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House | June 10, 2015 | Committee Room | Judiciary IV

Full MP3 Audio File

Judiciary full please come to order we have got two bills on the agenda this morning with the committees permission on senate bill 161 this is sponsored by Senator, Warren Daniel from Burke County the committee has previously approved the house version of this bill I think unanimously I told senator Daniel I dint think it would be necessary for him to come because and he is handling another bill for me over the senate side if their are question or comments about it that I can let representative Bryan chair, and I will try to respond but if their are no objection I will entertain a motion talk. I did have a question Mr. Chairman. Okay. Representative Brian you want to come to preside on this thing Sure preside on this then. Thank you Mr. Chairman Representative, there's been a good degree of talk about native funds in the jurisprudence in the judicial system, and those have been addressed. I don't see any costs associated with this. I would just guess, I don't know, but I would guess it would take some tidy sum to move the operating procedures of North Carolina Supreme Court from one town to another town. Is that a doable number or? Representative [xx]. This bill was requested by the Supreme Court and when the bill came before this committee before I think I indicated that they had advised us that they felt like the expense would be minimal and they could handle it with their existing budget that was the existing budget before before the house budget was passed which I think probably has given them a little extra breathing room but, even in the old budget that they had and they were comfortable with that. Follow up Mr. Chairman thank you they having idea why they want to do this, why they want Engenton, why wanted [xx] aside from the holding court in Riley I'm not familiar I may be wrong but do the US primes do they go on the roads so to speak I don't know about the US supreme but as I think we discuses before the North Carolina supreme court historically held meeting of the court in other parts of the state and one of the reason we are doing it in Mogington is if you go back into the 1800 the North Carolina supreme court went to the western part of the state and held court in RO court house there they have for they been doing something similar in Engenton on the Eastern under the state for a number of years and the idea is this simply helps publicize a little bit more what North Carolina suprime court does and its Stand as if you will in the state bag you know they go and conduct a session and it is in the newspaper and may be they get a little publicity and people here in understand will be about cord that is my understanding on what they will like to do and in the worst in addition to do it in and it may not be accepted in second third or fourth year.  Thank you representative senator.   As someone from the western part or the state we appreciate the thought of your visit in that affair and in the appropriate time I would like to make a motion on figurral report. Any further discussion before we take representative senators motion yes hearing non representative Sathra, now will be the appropriate time to make a favor of motion to the bills amendment wrote on to oppose to the committee substitute with a favor report to the committee substitute and favor to the original if you'd like to make that move. No move. Thank you. okay am sorry, it's actually just as favorable to the Bill because it's a first edition so thought I was right, I was reading the wrong part am sorry, just a favor to the Bill we heard the motion for representative Strather all those in favor Aye, thank you any oppose yes, Bill passed. Am going to charge you. Okay the second Bill this morning is senate Bill 462 public authority is none profit corporation I believe there is a PCS on this, is there a motion that the PCS that's an issue from Representative Wayne hearing no objection the PCS is so center hustle we're delighted to welcome you to J4. That worries me.

Thank you Mr. Chairman. Members of the committee. Frankly this bill arises from an accidental discovery generated by a new associate in my law firm who was looking at the structure of some entities and discovered that there are public authorities all over the place who have associated non-profits. Problem is and they actually set him up [xx] and they exist for now, problem is there is no specific authority in the statute that says that they may do so what they've done is they've set them up at least in some of these authority situations they set them up and they have them operating but ultimately they could be independent over the entity that they initially associated with so what we are trying to do is about succession kind of situation or simply spelling out that they may have hostage associated which what they are doing and will continue going forward and I just know there are a number who do this in a number of ways we are just trying to click essentially clean up the statue because we are dealing with real state because that's simple? Question for senator Hudson from the committee, Representative Wilingham Thank you, my question is the where I think a lot of the agencies are already doing these, and it wouldn't probably get the bill, so, explain that. But can read this, does it mean that the government MP can own position now or which organizer operator [xx] Well the language not frankly would acknowledge assistance of David [xx] from the same of non profit and with this regard the issues rely are not in under control and that is why we change it control, it doesn't. In effect they own it but it's really more of a control issue and that's the more appropriate term. Follow up. Yes. Can the nonprofit has been all, could be the end of it, even though Control [xx] has been altered. Well I would assume that could always be the case in some function it could be the case now. So what we're trying to do is make certain that at least for the moment these entities that were established for these purposes continue in the purposes continue and at sometime in the future they choose to spend them all, then they spend them all. Representative Terry. Thank you Mr. Chair, I have a question so similar to I think what one representative Willy has; when the nonprofit that has been from a public becomes independent. Are there any tenants that they have to ascribe to as becoming independent from the public entity, and.  They still have to to perform the purposes set forth in their charter.  In the non profit? In the non profit, sure, absolutely.  Follow up? my question then is where, as an independent that has been affiliated with the public. Who sets the rules like this?  The non profit incorporation act the law, the other law said so. That's the underlying law which is the case now. All we're doing is simply saying that they may create these establish them in a particular planship[sp?]. They're doing it now, is the question is do they have the authority to do it or not, we're just clarifying they do have the authority to set it up to establish them but at some point, if for instance they want to spend them off as an associate non profit, the entity that set them up can spend it off.

