1.1                          A bill for an act 
  1.2             relating to organizations; regulating certain 
  1.3             nonprofit and charitable organizations; defining a 
  1.4             nonprofit health care trust; establishing requirements 
  1.5             for certain agreements and transactions between 
  1.6             nonprofit health care trusts and noncharitable 
  1.7             entities; requiring that financial statements of 
  1.8             charitable organizations contain certain information; 
  1.9             amending Minnesota Statutes 1998, sections 13.99, by 
  1.10            adding a subdivision; 309.53, subdivision 3; 317A.141, 
  1.11            subdivision 4; and 317A.811, subdivision 6; proposing 
  1.12            coding for new law in Minnesota Statutes, chapter 501B.
  1.13  BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.14     Section 1.  Minnesota Statutes 1998, section 13.99, is 
  1.15  amended by adding a subdivision to read: 
  1.16     Subd. 100b.  [WRITTEN NOTICES OF CERTAIN ASSET 
  1.17  TRANSFERS.] Written notices of asset transfers by nonprofit 
  1.18  health care trusts are classified under section 501B.453, 
  1.19  subdivision 4. 
  1.20     Sec. 2.  Minnesota Statutes 1998, section 309.53, 
  1.21  subdivision 3, is amended to read: 
  1.22     Subd. 3.  The financial statement shall include a balance 
  1.23  sheet, statement of income and expense, and statement of 
  1.24  functional expenses, shall be consistent with forms furnished by 
  1.25  the attorney general, and shall be prepared in accordance with 
  1.26  generally accepted accounting principles so as to make a full 
  1.27  disclosure of the following, including necessary allocations 
  1.28  between each item and the basis of such allocations: 
  1.29     (a) total receipts and total income from all sources; 
  2.1      (b) cost of management and general; 
  2.2      (c) program services; 
  2.3      (d) cost of fund raising; 
  2.4      (e) cost of public education; 
  2.5      (f) funds or properties transferred out of state, with 
  2.6   explanation as to recipient and purpose; 
  2.7      (g) total net amount disbursed or dedicated within this 
  2.8   state, broken down into total amounts disbursed or dedicated for 
  2.9   each major purpose, charitable or otherwise; 
  2.10     (h) names of professional fund raisers used during the 
  2.11  accounting year and the financial compensation and profit 
  2.12  resulting to each professional fund raiser; and 
  2.13     (i) a list of the five highest paid directors, officers, 
  2.14  and employees of the organization and its related organizations, 
  2.15  as that term is defined by section 317A.011, subdivision 18, 
  2.16  that receive total compensation of more than $50,000, together 
  2.17  with the total compensation paid to each.  Total compensation 
  2.18  shall include salaries, fees, bonuses, fringe benefits, 
  2.19  severance payments, and deferred compensation paid by the 
  2.20  charitable organization and all related organizations as that 
  2.21  term is defined by section 317A.011, subdivision 18.  The 
  2.22  financial statement must include the existence of all agreements 
  2.23  for future contingent compensation between any of these 
  2.24  individuals and the charitable organization or any related 
  2.25  organization as that term is defined by section 317A.011, 
  2.26  subdivision 18.  
  2.27     Unless otherwise required by this subdivision, the 
  2.28  financial statement need not be certified. 
  2.29     A financial statement of a charitable organization which 
  2.30  has received total revenue in excess of $350,000 for the 12 
  2.31  months of operation covered by the statement shall be 
  2.32  accompanied by an audited financial statement prepared in 
  2.33  accordance with generally accepted accounting principles that 
  2.34  has been examined by an independent certified public accountant 
  2.35  for the purpose of expressing an opinion.  In preparing the 
  2.36  audit the certified public accountant shall take into 
  3.1   consideration capital, endowment or other reserve funds, if any, 
  3.2   controlled by the charitable organization. 
  3.3      Sec. 3.  Minnesota Statutes 1998, section 317A.141, 
  3.4   subdivision 4, is amended to read: 
  3.5      Subd. 4.  [EFFECT OF AMENDMENTS ON CHARITABLE TRUST 
  3.6   ASSETS.] Assets held by a corporation, including income or fees 
  3.7   from services, are restricted to the uses and purposes for which 
  3.8   the property was received and held.  This subdivision does not 
  3.9   apply to nonprofit health care trusts as defined in section 
  3.10  501B.451, subdivision 3. 
