HB 1254: RELATING TO SOLICITATION OF FUNDS FROM THE PUBLIC.

HOUSE OF REPRESENTATIVES	H.B. NO.	1254
THIRTY-THIRD LEGISLATURE, 2025
STATE OF HAWAII

A BILL FOR AN ACT

 

 

relating to solicitation of funds from the public.

 

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 

     SECTION 1.  The legislature finds that Act 205, Session Laws of Hawaii 2024 (Act 205), was intended to regulate charitable fundraising platforms in order to ensure proper and transparent fundraising activities in the State.  Act 205 is scheduled to take effect on January 1, 2026.

     However, the legislature finds that Act 205, while well-intended, has the potential to create undue burdens on charitable fundraising platforms, which may hamper and inhibit the ability of charitable organizations to respond to and fundraise in times of emergency and need.

     The legislature further finds that it would be prudent to amend Act 205 before its effective date, while retaining public protection, donor security, and transparency, and maintaining a balance that will not burden charitable fundraising platforms, charitable organizations, and the department of the attorney general.

     Accordingly, the purpose of this Act is to amend Act 205 by:

     (1)  Reducing undue burdens on charitable fundraising platforms and platform charities, including requirements related to good standing, reporting complaints, waivers of certain requirements, solicitation campaign records, and contracts; and

     (2)  Extending its effective date to June 30, 2026.

     SECTION 2.  Act 205, Session Laws of Hawaii 2024, is amended as follows:

     1.  By amending section 1 to read:

     "SECTION 1.  Chapter 467B, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

     §467B-     Charitable fundraising platforms; platform charities.  (a)  Each charitable fundraising platform shall be subject to the department's supervision for activities regulated by this section.  Before soliciting, permitting, or otherwise enabling any solicitations for purported charitable purposes, a charitable fundraising platform shall register with the department on a form or in a manner as provided by the department.  Registrations under this section shall be subject to an annual report and an annual renewal fee imposed by the department.  Fee revenues from this section shall be deposited into the solicitation of funds for charitable purposes special fund.

     (b)  A platform charity shall be subject to the department's supervision.  The platform charity shall register with the department as a platform charity before conducting activities regulated by this section[.] and shall only solicit donations through a registered charitable fundraising platform.

     (c)  Each charitable fundraising platform and platform charity shall file periodic reports with the department on a form provided by the department.  Reports shall be filed pursuant to section 467B-12.  Each report shall:

     (1)  Enable the department to ascertain whether charitable funds have been properly solicited, received, held, controlled, or distributed;

     (2)  Provide information on the number of donations made, amount raised, length of time for distributing donations or grants of recommended donations, fees charged by or through a charitable fundraising platform or platform charity, and names of recipient charitable organizations or other charitable organizations that were sent or have not yet been sent donations or grants of recommended donations; and

     (3)  Protect from disclosure any personally identifiable information of donors or other users of the charitable fundraising platform.

     (d)  No platform charity shall facilitate acts of solicitation on a charitable fundraising platform unless the platform charity is in good standing.

     (e)  A charitable fundraising platform or platform charity shall only solicit, permit, or otherwise enable solicitations, or receive, control, or distribute funds from donations for purported charitable purposes for recipient charitable organizations or other charitable organizations in good standing.  To determine good standing of a recipient charitable organization or other charitable organization, a charitable fundraising platform or platform charity may rely on electronic lists periodically published by the Internal Revenue Service, department of taxation, or department[.]; provided that:

     (1)  If a recipient charitable organization is deemed not in good standing by the department due to a minor administrative or ministerial deficiency, and not due to its tax-exempt status being revoked by the Internal Revenue Service, a charitable fundraising platform or platform charity may continue to solicit, permit, or otherwise enable solicitations, or receive, control, or distribute funds from donations for purported charitable purposes for the recipient charitable organization;

     (2)  A recipient charitable organization or other charitable organization deemed not in good standing by the department due to an administrative or ministerial deficiency, and not due to its tax-exempt status being revoked by the Internal Revenue Service, shall take steps to achieve good standing or compliance to establish good standing in a manner as required by the department; and

     (3)  Recipient charities that continue to receive funds from donations for purported charitable purposes after being deemed not in good standing by the department and that fail to take steps to achieve good standing within a reasonable period may be subject to penalties or fines as set forth in this chapter.