It's not the entity that exist just doing it on its own. Follow up, Representative Terry. Just one additional question, I guess I'm trying to frame this with regard to how the Department of Commerce partnership with the non profit I'm not that is not I'm not familiar with even the structure this is not designed to deal with the department of commerce what it actually is designed to do as much as anything else is a number particularly of health related non profits may apply for grants that there are public entities may not apply for we are just trying to create the eligibility for doing that that's that's the rational and they do it now I will just give you an example general Representative Tin.  Thank you Mr. Chairman I like that actually that will be very helpful my question was going to give us a couple of example of what I think.  OK I will give you an example of one with which I'm intimately familiar and that is there is the public health authority Cabarrus county which is actually set up as a hospital authority that's what initially became a public health authority all statutes know all these things has an associated non profit. The non profit is set up as well is actually the applicant for a federal the tere health group that initiated all these the connections through the ACC for the mainly small community rural hospitals and others which the fact is, the non-profit can actually act more quickly, because I still have to do it under the guidelines of the Federal Act or nest through for any of these grants, but they can move it and get the structure initiated far more quickly than a public entity and so what I'm saying is, for in this case the Health Alliance got a very substantial Federal Grant. It's the non-profit itself wasn't able enough that it got that The infrastructure in place in less than two years and that's probably 100 locations across the state and that sort of thing which you can't do very effectively in the context of a public entity for other kinds of reasons, you still do it under the terms of the grant. Follow up Thank you So are there other reasons that the public didn't set up non-profits other than mainly great. It's largely there are lot's of reasons for different public entities but that's one, I know that for instance there are financing transactions that cities or counties which would also be in direct link to our the trustee of funds becomes a hostage non profit, they have some of those kinds of things. I know that's the case because I've seen and it is not those kinds of situations which also have to act under center of guidelines but it's just they have someone independent There folks are here.  I know that there are members of the committee that I have yet not recognized that could have a couple of questions, but let me interrupt that question is to ask if there are members of the public that are present that may want to be recognized to speak on any of this I don't know whether the gentleman from the nonprofit organization can shed any light on the request for examples or further explanation or maybe you prefer to remain seated.  You do. If you'd just give us your name and the organization you're with. Mr. Chair, David Heinen with the North Carolina Center for Nonprofits, wanted to just follow up Senator Hartsell's explanation of the structure of that is the public authority that is creating the non-profit with the controlled nonprofit would be regulated under chapter 55 A of