  3.11     Sec. 4.  Minnesota Statutes 1998, section 317A.811, 
  3.12  subdivision 6, is amended to read: 
  3.13     Subd. 6.  [EXCEPTION.] Subdivisions 1 to 4 do not apply 
  3.14  to:  (1) a merger with, consolidation into, or transfer of 
  3.15  assets to an organization exempt under section 501(c)(3) of the 
  3.16  Internal Revenue Code of 1986, or any successor section; or (2) 
  3.17  an agreement or transaction for which the attorney general has 
  3.18  been given notice under section 501B.453.  A corporation that is 
  3.19  exempt under this subdivision clause (1) shall send a copy of 
  3.20  the certificate of merger or certificate of consolidation and 
  3.21  incorporation to the attorney general. 
  3.22     Sec. 5.  [501B.451] [DEFINITIONS.] 
  3.23     Subdivision 1.  [APPLICABILITY.] The following definitions 
  3.24  apply to sections 501B.451 to 501B.455. 
  3.25     Subd. 2.  [COMMISSIONER.] "Commissioner" means the 
  3.26  commissioner of health. 
  3.27     Subd. 3.  [NONCHARITABLE ENTITY.] "Noncharitable entity" 
  3.28  means any person or entity that is not: 
  3.29     (1) exempt under section 501(c)(3) of the Internal Revenue 
  3.30  Code of 1986, or any successor section; 
  3.31     (2) a health maintenance organization that possesses a 
  3.32  certificate of authority from the commissioner under section 
  3.33  62D.04; or 
  3.34     (3) a county, city, or a political subdivision of the 
  3.35  county or city. 
  3.36     Subd. 4.  [NONPROFIT HEALTH CARE TRUST.] "Nonprofit health 
  4.1   care trust" means a nonprofit or publicly owned hospital 
  4.2   licensed under sections 144.50 to 144.56. 
  4.3      Subd. 5.  [RELATED ORGANIZATION.] "Related organization" 
  4.4   has the meaning given in section 317A.011. 
  4.5      Sec. 6.  [501B.453] [NOTICE TO ATTORNEY GENERAL; WAITING 
  4.6   PERIOD.] 
  4.7      Subdivision 1.  [WRITTEN NOTICE REQUIRED.] A nonprofit 
  4.8   health care trust shall notify the attorney general in writing 
  4.9   before closing an agreement or transaction that would: 
  4.10     (1) sell, transfer, lease, exchange, option, convey, or 
  4.11  otherwise dispose of 50 percent or more of its assets or 
  4.12  operations, or 50 percent or more of the assets or operations of 
  4.13  a related organization, to a noncharitable entity; 
  4.14     (2) sell, transfer, lease, exchange, option, convey, or 
  4.15  otherwise dispose of any of its assets or operations or any of 
  4.16  the assets or operations of a related organization, if the 
  4.17  transaction would result in a noncharitable entity or entities 
  4.18  owning or controlling 50 percent or more of the assets or 
  4.19  operations of the nonprofit health care trust or 50 percent or 
  4.20  more of the assets or operations of a related organization; or 
  4.21     (3) result in a noncharitable entity or entities having 
  4.22  control or governance of, or the power to direct management and 
  4.23  policies of, the nonprofit health care trust or of a related 
  4.24  organization. 
  4.25     Subd. 2.  [CONTENTS OF WRITTEN NOTICE.] The written notice 
  4.26  required by subdivision 1 must include: 
  4.27     (1) the name and address of the nonprofit health care 
  4.28  trust; 
  4.29     (2) the name and address of the noncharitable entity; 
  4.30     (3) the names of individuals authorized to receive data in 
  4.31  the written notice from the attorney general; 
  4.32     (4) the name and address of any other parties to the 
  4.33  agreement or transaction; 
  4.34     (5) the terms of the proposed agreement or transaction, 
  4.35  including proposed sale price; 
  4.36     (6) a copy of the proposed agreement or transaction; and 
  5.1      (7) information on whether a financial or economic analysis 
  5.2   or report from an independent expert or consultant has been 
  5.3   prepared concerning:  (i) the degree to which the agreement or 
  5.4   transaction serves the public interest; or (ii) the fair market 
  5.5   value of the nonprofit health care trust. 