     (f)  If the department notifies a charitable organization that it is not in good standing and is prohibited from soliciting or operating in the State, the department shall indicate whether the basis for the prohibition is due to an administrative or ministerial deficiency.

     [(f)] (g)  With respect to purported charitable purposes, a charitable fundraising platform or platform charity that performs, permits, or otherwise enables solicitation activities shall, before a person can complete a donation or select or change a recipient charitable organization, provide conspicuous disclosures that reduce the likelihood of deception, confusion, or misunderstanding, including:

     (1)  A statement that donations are made to the charitable fundraising platform, platform charity, recipient charitable organization, or person engaging in peer-to-peer charitable fundraising, whichever is applicable;

     (2)  A statement that a recipient charitable organization may not receive donations or grants or recommended donations, with an explanation identifying the most pertinent reasons under which a recipient charitable organization may not receive the funds; provided that the explanation as to the maximum length of time may be provided through a conspicuous hyperlink, so long as the disclosure is conspicuous when the hyperlink is selected; provided further that this paragraph shall not apply when there are no circumstances under which a recipient charitable organization may not receive the funds;

     (3)  The maximum length of time it will take to send the donation or a grant of the recommended donation to a recipient charitable organization with an explanation of the time needed, unless the donation is sent contemporaneously to a recipient charitable organization after the donation is made; provided that the explanation as to the maximum length of time may be provided through a conspicuous hyperlink, so long as the disclosure is conspicuous when the hyperlink is selected;

     (4)  The fees or any other amounts that will be deducted from or added to the donation or a grant of the recommended donation and that are charged or retained by the charitable fundraising platform, platform charity, or any other partnering vendor, other than any applicable digital payment processing fees; and

     (5)  A statement as to the tax deductibility of the donation.

     [(g)] (h)  Each charitable fundraising platform or platform charity that solicits, permits, or otherwise enables solicitations shall obtain the written consent of a recipient charitable organization before using the recipient charitable organization's name in a solicitation for a purported charitable purpose.  Written consent shall be provided directly to the charitable fundraising platform or platform charity, or may be provided to a charitable fundraising platform or platform charity by one authorized officer, director, trustee, or other duly authorized representative of the recipient charitable organization and may apply to multiple affiliated charitable fundraising platforms expressly identified in the agreement providing consent.

     [(h)] (i)  After a donor contributes donations and with respect to purported charitable purposes, the charitable fundraising platform or platform charity shall promptly provide a tax donation receipt to the donor in a format determined by the department.

     [(i)] (j)  The charitable fundraising platform or platform charity shall not divert or otherwise misuse any donations made for purported charitable purposes that the charitable fundraising platform or platform charity receives through solicitation on the charitable fundraising platform, and shall hold the donations in a separate account or accounts from other funds belonging to the charitable fundraising platform or platform charity.  The charitable fundraising platform or platform charity shall promptly ensure that donations and grants of recommended donations are sent to the recipient charitable organizations with an accounting of any fees assessed for processing the funds, and in accordance with any rules adopted by the department pursuant to chapter 91.  A charitable fundraising platform and platform charity shall each be [vicariously] liable for [a charitable fundraising platform's] its own misuse of funds[, and vice versa].  A charitable fundraising platform shall maintain and operate a process for complaints about any fundraising activity regulated by this chapter and shall investigate and make findings on complaints, and at the request of the department shall report the findings to the department along with its actions for resolution, including any full refunds of contributions.

     [(j)] (k)  If a charitable fundraising platform or platform charity enters into any contract with a vendor to solicit, receive, control, process, distribute, and otherwise account for donations on the charitable fundraising platform, the contract shall be available for inspection by the department.

