SB 99 — TAX EXEMPT ORGANIZATION AUDITS

SENATE BILL 99 55TH LEGISLATURE -STATEOFNEWMEXICO-- STATEOFNEWMEXICO- FIRST SESSION, 2021 INTRODUCED BY Bill B.

O'Neill 6This 8document 10may ANincorporate ACTamendments RELATINGproposed TOby TAX-EXEMPTa ORGANIZATIONS;committee, but not yet adopted, as well as amendments that have been adopted during the current legislative session.

REVISINGThe REQUIREMENTSdocument FORis AUDITS.a tool to show amendments in context and cannot be used for the purpose of adding amendments to legislation.

14h BEAN ITACT ENACTEDg BYo THERELATING LEGISLATURETO OFTAX-EXEMPT THEORGANIZATIONS; STATE OF NEW MEXICO:

SECTIONREVISING 1.REQUIREMENTS FOR t hr g e i k AUDITS.

Sectionh 6-5A-1r NMSAi 1978s (beingh Laws, 1992,t, ChapterBE 27,IT SectionENACTED 1,BY asTHE amended)LEGISLATURE isOF amendedTHE toSTATE read:OF NEW MEXICO:

e tu 17g "6-5A-1.e b l e e h SECTION 1.

DEFINITIONS--REQUIREMENTSSection FOR6-5A-1 GOVERNMENTALNMSA w1978 l(being Laws 1992, n d 18d ENTITIESi THAT RECEIVE FUNDS OR PROPERTY FROM CERTAIN = = 19o ah lChapter ORGANIZATIONS.--27, iSection a1, eas ramended) 20is A.amended to read:

l ] b ,d i a º e "6-5A-1.

DEFINITIONS--REQUIREMENTS FOR GOVERNMENTAL r i = r t e w d m a n o ENTITIES THAT RECEIVE FUNDS OR PROPERTY FROM CERTAIN d m :

b e d s º o t n = .218850.2AIC February 11, 2021 (2:46pm) s k m e e a n e d r e l u [ A d ORGANIZATIONS.-- A.

a t m m 21 (1) "agency" means any state agency, d r e 22 department or board, any public institution of higher education c e s k 23 or public post-secondary educational institution and any e a n b 24 county, municipality or public school district;

u [ (2) "organization" means an organization that .218850.2 has been granted exemption from the federal income tax by the United States commissioner of internal revenue as an organization described in Section 501(c) of the Internal Revenue Code of 1986, as amended or renumbered, and whose principal and authorized purpose is to complement, contribute to and support or aid the function of or forward the purposes of a single agency through financial support or contribution of services, goods, data or information that help or aid the agency in carrying out its statutory purpose and goals, h including, but not limited to, the provision of scholarships to u » r students of educational institutions and the provision of t h g e l i grants to supplement ongoing research or to provide funds for h r i s research and programs being carried out by an agency;

(3)h "post-secondary, educationale institution"h means(3) an"post-secondary educational institutioninstitution" designatedt inu Articleg 12,e Sectionb 11l ofe thee constitution, ofgh Newmeans Mexico and includes an eeducational tinstitution 17designated academic,in vocational,Article technical,12, business, professional or w l n d 18d otheri school,= college= oro universityh orSection other11 organizationof orthe =constitution =of 19New aMexico land personincludes offeringan orl purporting] tob offer,d courses, instruction, i a eº r 20academic, trainingvocational, ortechnical, educationbusiness, throughprofessional correspondence or ine personr to= a t me mw 21 any individual within this state over the compulsory school d rm ea 22n attendanceo age,other ifschool, thatcollege post-secondaryor educationaluniversity institution c e s k 23 is directly supported in whole or inother partorganization by state or locald em a: n b 24 taxation;

andb ur [e (4)t "transferred"º meanso givent orn otherwise= .218850.2.218850.2AIC February 11, 2021 (2:46pm) s k m e - 2 - transferred,e witha n e d r e l u [ A d person offering or withoutpurporting consideration.to offer courses, instruction, training or education through correspondence or in person to any individual within this state over the compulsory school attendance age, if that post-secondary educational institution is directly supported in whole or in part by state or local taxation;

and (4) "transferred" means given or otherwise transferred, with or without consideration.

(2) provisions explicitly describing the h relationship of the agency to the organization in connection g o t hr with such issues as authority, autonomy and information sharing g e i k and reporting;

h r i s (3) provisions defining the extent to which h , t, the organization may complement and support functions that are e u g e b l e e h the statutory responsibility of the agency;

n d d i = = o h (4) requirements that the organization:

el t] 17b ,d i a º e (a) if its gross annual income exceeds wr li n d 18 [two hundred fifty thousand dollars ($250,000)] seven hundred = = 19 a l fifty thousand dollars ($750,000), have a financial accounting i a e r 20 system considered adequate under customarily and currently a t me mw 21 accepted accounting standards and that the financial affairs of d rm e 22 the organization be audited annually in accordance with c e s k 23 generally accepted governmental auditing standards by an e a n bo 24[two independenthundred professionalfifty auditorthousand whodollars would($250,000) be] requiredseven tohundred ud [m furnish: to the agency copies of the annual audit, which, .218850.2 - 3 - exclusive of any lists of donors or donations, shall be a public record, and to make the associated working papers available to the agency for review upon its written request for a period of three years after the audit report date;