the General statutes, responding to representative Terry's question, representative Willingham's inquiry and there would be a lot of flexibility under chapter 55A with how it is structured and the public authority could have a lot of economy in setting up the structure to ensure that the purposes of the organization and also the organizational structures of the board of directors and the officers of the organization can be appointed by the public authority to ensure that as it is, is created as independent non-profit that it is so responsible to the intense of the public authority that is creating it yes, it is some of the questions that came up. Anybody else in the public that wants to be recognized, otherwise I am going to get back to Committee questions, Okay, Representative Richardson Thank you Mr. Chairman, when I am on you now, you said some of these non-profit already exist yes ma'am So will your bill grandfather all of them in or will they have to come back and apply through a new structure or how will this bill impact them since they would do it in court without authority and not inline with authority and in my second question is, does this give double competition to truly non profits who's the only way they are funded is through the grant money so now we're setting up people like housing authority more than [xx] who would have much more qualified staff to work on grants where you may have a little mum and pap, a non profit that's trying to compete with big conglomerate so those are my concerns about this bill As a practical matter to answer your first question existing entities would be in fact grandfather because they have been set up in their structure there board of directors, there members and [xx] LLC that sort of thing would remain the same and the appointments have originally come from the initial entity so it would be essentially the same it's just sort of validating it putting it over time as to the second question, I don't think you're really, nobody is trying to create something that's unnecessary competition for anybody. There is a need for this is going to be quite candid, this sort of thing with or without this bill will continue to occur. The question is whether they because there's nothing that says the entity can't do this and so what they have, but what they set it up is they [xx] so the board of director is generally named by the entity that set them up nothing changes that and they will probably with or without this bill continue to do it. The question is going to become wanting to go back and look a the powers and duties of the entities can they continue to do it if in fact this hostage none profit for some reason or other becomes a bit of a rouge don't think it's likely to happen in the near term but it could happen in the long term and choose to essentially independent away from it's parent and that's the best way I can describe it, because the existing non-profits are governed by the board directors or whom ever the question is who appoints them? Representative Adams.  Yes I understand your what you're saying but I've got a question. Is there any reason why a non-profit, an established non-profit would set up corresponding public entity? It just help me gain perspective if I understand that that's a possibility, has it ever happened? I will be a little public entities By way of statute.  Okay.  And non profits, I'm not sure non profit can create a public entity. Thank you.   I don't.. I cant. I can't think of a situation, Okey, thank you I'm not I think Steph agrees with that response, yeah Okay.  Other questions Members of the Committee comments? Representative Terry.  Thank you so much Mr. Chair, I was in that last discussion wondering about a non-profit entity having a

tax advantage, because I understand that they're the public may be taxed but the non-profit would not be taxed, is that not? Would it be in if it doesn't. The public are taxed. Most public entities are treated as non taxable anyway. In fact they don't even have to file exemptions, we're not doing a whole lot that would address, there're probably some exceptions, but public I mean and I'm doing this off the top of my head but there are two sections in internal revenue code to deal with the issue one of which is 501 C3 for instance we are not tax but the same in fact may be in the subsequent section of the prior section says public entities like cities, counties, authorities whatever are also non-tax, now they sometimes do have to file reports information kinds of things but they're not, there's not a tax consequence associated with it, none that I'm aware of. Representative Johnson thank you Mr. Chair do I need to I think everyone has a copy of the amendment, do we have the amendment to Okay, all the members of the committee have a copy of the amendment. Okay Representative Johnson. I just wanted to make sure that there is not [xx] or political activity once this is adopted because it deals with all the the levels of non profits C3, C4 and on down. And I just wanted to make sure that that;s separate, there is no lobbying okay.  But this is not designed to deal with lobbying in any fashion but I would have to say that I mean the public entities they can set them up, can lobby, they do. I mean you say this is your county, your authorities, your health department, they all lobby whether we like it or not, and they do provide some political lobbying I'm not. They don't do political lobbying. I mean Well you said of foul 1C3 a favorable 1C3 is not I don't think and Mr. Hainekem because he is here loving for the non-profits he is going to I think this bill addresses anything further 1C. The parties will come and they're different times the powers in lobbying innocence, and there is issue logging but public entities is I understand not only applies to the non-profits that are set up. And I don't have a particular problem with that. Okay. The problem problems that I know of as long it doesn't affect the parent entity because the parent entity in many cases has to do these kind of things but I would refer to [xx] Representative Tank Mr. Chair with your permission if I could ask the amendment sponsor a question? Will you yield Representative John's and Representative Tank's question? thank you sir. If you look at the Bill summary the type of Public Authorities that we're talking about and were already authorized, already doing it whether they're particularly  authorized or not. Housing authorities, Water and Sea Water Authorities, Parking Authorities, Public transportation Authorities public health authorities hospital authorities, so they are already doing it and then if they are setting up to gain money for whatever initiative like a housing authority may be doing to expand the mission, they may be going to they to say we need a system with low income housing and we want you to put more money in the budget and things like that, so is there something since it all exist and they are already doing it, is there something particular that you might be with and help me with that you seeing it was an issue that were trying to correct, is it that they're already doing it today these things exist today and there is no statute to say they can't do this, so am wondering how do you get an example of something that happened that actual with lot respect.  We need time to deal with the issues before it happens, there funding issue that could be put into play if you don't be in to a none profit, I just want to keep everybody on the [xx] season means. Follow up Mr. Chairman.

