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Overview

On Friday afternoon, July 28, 2006, the Office of the Ohio Attorney General released a set of proposed administrative rules (“the Rules”) affecting charitable organizations (“charities”) in Ohio. Although these Rules are a substantial revision of a draft issued in late June they are intended to serve the same purpose. The announced purpose of the Rules is to improve transparency and accountability among Ohio’s charities and ensure that they are meeting their fiduciary responsibilities, as well as to assist the Attorney General’s Office in conducting any necessary investigations regarding charities’ actions or policies. Ohio law currently requires that most charities register with and submit annual reports to the Attorney General’s office. If finalized in their current form, the rules would expand those requirements and provide more detail about their application. The most important provisions of the Rules involve changes in which charities must file an annual report and the form of the annual report that some charities will be expected to file. The Rules also would provide for the creation of a Charitable Advisory Council. The Rules represent a significant change from the proposed Rules released in June 2006. Specifically, they eliminate many onerous reporting and policy expectations. They also clarify confusion created by the June proposed Rules as to whether all procedures were mandatory or some were optional.

Reporting Requirements

The Rules require all but a few types of charities to register with the Attorney General’s office. Charities required to register that have gross receipts greater than $5,000 in a year or gross assets greater than $15,000 must file an annual report (the “report”).

The annual report filing may be satisfied in one or more ways, depending on the charity’s size, whether it files an information return with the Internal Revenue Service (“IRS”), and whether it is headquartered in Ohio.

• All charities may file a report using a form prepared by the Attorney General’s office.
• Charities with gross receipts less than $25,000 or those that are otherwise exempt from filing an information return with the IRS must file a report using a form prepared by the Attorney General’s office.
• Charities headquartered in Ohio that file a version of IRS Form 990 may file as their report a form certifying that they have filed their IRS form.
• Charities may file a complete copy of their federal return will all its attachments.

The Rules indicate that the annual report form prepared by the Attorney General’s office may include questions to assist the Attorney General in determining that charities are acting in accord with fiduciary principles. Specifically, the report may ask the following:

• Has the charity made loans to executives, directors, or employees?
• Does it have a policy requiring that conflicts of interest be disclosed and reflected in the minutes?
• Does it have a policy prohibiting excessive compensation?
• If the charity is a hospital or nursing home, does it have fair billing policy consistent with its charitable mission and a charitable and humane debt-collection policy?
• Is the charity certified by a state or national certification agency?

Charitable Advisory Council

The Rules establish a 9-member Charitable Advisory Council (the “Council”) that will advise the Attorney General about training and education for charities and model policies for charities’ governance and administration. The Council will also assist the Attorney General in identifying issues and trends relating to charities. The Attorney General will appoint the members of the Council, whose terms will expire with the term of the appointing Attorney General. Six (6) individual members will be appointed to represent large, medium, and small charities, as well as hospitals, nursing homes, and United Way organizations. The remaining three (3) members will be persons with general expertise in charity management.

Application Of The Rules

The Attorney General's office has issued the Rules through the administrative process, which means there will be no hearings on the Rules in the legislature. A public comment period on the Rules will run until August 21, 2006, and the Rules will be filed with the Joint Committee on Agency Rule Review on August 31. The full text of the Rules is available though the Attorney General's web site. Comments should submitted Brian Cook, Chief Deputy Attorney General, Public Protection Division, 30 E. Broad Street, 17th Floor, Columbus, Ohio 43215-3400.

For More Information

Click here to read the proposed rules.

Please contact Deborah Z. Read or any member of our Health Care or Tax practice groups for more information.

Disclosure

This advisory may be reproduced, in whole or in part, with the prior permission of Thompson Hine LLP and acknowledgement of its source and copyright. This publication is intended to inform clients about legal matters of current interest. It is not intended as legal advice. Readers should not act upon the information contained in it without professional counsel. This document may be considered attorney advertising in some jurisdictions. Some of the design images and photographs in this document may be of actors depicting fictional scenes.