  5.6      Subd. 3.  [TRANSACTIONS BETWEEN RELATED ORGANIZATIONS.] The 
  5.7   notice requirements of this section do not apply to agreements 
  5.8   or transactions between related organizations. 
  5.9      Subd. 4.  [DATA CLASSIFICATION.] The written notice 
  5.10  required by this section is classified as private data under 
  5.11  section 13.02, subdivision 12, for data on individuals, or 
  5.12  nonpublic data under section 13.02, subdivision 9, for data not 
  5.13  on individuals.  However, the attorney general may make the 
  5.14  written notice required by this section accessible to the public 
  5.15  if the attorney general determines that public access would be 
  5.16  in the public interest.  The attorney general shall give the 
  5.17  nonprofit health care trust five business days' prior notice of 
  5.18  its determination to make the notice accessible to the public, 
  5.19  after which time the attorney general may make the data 
  5.20  accessible to the public unless the nonprofit health care trust: 
  5.21  (i) obtains a district court order prohibiting the data from 
  5.22  being made available to the public; or (ii) withdraws its 
  5.23  notice.  Upon notification by the attorney general of a 
  5.24  determination to make a written notice accessible to the public, 
  5.25  the nonprofit health care trust may request an extension of up 
  5.26  to ten additional business days to consider whether to seek a 
  5.27  district court order or withdraw its notice.  Any extension of 
  5.28  time granted by the attorney general extends the maximum waiting 
  5.29  period allowed by subdivision 6.  If the nonprofit health care 
  5.30  trust withdraws its notice, it shall not consummate the proposed 
  5.31  transaction or agreement unless it files a new notice containing 
  5.32  the information required by subdivision 2 and otherwise complies 
  5.33  with the requirements of sections 501B.451 to 501B.455. 
  5.34     Subd. 5.  [INVESTIGATION; OTHER INFORMATION.] After 
  5.35  receiving notice under this section, the attorney general may 
  5.36  investigate the transaction under sections 8.31 and 501B.40 and 
  6.1   may require the nonprofit health care trust and the 
  6.2   noncharitable entity to provide any additional information 
  6.3   relevant to the attorney general's review of the proposed 
  6.4   agreement or transaction. 
  6.5      Subd. 6.  [RESTRICTION ON TRANSFERS.] Subject to 
  6.6   subdivision 7, a nonprofit health care trust shall not transfer 
  6.7   or convey any assets or control through an agreement or 
  6.8   transaction described in subdivision 1 until 45 days after it 
  6.9   has given the written notice required by subdivision 1, unless 
  6.10  the attorney general waives all or part of the waiting period. 
  6.11     Subd. 7.  [EXTENSION OF WAITING PERIOD.] The attorney 
  6.12  general may extend the waiting period under subdivision 6 for 
  6.13  one additional 60-day period by notifying the nonprofit health 
  6.14  care trust in writing of the extension before the end of the 
  6.15  initial waiting period.  The attorney general shall notify the 
  6.16  commissioner if the waiting period is extended under this 
  6.17  subdivision. 
  6.18     Subd. 8.  [ADDITIONAL REQUIREMENTS RELATED TO CHARITABLE 
  6.19  TRUSTS.] The requirements of sections 501B.451 to 501B.455 are 
  6.20  in addition to any other requirements that may apply to a 
  6.21  nonprofit health care trust under sections 501B.33 to 501B.45. 
