC Council’s Committee on Public Safety and the Judiciary, chaired by Councilmember Phil Mendelson, convened a hearing on Bill 17-53 (Version 3), "Nonprofit Organizations Oversight Improvement Amendment Act of 2007."

This bill, which was originally introduced as B16-759 on May 4, 2006 by Mayor Anthony Williams, was pulled before a scheduled mark-up in November due to statements of concern from members of the nonprofit community. Councilmember Mendelson has now reintroduced the legislation, which takes into account many of the concerns raised last fall. This redlined version of the bill shows the changes made to the original bill.

Witnesses to the hearing included: James M. Goldberg of Goldberg & Associates; Jay Kalinski on behalf of the American Society of Association Executives (ASAE); John Childers, President & CEO of the Consortium of Universities of the Washington Metropolitan Area; Robert A. Malson, President of the DC Hospital Association; and Bennett Rushkoff of the DC Office of the Attorney General. (Click on highlighted names above for copies of their written testimony.)

According to Mendelson, new legislation is needed to correct the following problems with the existing law:

1. The law does not specifically require nonprofits to be organized for nonprofit purposes;
2. Under existing law, dissolution is the only option to correct bad behavior; intermediate steps are needed;
3. Te law does not allow the Attorney General to investigate nonprofits, issue subpoenas and bring actions in court; and
4. Currently, nonprofit corporations are exempt from the Consumer Protection Procedures Act.

According to witness Jay Kalinski of ASAE, the 2006 bill, which was proposed to address these concerns, contained "ambiguities and unintended consequences," was excessively broad in scope, and gave too wide a level of discretion to the Attorney General and DC Courts.

After subsequent collaboration among the Judiciary Committee, the Attorney General’s office, and members of the nonprofit community, the amended bill is a "vast improvement over last year’s bill," according to witness James Goldberg. Most of the witnesses were "generally very supportive," and agreed that the revisions addressed most of the nonprofit community’s concerns, but they said they may have additional minor changes in the future. The witnesses encouraged the Council to continue to work with the nonprofit community as they continue to hone the legislation.

The matter will be open until February 23, at which time it will go to the DC Council for a mark-up.