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Running Online Charitable Promotions: The Impact of California AB 488

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Running Online Charitable Promotions: The Impact of California AB 488

This course provides insight into the new California law (AB 288) that comes into effect in January 2023 and will change how companies and brands run online charitable promotions. This new comprehensive law significantly changes the landscape of national online charitable promotions. This course will provide participants tips to recognize when and to whom this new law applies, how to comply with the requirements of the new law, including registration of promotions, contracts with charities, sending donations to charities and disclosures.

Transcript

- [Rob] Hi, this is Rob Laplaca. I'm a partner at Verrill Dana in Westport, Connecticut. And this presentation is called Running Online Charitable Promotions and the Impact of California AB 488. So last year, California had the good idea to amend its charitable donation and charitable promotion laws. And they passed a bill called AB 488, that has a significant impact on online charitable promotions. And that is an area that we will highlight today. And before we get into that, we are going to go over in general, some of the different types of charitable promotions and in particular highlight on commercial co-ventures. And once we do that, we'll be able to explain how traditionally charitable promotions and in particular commercial co-ventures have been run and how they will be affected by the new California law, which comes into effect on January 1st, 2023. So, let's go over with a review or for those of you who aren't familiar, that's fine, we'll learn from scratch, about commercial co-ventures. So, this is an actual term that's used in charitable promotions. And the basic definition as I state here is, when a brand sponsors a sales promotion, so it's sometimes also called the charitable sales promotion, and advertises that a portion of the proceeds from the sale of the company's goods of services will go to charity. So, you have a promotion, and promotion, meaning a time sensitive, literally promotion where, it's not something you do all the time, that you're gonna have a promotion, that this weekend we're gonna give 20% of all sales to X, Y, Z charity. So, all you need to remember if you see something and the bottom line is if you buy this, then we will donate that, meaning the brand, that's essentially what you have for a commercial co-venture. There's typically a sale involved and it's the brand making the donation to charity, not the consumer making the donation to charity. And that is a regulated area, traditionally regulated area. There's about 23 states that have laws regarding commercial co-ventures, which we'll go over the general requirements. I have one little caveat that, of these 23 or so states that have laws, almost all of them have the concept of, you buy this, we'll donate that. That it's a sales promotion. I point out that what I call the goodwill states of Alabama, Massachusetts and South Carolina, the definition by its terms is a little broader than simply making a purchase. As I write on the slide there, it says any person who for profit or commercial consideration, then we get into conducts, produces, promotes, underwrites, arranges or sponsors performance event or sale to the public. So that's why we're a little concerned that it could be something more than a sale and that it's in a performance event or sale that's advertised in conjunction with the name of a charity or as benefiting any extent, any charitable purpose. So as you can see from the words used in this statute, that it's broader than just a traditional definition of, you buy this, we'll donate that. It becomes important because Alabama, Massachusetts and South Carolina are three of the six states where there are registration requirements for commercial co-ventures. So therefore, you're gonna have to think a little bit more on whether you should be registering in Alabama, Massachusetts or South Carolina when it's not a simple you by this, we'll donate situation, but something that could conceivably be considered where a brand produces, promotes, et cetera, a performance or event to the public, which is advertising conjunction with a charitable organization. So, well look at that a little bit more, but I wanted to point that out just at the very beginning of what a commercial co-venture is. So some of the terms that you'll hear in commercial co-venture land are charity or otherwise known as the non-profit organization. There are obviously the company, the organization, sorry, that receives the donation. The commercial co-venturer is the brand. That's the seller of the good earth service. And as I pointed out, what's critical is that the brand, the commercial co-venturer is making the donation to charity. The commercial co-venture itself is, as we just explained, a charitable sales campaign. And some states use the term charitable trustee for an entity that holds money for the benefit of a charity. So in concept, when a brand says that we will donate 10 cents for the sale of our widget to charity, when you make that purchase, conceivably that 10 cents is being held for the benefit of the charity until the brand, the commercial co-venturer turns that money over to the charity. So in that sense, for that timeframe, they could be considered a charitable trustee, which becomes important for the State of Illinois, which is one of the registration states as we will see. So when