  6.22     Sec. 7.  [501B.455] [REVIEW BY ATTORNEY GENERAL.] 
  6.23     Subdivision 1.  [ATTORNEY GENERAL REVIEW.] Upon receipt of 
  6.24  a written notice from a nonprofit health care trust under 
  6.25  section 501B.453, the attorney general, in consultation with the 
  6.26  commissioner, may review the proposed agreement or transaction 
  6.27  to determine whether consummation of the proposed agreement or 
  6.28  transaction by the nonprofit health care trust is consistent 
  6.29  with the fiduciary obligations of the nonprofit health care 
  6.30  trust and its officers and directors and in accordance with 
  6.31  law.  The attorney general, in evaluating the agreement or 
  6.32  transaction, may consider, but is not limited to a consideration 
  6.33  of, the following factors: 
  6.34     (1) whether appropriate steps have been taken by the 
  6.35  nonprofit health care trust to safeguard restricted assets 
  6.36  transferred to the noncharitable entity and to ensure that any 
  7.1   proceeds of the agreement or transaction are used for charitable 
  7.2   purposes consistent with restrictions placed on assets of the 
  7.3   nonprofit health care trust and with the purposes of the 
  7.4   nonprofit health care trust; 
  7.5      (2) whether the terms and conditions of the agreement or 
  7.6   transaction are fair and reasonable to the nonprofit health care 
  7.7   trust, including whether the nonprofit health care trust will 
  7.8   receive fair market value for its assets; 
  7.9      (3) whether any conflicts of interest exist and were 
  7.10  disclosed, including, but not limited to, conflicts of interest 
  7.11  related to directors and officers of, executives of, and experts 
  7.12  retained by the nonprofit health care trust, the noncharitable 
  7.13  entity, and other parties to the agreement or transaction; and 
  7.14     (4) whether the agreement or transaction will result in 
  7.15  inurement, pecuniary gain, or excess benefit to any officers, 
  7.16  directors, members, health care providers, managers, or other 
  7.17  persons or entities associated with the nonprofit health care 
  7.18  trust. 
  7.19     Subd. 2.  [REVIEW PROCESS.] For the purpose of evaluating 
  7.20  the factors identified in subdivision 1, the attorney general 
  7.21  may, in the attorney general's sole discretion: 
  7.22     (1) retain experts required for the administration of 
  7.23  sections 501B.451 to 501B.455; and 
  7.24     (2) obtain public comment regarding the agreement or 
  7.25  transaction. 
  7.26     If the attorney general intends to seek reimbursement from 
  7.27  the nonprofit health care trust for the cost of experts retained 
  7.28  under this subdivision, the attorney general shall give five 
  7.29  business days' prior notice to the nonprofit health care trust 
  7.30  of the costs projected to be incurred.  If the nonprofit health 
  7.31  care trust objects to paying these costs, it may seek a district 
  7.32  court order limiting its liability for the costs.  In 
  7.33  determining whether to issue an order limiting the nonprofit 
  7.34  health care trust's liability for these costs, the court shall 
  7.35  consider whether the experts are required and their cost 
  7.36  relative to the value of the proposed agreement or transaction. 
  8.1      Subd. 3.  [PAYMENT OF EXPERT COSTS.] A nonprofit health 
  8.2   care trust proposing to enter into, or entering into, an 
  8.3   agreement or transaction for which notice to the attorney 
  8.4   general is required under section 501B.453, shall pay the 
  8.5   reasonable costs of experts retained by the attorney general 
  8.6   about which it received prior notice pursuant to subdivision 2.  
  8.7   These payments must be deposited in the general fund.  The 
  8.8   commissioner of finance shall reimburse the attorney general for 
  8.9   all costs for which these payments are received from a nonprofit 
  8.10  health care trust. 
  8.11     Subd. 4.  [ATTORNEY GENERAL MAY BRING PROCEEDINGS.] The 
  8.12  attorney general may bring proceedings to secure compliance with 
  8.13  sections 501B.451 to 501B.455.  In addition, if the attorney 
  8.14  general determines that consummation of the proposed transaction 
  8.15  or agreement would not be consistent with the fiduciary 
  8.16  obligations of the nonprofit health care trust and its officers 
  8.17  and directors or would not be in accordance with law, the 
  8.18  attorney general may bring proceedings to enjoin the 
  8.19  consummation of the proposed transaction or agreement or to 
  8.20  secure any other relief available under section 8.31, 317A.813, 
  8.21  or 501B.41, or any other applicable statute or law. 
  8.22     Subd. 5.  [EFFECT.] Failure of the attorney general to take 
  8.23  action on an agreement or transaction described in section 
  8.24  501B.453 does not constitute approval of the transaction and 
  8.25  does not prevent the attorney general from taking other action.  
  8.26  Nothing in sections 501B.451 to 501B.455 shall be construed to 
  8.27  limit the authority of the attorney general, the commissioner, 
  8.28  any other government official or entity, or the courts with 
  8.29  respect to the supervision and oversight of nonprofit 
  8.30  corporations and charitable trusts. 
  8.31     Sec. 8.  [EFFECTIVE DATE.] 
  8.32     Sections 1 and 3 to 7 are effective the day following final 
  8.33  enactment.