Yes. I mean the way that it's written right now I'd be opposed to the amendment simply because I think there maybe some unattended consequences of not being able to go and love you for funding for their particular projects or their particular whatever it is that they are trying to raise money and get grands for, so I'll be concerned that under the way reason that we might place some unattended consequences that we don't mean to put in. You want to respond senator. Allow me. I'm doing this tip top processes a memory at my age that's pretty deep and pretty dark, but I don't believe There any non profits of any sort who may engage in effect political partisan kind of law nothing simply because if they do they loose a non profit status. So what think about it I'm not sure now loving is another matter because a grand application in some peoples minds could be considered robbing and I will be very concerned because that's what the purpose of some of this is to assist some of the example season for feelings and break the those and they do it now and they've done for ever whether they are affiliated with a public entity or non affiliated public entity I mean if we are talking about partisan, I mean I, they will lose their on profit status, and that's even if you are a church if you are engaged in some kind of partisan lobbying as I understand it. what would you agree it is Representative Joshson if you hold that just a minute. I wan to ask Carol McCraw[sp?] to comment on that question that was discussed earlier. So matter of fact any favor 1c3 is prohibitive from engaging in political activity or lobbying beyond a certain limit exiciting there is a certain amount that they can do, but they are not allowed to engage in political campaign activity. There are other kinds of tax exempt 501c organisation, 501c4s, 5s and 6s as well as some other that are permitted to engage in political campaign activity including donation and independent political expenditures and they are also and the're able to engage in mobbing is not their primary purpose for their type of activity that they conduct so there those kind of numbers of different types of taxes upon the organisation and the rules depending on how much is coming on. Representative Johnson do you want to come here and have another question question for the staff well I am agreeing okay but what I am saying is that is one of reasons why I have for this bill opt to be done is possibly different levels and only thing want to do is to make sure there is no any room there to [xx] Representative Tin. Thank you Mr. Chairman it seems to me that there's already organisation chart set up based on how you apply and the result rules and regards to robbing and political depending on which one that you setup and so I would think that we are already have that in place and having as broader is just lobbing I be concerned that you might limit them in their ability to be able to go after funds what fund to support the group they were always in they will set up Representative Torben Thank you Mr. Chairman it seems like we might be trying get against to some done but in effort to somewhat support Representative Johnson is would it be possible to to strike or lobbing and just add in partisan in front of political and I think that would pretty much be done what we currently have least it was spill it out specifically Let me ask staff if they would have a comment on the suggestion If the committee wishes do not have lobbing be apart of the amendment and just deal with thing like partisan campaign activities and we could rewrite that we could even save political campaign activity they fund some political activities it may be going to start campaign in there as well Partisan pay [xx] Miss Chairman encompasses everything Okay, you could just strike for lobbing if everybody rather than rewrite this if everybody was just seated would say [xx] Representative Jason is that agreeable with you?

if that is the case do we need to formalize it more can we do it on the basis of this discussion. The lady is comfortable with that language then you can just go Okay, is there, first of all I think I need to, let me backup and maybe Representative Johnson let me ask you first to move the adoption of your original amendment. I move for the adoption of the amendment. The amendment is before the committee Representative Torbett now has moved to modify or amend the amendment as has been stated is there objection to so doing? Seeing none the motion is now amended the amendment is before the committee as amended, is there further discussion? Seeing now those in favor of the amendment as amended Please signify by saying aye. Aye oppose no. The ayes have it. The bill as amended is now before the committee again is there further comment or question. Representative Tins. A motion when you are ready sir. Alright representative Tin I'm wondering if you might wish to move a favorable report to the proposed committee substitute as amended rolled into a new proposed committee substitute with a favourable report to the new committee substitute and an unfavourable report to the original bill. That sounds lovely Mr. Chairman. Alright, it having been moved is there further discussion seeing non, those in favour of Representative Tins signify by saying Aye, Aye Oppose No, the Ayes have it. Let me quickly, before you all go out the door, I have neglected to do one other thing, we want to recognize our pages, that are with us today. We normally do this at the beginning, but I got distracted, I apologize. Parker Castleberry are you here? If you would stand up please from Wake County sponsored by Representative George Robinson, Ted Chapman from Mecklenburg sponsored by Speaker Moore, Dylan Melvin from Bladen County, or is that Dylan I guess? Dylan. Sponsored by representative Breson and Cody Moses who is also from Mucklenburg sponsored  by Representative Gider. We also thank Charlers Godin and Ray Cook, and Dean Mashton for being our Sergeant at Arms, the meeting is adjourned.