you have a commercial co-venture, so we have the traditional situation of, you purchased this, we'll donate that, what do you need to do when you have that situation? So, the charity itself needs to be registered as a charitable organization in all of the states where this promotion is going on. Now, charities have the requirement, about 40 states require charities to register when they are soliciting donations within the state. Typically, the definition of soliciting donations is broad enough that it could include a commercial co-venture where a third party, the brand, is asking people to make purchases that will trigger a donation. And that could be an indirect solicitation by the charity. And therefore the charity should be registered in those states. When the states will actually ask for information for registration, a lot of times they do wanna know when you fill out that information, if you are having any indirect solicitations, which could conceivably include commercial co-ventures. So, that's why the charity should be registered in all of the states where the promotion is being conducted. You need to have a written contract between the charity and the brand, making the donation. The statutes on commercial co-ventures also have mandatory ad disclosures, things you must say in any advertising of the promotion. The states almost uniformly have requirements that the brand must keep records of their sales and donations for this promotion for at least three years. And as I mentioned, there's registration or bond and or bonding in six states, Alabama, Hawaii, Illinois, Massachusetts, Mississippi and South Carolina. California previously had a requirement for commercial co ventures for registrations, but it could be worked around by having certain mandatory contract provisions and disclosures to the charity, which I'll get to, and as we will further get to the issue of what new registration requirements under the new California law for online promotions and in particular, online commercial co-ventures. There is now a registration requirement in certain circumstances for online promotions, commercial co-ventures in California. So, the first thing I mentioned, after the charity being registered in all states, many of the states with commercial co-venture laws have specific requirements for what must be in the contract between the charity and the brand. When you put them all together, you get these requirements. You need to identify the specific item being sold, not just saying that we will sell stuff and we'll donate something to a charity. You need to say that when a consumer purchases a specific type of watch or a specific widget, if there's something specific that's gonna trigger the donation, it needs to be identified. If it's all sales, that's fine. Identify that it's all sales. Be very clear on what triggers the donation, what purchase triggers the donation. If there's any limitations, whether it's online only, or whether it's in stores or only in certain stores, you need to be specific so everybody knows what exactly is going to trigger the donation. Because it's a promotion as I said, it's gonna have start and end dates. So, you want to identify in the contract when it's gonna start and when it's gonna end. If it's nationwide, mention that it's nationwide, or if it's limited to certain states, state the states that it's limited to. If you'd like to avoid registration, you can void the six and or California registration states. That's an option. I'd put that into contract because even though those states require registration, when you look at the other, almost 20 states that have commercial co-venture laws, many of them still have the contract requirements and the mandatory contract provisions. So, you're still going to have to have the contract with provisions and with the advertising and the accounting requirements in many of these other states. So, that's why you still need to be concerned even if you're not going to be registering the promotion. Next, you're gonna have to mention, oops, sorry. Next, you're going to have to mention how the charity's name is to be used by the brand. Typically you're gonna need a requirement or provision in your contract that's going to state that the charity is giving a license or giving permission or granting the right to the brand to use the charity's name, logo, et cetera, for the purposes of the promotion. Sometimes this goes back and forth that the brand gives the right to the charity to use the brand's name, as I'll mention a little later, that the charity does need to be on the lookout, that it's not actively advertising for the brand itself, because that could get into issues on the charity's nonprofit status. But for the purposes here in the contract, you wanna basically have a provision that gives the brand the right to use the charity's name. You need to be specific on how much is being donated. You can't just say all profits. You can't say that we will donate a portion of the proceeds. You need to identify the actual per unit percentage or per unit dollar amount being donated. So, when you purchase a pair of glasses from us, we will donate 20% of the sales price to charity or we will donate $1 for each cup purchased during the promotion period to charity. So, a specific per unit percentage or dollar amount needs to be in the contract. The contract should also have any maximum or minimum donations. I'm gonna talk about briefly some concerns, issues that you need to think about if you do have any maximum or minimum donation. But practically a lot of times the brands and the charity like to