     (l)  Nothing in this chapter shall prohibit the department from entering into an agreement with any charitable fundraising platform to waive any requirements under this chapter when the charitable fundraising platform properly demonstrates to the department that its standard operating procedures achieves the same or similar purposes of transparency, reporting, monitoring, and accountability.

     [(k)] (m)  As used in this section, "good standing" means that a platform charity, recipient charitable organization, or other charitable organization's tax-exempt status has not been revoked by the Internal Revenue Service or is not prohibited from soliciting or operating in the [state] State by the department."

     2.  By amending section 16 to read:

     "SECTION 16.  This Act shall take effect on [January 1,] June 30, 2026."

     SECTION 3.  Section 467B-2.5, Hawaii Revised Statutes, is amended by amending subsection (c) to read as follows:

     "(c)  A professional solicitor, charitable fundraising platform, or platform charity shall maintain during each solicitation campaign and for not less than three years after the completion of that campaign the following records, which shall be available for inspection upon demand by the attorney general:

     (1)  The date and amount of each contribution received and the name and address of each contributor; provided that an electronic mail address and internet protocol address shall be sufficient for any contribution received over the Internet;

     (2)  The name and residence of each employee, agent, or other person involved in the solicitation;

     (3)  Records of all revenue received and expenses incurred in the course of the solicitation campaign; and

     (4)  The location and account number of each bank or other financial institution account in which the professional solicitor, charitable fundraising platform, or platform charity has deposited revenue from the solicitation campaign."

     SECTION 4.  Section 467B-9, Hawaii Revised Statutes, is amended by amending subsection (d) to read as follows:

     "(d)  No professional solicitor, charitable fundraising platform, or platform charity, and no agent, employee, independent contractor, or other person acting on behalf of the professional solicitor, charitable fundraising platform, or platform charity, shall solicit in the name of or on behalf of any charitable organization unless:

     (1)  The professional solicitor[, charitable fundraising platform, or platform charity] has obtained the written authorization of two officers of the organization, which authorization shall bear the signature of the professional solicitor[, charitable fundraising platform,] or platform charity and the officers of the charitable organization and shall expressly state on its face the period for which it is valid, which shall not exceed one year from the date of issuance, and has filed a copy of the written authorization with the attorney general prior to the solicitation; [and]

     (2)  The professional solicitor[, charitable fundraising platform, or platform charity] and any person who, for compensation, acts as an agent, employee, independent contractor, or otherwise on behalf of the professional solicitor[, charitable fundraising platform, or platform charity,] carries a copy of the authorization while conducting solicitations, and exhibits it on request to persons solicited or police officers or agents of the department[.]; or

     (3)  The charitable fundraising platform or platform charity has obtained the written consent of a recipient charitable organization pursuant to section 467B-   (g)."

     SECTION 5.  Section 467B-12, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

     "(b)  Each professional solicitor[, charitable fundraising platform, or platform charity], at the time of each filing, shall file with and have approved by the attorney general a bond in which the applicant is the principal obligor in the penal sum of $25,000 issued with good and sufficient surety or sureties approved by the attorney general and which shall remain in effect for one year.  The bond shall inure to the benefit of the State, conditioned that the applicant, its officers, directors, employees, agents, servants, and independent contractors shall not violate this chapter.  A partnership or corporation that is a professional solicitor[, charitable fundraising platform, or platform charity] may file a consolidated bond on behalf of all its members, officers, and employees."

