Amendments to house Bill No. 278

2nd Reading/2nd House Copy

 

Requested by Edward Buttrey

For the (H) Committee of the Whole

 

Prepared by Jameson Walker

03/29/2021, 02:33:40

 

1. Title, line 9.

Following: "MANUFACTURES;"

Insert: "REVISING LAWS RELATED TO LEGAL FEES AND COSTS OF NONPROFIT CORPORATIONS;"

 

2. Title, line 11.

Following: "SECTIONS"

Insert: "15-31-102,"

Following: "27-2-208"

Insert: ","

 

3. Page 2.

Following: line 12

Insert: "NEW SECTION. Section 4.Nonprofit corporation -- legal fees and costs challenging government action. (1) (a) Except as otherwise provided in subsection (2), the payment of legal fees and costs associated with a nonprofit corporation challenging or supporting a government action is not a charitable purpose under state law, and any income used to support this activity constitutes unrelated business income under 15-31-102 and therefore is subject to taxation as provided for in 15-31-121. This requirement applies to any affiliated corporation or entity of the nonprofit corporation organized under 26 U.S.C. 501(c)(4) or 26 U.S.C. 527.

(b) Each 501(c)(3) nonprofit corporation that undertakes an activity in subsection (1)(a) shall file, under penalty of perjury, a statement with the attorney general within 30 calendar days of the action listing any donations or other financial assistance received during the previous calendar year through the date of submission of the statement with the attorney general, including providing the name and address of any individual or entity providing financial support in excess of $50.

(2) This section does not apply if the nonprofit corporation is either defending or prosecuting a government action that involves:

(a) property belonging to the nonprofit corporation;

(b) a contract to which the nonprofit corporation is a party;

(c) a permit or license held or owned by the nonprofit corporation; or

(d) any professional license associated with an employee or the nonprofit corporation.

(3) For the purposes of this section, the following definitions apply:

(a) "Government action" means the implementation or application of any law, including but not limited to federal, state, and local laws, ordinances, rules, regulations, and policies, whether statutory or otherwise, or other action by a federal, state, or local government body or official acting in their official capacity.

(b) "Legal fees and costs" include but are not limited to:

(i) internal lawyer, internal paralegal, internal legal assistant, internal expert witness, and other internal employee time and costs, including a calculation of employee benefits, associated with employee participation in the challenge or support of a government action; and

(ii) external lawyer, external paralegal, external legal assistant, expert witness, and other external resource time and costs associated with participation in the challenge or support of a government action under this section.

(c) "Nonprofit corporation" means a nonprofit corporation exempt from taxation under 26 U.S.C. 501(c)(3) and organized for charitable purposes. "

Insert: "Section 5. Section 15-31-102, MCA, is amended to read:

"15-31-102. Organizations exempt from tax -- unrelated business income not exempt. (1) Except as provided in subsection (3), there may not be taxed under this title any income received by any:

(a) labor, agricultural, or horticultural organization;

(b) fraternal beneficiary, society, order, or association operating under the lodge system or for the exclusive benefit of the members of a fraternity itself operating under the lodge system and providing for the payment of life, sick, accident, or other benefits to the members of the society, order, or association or their dependents;

(c) cemetery company owned and operated exclusively for the benefit of its members;

(d) corporation or association organized and operated exclusively for religious, charitable, scientific, or educational purposes, no part of the net income of which inures to the benefit of any private stockholder or individual;

(e) business league, chamber of commerce, or board of trade not organized for profit, no part of the net income of which inures to the benefit of any private stockholder or individual;

(f) civic league or organization not organized for profit but operated exclusively for the promotion of social welfare;

(g) club organized and operated exclusively for pleasure, recreation, and other nonprofitable purposes, no part of the net income of which inures to the benefit of any private stockholder or members;

(h) farmers' or other mutual hail, cyclone, or fire insurance company, mutual ditch or irrigation company, mutual or cooperative telephone company, or similar organization of a purely local character, the income of which consists solely of assessments, dues, and fees collected from members for the sole purpose of meeting its expenses;

(i) cooperative association or corporation engaged in the business of operating a rural electrification system or systems for the transmission or distribution of electrical energy on a cooperative basis;

(j) corporations or associations organized for the exclusive purpose of holding title to property, collecting income from the property, and turning over the entire amount of the income, less expenses, to an organization that itself is exempt from the tax imposed by this title;

(k) wool and sheep pool, which is an association owned and operated by agricultural producers organized to market association members' wool and sheep, the income of which consists solely of assessments, dues, and fees collected from members for the sole purpose of meeting its expenses. Income, for this purpose, does not include expenses and money distributed to members contributing wool and sheep.

(l) corporation that qualifies as a domestic international sales corporation (DISC) under the provisions of section 991, et seq., of the Internal Revenue Code, 26 U.S.C. 991, et seq., and that has in effect for the entire taxable year a valid election under federal law to be treated as a DISC. If a corporation makes that election under federal law, each person who at any time is a shareholder of the corporation is subject to taxation under Title 15, chapter 30, on the earnings and profits of this DISC in the same manner as provided by federal law for all periods for which the election is effective.

(m) farmers' market association not organized for profit, no part of the net income of which inures to the benefit of any member, but that is organized for the sole purpose of providing for retail distribution of homegrown vegetables, handicrafts, and other products either grown or manufactured by the seller;

(n) common trust fund as defined in section 584(a) of the Internal Revenue Code, 26 U.S.C. 584(a).

(2) In determining the corporate income tax imposed under this part, there may not be included any earnings derived from any public utility managed or operated by any subdivision of the state or from the exercise of any governmental function.

(3) (a)Any Except as provided in subsection (3)(b), any unrelated business taxable income, as defined by section 512 of the Internal Revenue Code, 26 U.S.C. 512, as amended, earned by any exempt corporation resulting in a federal unrelated business income tax liability of more than $100 must be taxed as other corporation income is taxed under this title. An exempt corporation subject to taxation on unrelated business income under this section shall file a copy of its federal exempt organization business income tax return on which it reports its unrelated business income with the department.

(b) Income associated with the activities set forth in [section 4] is deemed unrelated business taxable income and taxable under 15-31-121.""

Renumber: subsequent sections

 

4. Page 3.

Following: line 27

Insert: "(4) [Section 4] is intended to be codified as an integral part of Title 25, chapter 10, and the provisions of Title 25, chapter 10, apply to [section 4]."

 

5. Page 3.

Following: line 28

Insert: "NEW SECTION. Section 9. {standard} Severability. If a part of [this act] is invalid, all valid parts that are severable from the invalid part remain in effect. If a part of [this act] is invalid in one or more of its applications, the part remains in effect in all valid applications that are severable from the invalid applications."

Renumber: subsequent sections

 

6. Page 4, line 1.

Following: "Applicability."

Insert: "(1)"

Strike: "[This act]"

Insert: "Except as provided in subsection (2), [this act]"

 

7. Page 4.

Following: line 3

Insert: "(2) [Section 4] applies to any disbursements, contributions, expenditures, and promises associated with the payment of legal fees and costs pursuant to [section 4] on or after [the effective date of this act], regardless of whether the proceeding associated with the government action has already begun."