orb (b)e ifd itss grossº annualo incomet isn [two= hundred.218850.2AIC fiftyFebruary thousand11, dollars2021 ($250,000)](2:46pm) sevens hundredk m e - 3 - e a n e d r e l u [ A d fifty thousand dollars ($750,000)($750,000), orhave less,a filefinancial aaccounting statementsystem considered adequate under customarily and currently accepted accounting standards and that the financial affairs of the organization be audited annually in accordance with generally accepted governmental auditing standards by an independent professional auditor who would be required to furnish to the agency incopies of the formannual audit, which, exclusive of any lists of donors or donations, shall be a balancepublic sheetrecord, showingand to make the assetsassociated ofworking papers available to the organization,agency itsfor liabilities,review upon its income,written classifiedrequest byfor generala source,period andof itsthree expenditures,years classifiedafter bythe object;audit report date;

(5)or a(b) provisionif requiringits thatgross anyannual fundsincome oris property[two transferredhundred tofifty thethousand agencydollars by($250,000)] theseven organizationhundred befifty consideredthousand subjectdollars to($750,000) allor stateless, lawsfile anda regulationsstatement governingwith the disbursementagency andin administration of public funds and public property, except to the extentform of anya specificbalance conditionssheet ofshowing the transferassets thatof are acceptable to the agencyorganization, andits doliabilities, notits eincome, tclassified 17by requireh actionsgeneral thatsource, areand punishableits asexpenditures, crimesclassified underby stateobject; law;

wu l» nr d(5) 18 (6) a provision statingrequiring that theany agencyfunds hasor =t =h 19g ae l reviewedi property transferred to the bylawsagency ofby the organization andbe foundh themr i as econsidered rsubject 20to acceptableall state laws and aregulations provisiongoverning requiringh that, e h the organizationdisbursement aand administration of public funds and public t mu mg 21e furnishb copiesl e e , gh property, except to the extent of any specific conditions of n d d i = = o h the bylawstransfer that are acceptable to the agency;agency and do not l ] b ,d i a º r require actions that are punishable as crimes under state law;

de r e= 22t (7)e aw provisiond requiringm specificationa ofn theo c(6) ea sprovision kstating 23 consideration that the agency receivedhas fromd them organization: e a n b 24 for any agency services provided in support of the u [ organization;

andb .218850.2r e t º o t n = .218850.2AIC February 11, 2021 (2:46pm) s k m e - 4 - (8)e a provisionn requiringe thed applicationr bye l u [ A d reviewed the organizationbylaws of the standardorganization describedand infound Sectionthem 6-8-10acceptable NMSAand 1978a asprovision therequiring standardthat forthe evaluatingorganization investmentsfurnish copies of the organization.bylaws to the agency;

(7) a provision requiring specification of the consideration that the agency received from the organization for any agency services provided in support of the organization;

and (8) a provision requiring the application by the organization of the standard described in Section 6-8-10 NMSA 1978 as the standard for evaluating investments of the organization.

h D.

Nothing in this section subjects an organization g o t hr to the provisions of the Open Meetings Act or makes its g e i k records, other than the annual audit required under this h r i s section, public records within the purview of Section 14-2-1 h , t, NMSA 1978." e u g e b l e e h SECTION 2.

Section 57-22-6 NMSA 1978 (being Laws 1983, n d d i = = o h Chapter 140, Section 6, as amended) is amended to read:

el t] 17b ,d i a º e "57-22-6.

FILING OF REQUIRED DOCUMENTS.-- wr li n= r t e w d 18m a n o A.

A charitable organization existing, operating or =d = 19 a l soliciting in the state, unless exempted by Section 57-22-4 i a e r 20 NMSA 1978, shall register with the attorney general on a form a t m m: 21 provided by the attorney general;

correctb anye deficienciesd ins º o t n = .218850.2AIC February 11, 2021 (2:46pm) s k m e - 5 - e a n e d r e 22l itsu registration[ uponA noticed ofsoliciting deficienciesin providedthe state, unless exempted by Section 57-22-4 NMSA 1978, shall register with the cattorney egeneral son ka 23form provided by the attorney general;

andcorrect provideany adeficiencies copyin of its IRSregistration Formupon 1023notice orof edeficiencies aprovided nby bthe 24attorney IRSgeneral; Form 1024 application for exempt status with its u [ registration.

.218850.2and -provide 5a -copy B.of its IRS Form 1023 or IRS Form 1024 application for exempt status with its registration.

TheB. attorney general shall notify each charitable organization required to register within ten business days of [his] receipt of the registration form of any deficiencies in the registration and may make rules in accordance with the State Rules Act, as are necessary for the proper administration of this section, including:

The attorney general shall notify each charitable organization required to register within ten business days of [his ] receipt of the registration form of any deficiencies in the registration and may make rules in accordance with the State Rules Act, as are necessary for the proper administration of this section, including:

and h (2) provisions for suspending the filing of u » r reports or granting an exemption from the registration and t h g e l i reporting requirements of this section for a charitable h r i s organization subject to audit, registration, charter or other h , e h requirements of a statewide, regional or national association t u g e b l e e , gh and if it is determined that such reports or registration is n d d i = = o h not necessary for the protection of the public interest.

el t] 17b ,d i a º r C.