     SECTION 6.  Section 467B-12.5, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

     "(a)  There shall be a written contract between a charitable organization and a professional fundraising counsel, professional solicitor, charitable fundraising platform, or platform charity that shall be filed by the professional fundraising counsel, professional solicitor, charitable fundraising platform, or platform charity with the attorney general that shall:

     (1)  In the case of a professional fundraising counsel or professional solicitor, be filed at least ten business days prior to the performance by the professional fundraising counsel[,] or professional solicitor[, charitable fundraising platform, or platform charity] of any service.  No solicitation or service pursuant to the contract shall begin before the contract is filed with the attorney general.  The contract shall be signed by two authorized officials of the charitable organization, one of whom shall be a member of the organization's governing body, and the authorized contracting officer for the professional fundraising counsel[,] or professional solicitor[, charitable fundraising platform, or platform charity.  The contract shall contain];

     (2)  In the case of a charitable fundraising platform or platform charity, a written contract shall be filed with the attorney general prior to any fundraising activity; provided that when a charitable fundraising platform has a written agreement with a third-party disbursement intermediary to facilitate transfer of funds to a recipient charitable organization, a written contract between a charitable fundraising platform and a recipient charitable organization shall not be required to be filed unless ordered by the department; and

     (3)  Contain all of the following provisions:

          [(1)] (A)  The legal name and address of the charitable organization;

          [(2)] (B)  A statement of the charitable purpose for which the solicitation campaign is being conducted;

          [(3)] (C)  A statement of the respective obligations of the professional fundraising counsel, professional solicitor, charitable fundraising platform, or platform charity and the charitable organization;

          [(4)] (D)  A statement of the guaranteed minimum percentage of the gross receipts from contributions that will be remitted to or retained by the charitable organization, if any, or, if the solicitation involves the sale of goods, services, or tickets to a fundraising event, the percentage of the purchase price that will be remitted to the charitable organization, if any.  The stated percentage shall exclude any amount that the charitable organization is to pay as fundraising costs;

          [(5)] (E)  Information concerning the compensation of the professional solicitor and professional fundraising counsel as follows:

             [(A)]  (i)  If the compensation of the professional fundraising counsel, professional solicitor, charitable fundraising platform, or platform charity is contingent upon the number of contributions or the amount of revenue received, a statement shall be included specifying the percentage of the gross revenue that is the basis for that compensation.  The stated percentage shall include any amount that the professional fundraising counsel, professional solicitor, charitable fundraising platform, or platform charity is to be reimbursed for fundraising costs;

             [(B)]  (ii) If the compensation of the professional solicitor, charitable fundraising platform, or platform charity is not contingent upon the number of contributions or amount of revenue received from the solicitation campaign, the compensation shall be expressed as a reasonable estimate of the percentage of the gross revenue, and the contract shall clearly disclose the assumptions upon which the estimate is based.  The stated assumptions shall be based upon all of the relevant facts known to the professional solicitor regarding the solicitation to be conducted by the professional solicitor; or

             [(C)]  (iii)     If the compensation of the professional fundraising counsel, charitable fundraising platform, or platform charity is not contingent on the number of contributions or amount of revenue received from the solicitation campaign, the compensation shall be stated in a dollar amount;

          [(6)] (F)  The effective and termination dates of the contract or, if the contract does not have a set termination date, a clause allowing either party a reasonable period to terminate the contract or notify the other party if either party chooses not to renew.  The contract shall also contain the date services will commence with respect to solicitation in this State of contributions for a charitable organization;

          [(7)] (G)  In the case of a professional fundraising counsel, charitable fundraising platform, or platform charity, a statement that the professional fundraising counsel will not at any time have custody or control of contributions, as applicable;

          [(8)] (H)  A statement that the charitable organization exercises control and approval over the content and volume of any solicitation; and

          [(9)] (I)  Any other information required by the rules of the attorney general."

     SECTION 7.  This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun before its effective date.

     SECTION 8.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 9.  This Act shall take effect on July 1, 2026.

 

INTRODUCED BY:

_____________________________

 

 

Report Title:

Donations; Solicitations; Charitable Funding Platforms; Platform Charities; Attorney General

 

Description:

Amends Act 205, SLH 2024, by:  reducing undue burdens on charitable fundraising platforms and platform charities, including requirements related to good standing, reporting complaints, waivers of certain requirements, solicitation campaign records, and contracts; and extending its effective date until 6/30/2026.  Effective 7/1/2026.

 

 

 

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.