have a idea of how profitable this is going to be, the promotion. So, maximums and minimum donations are typically set. They should be set forth clearly in the contract itself. Oddly enough, Georgia, New Hampshire and New Jersey have provisions in their statutes that say, you must put in your contract that our law applies. So, put it in there. New York has a requirement that the charity has the right to cancel in 15 days of signing of the contract. And that needs to be in the contract itself to comply with New York law. So you're gonna have a provision in there that says that the charity could cancel the contract within 15 days. And to be a nationwide legitimate contract that covers every state, you should have it signed by two officers of the charity. A number of states require signatures by two officers. So, if it's gonna be a nationwide promotion, make sure you have two officers. If it's going to be in selected states, take a look at the different statutes to see if you can get away with only one charitable officer making the signature. But in general get to, and you're good to go. Now, as I mentioned, California, prior to the new law and it's still in the books, they have registration for commercial co-ventures. They have a requirement to do that. But if your contract provides that the donation will be made within 90 days of the start of the promotion, within every 90 days during the promotion, and that the final donation will be made 90 days at the end of the promotion, and it provides further that the brand will provide an accounting to the charity along with each of these donations, then if that provision is in your contract and that contract is signed by two officers of the charity, you do not have to register in California if it's a non-internet based promotion. As I mentioned, the new law deals with internet online commercial co-ventures. So if you have one that is not internet based and you could put these provisions in your contract, you could avoid registration in California. The next thing you need to worry about after you get your contract all said and done, and you're going to promote your charitable sales campaign. You need to have, according to the statutes to comply with a nationwide promotion, you should have mandatory advertising disclosures. Every time you tell someone you buy this we'll donate that, what you need to say is the exact per unit dollar or percentage amount to be donated, if there's a maximum or minimum donation, where the promotion is might be particularly limited or what it covers, the time period, you should have the charity's name, address and phone, or at least a website address so a consumer could look at the charity information themselves. Massachusetts in the statute, when you read it literally says that, the advertising should have, how funds to be used and that the brand is a paid fundraiser. In practical world, these, I don't see them in advertising disclosures. Typically, how the funds to be used is something much broader and more on the lines of, what the charity does with the funds, not what the brand is going to do. The brand might not necessarily know how particularly the funds will be used by the charity. But at least having a reference to the charity's website or address, the person you can get information on how the charity uses funds. The provision about being a paid fundraiser to me actually, is a little contradictory in the sense that, a paid fundraiser more gets into the lines of other regulated entities that are getting paid actually by the charity to solicit funds for them. And it's a little misleading, I think, to call a commercial co-venture a paid fundraiser since they're not getting paid by the charity. So actually, you don't really see that in there, but don't be afraid if you do see that in your look at the Massachusetts law, if you're still inclined. California mentions that it should also be advertised that the money is not tax deductible. It's actually highlighting the fact that the consumer is not making the donation. It's the brand that's making the donation. So, it's telling the consumer in a way that, when you make this purchase, that the 10 cents or whatever it is being donated is not tax deductible by you since you're not making that donation. Frankly, you don't see that disclosure often in the typical abbreviated disclosures you see with commercial co-ventures. So typically, you're gonna see in an ad, something along the lines of, that the brand will donate to this charity, identifying the brand and the charity, $1 specific dollar amount, for each widget, naming the item, but in the US, the geographic location, or, you know, all in participating stores in the US, et cetera, or wherever happens to be, between here, 12/1/21 and 3/1/22, which is the specific timeframe. Here, it happens to be a maximum donation, $100,000. And for more information see, www.charity.org, so you get the charity information in there also. As I mentioned, six states plus possibly California have registration and bonding requirements. They're all a little bit the same and a little bit different. Alabama, they have an annual registration and then also a separate filing each time you have a promotion during that year of the actual CCB contract in the forms. Alabama is one of the states that require a bond. You need to file every year a $10,000 surety bond with Alabama. Hawaii, their registration's a little bit easier. No bond and you just need to file basically the contract that states your written consent, but that's usually the contract, 10 days prior to promotion. Illinois, as I mentioned, does not have a specific commercial co-venture statute, but it does have a charitable trust statute that would apply to a commercial co-venture since conceivably, they are holding in trust the money that they promised in their advertising would be donated to charity. So in Illinois, with some exception, you're gonna need to register, the brand will need to register as a charitable trust. Massachusetts has registration and bonding requirements for the brand, including an annual registration and a $25,000 surety bond. Mississippi is now done all online. A little bit easier. But also in the sense that that's one of the places that if your charity isn't registered in Mississippi and you go to register online, you will find out immediately that you can't do that. You need to do that seven days before the start of the promotion. And lastly, South Carolina, they also have an annual registration and they require you to file a notice of solicitation at least 10 days prior. So if you look at these altogether, 15 days is the longest timeframe prior to the start of promotion when the registration must be made. So, you need to have this promotion all ready to go, usually at least 15 days before the start of the promotion, so that you could be on time and registered in all of the states. Typically, if you have your contract ready about a month out of the start date of the promotion, you should be able to get your registrations and bonding all done so you could timely do it in all of the six registration states. I wanna point out that when you look at the fundraising statutes, you'll see some other terms that are used, where you have what's called a professional fundraiser or a paid solicitor. Same thing, different terms used in different statutes. That's someone that basically adds their business. They are hired by the charity to be a entity that does fundraising, at least in part for the charity. The charity pays them to be their solicitor or their fundraiser. And they will then go out and do the solicitations for the charity. Because of that, because of the ability that they have to represent the charity and to be paid by the charity, they have a much more rigorous registration bonding and other reporting requirements than a commercial co-venturer. Along these same lines., you have fundraising council. That's very similar to the fundraising, but it's someone who the charity hires to advise on charitable campaigns. So now, you're the advisor for the charity. You get paid by the charity. You're gonna have basically equal registration bonding and reporting requirements like someone who's doing the actual fundraising. And as I mentioned before, there is the charitable trustee, which term you will see in the statutes themselves. I want to point out a couple other things to keep in mind when doing a commercial co-venture. What you should keep in mind is that the charity itself, as I said, needs to be registered in all of the states where this promotion's gonna be held with a caveat that there's something that's called the Charleston principles. And under these Charleston principles, if it's an online solicitation only, so your promotion is only online, does the charity need to be registered in all, let's say 50 or 40 states where this promotion's being held when it's strictly online? You get this question all the time from the charities or from the clients. Why do I need to be registered? We're not physically located there. We don't do business in that state. It's just a nationwide online promotion. Well, it's possible that the charity could take advantage of what's called the Charleston principles, which are a set of principles that have been adopted by some states not adopted by other states, but could be considered as a good basis why a charity does not need to register since they don't have brick and mortar or people on the ground in a particular state for an online solicitation only. Something to remember. The charity also in commercial co-ventures, they have their own registration requirements. They need to file the contract in Arkansas, Connecticut and New Jersey. The charity needs to register the promotion in New Hampshire, New York and Utah. And the charity needs to file post promotion reports in New Jersey, New York and North Carolina. So, when you put this all together, you have a lot of different states with very specific requirements, whether they pertain to the charity, whether they pertain to the company, the brand, and you need to be able to put it all together, to be able to advise a charity or a brand on what needs to be done to make the commercial co-venture legally compliant in all of the states. The other thing is, a charity needs to consider, as I mentioned, there is the concept that a charity, if they are acting as a commercial business, they could be subject to what's called the unrelated business income tax or UBIT, which is basically where the IRS considers that the company or that the charity is doing more than just acknowledging the goodwill and the donations being received from a company, but is actually going out there and advertising on behalf of the charity. The concept for the charity, to keep in mind with these promotions, is that they can acknowledge, but they can't advertise. So basically, a charity can allow a link to their website. They could link to the brand's website. But they shouldn't link to the brand's sale page. That's getting a little too close to advertising on behalf of the brand. They could mention the brand's name. They could mention that the brand is a sponsor of the charity, and they could provide a general description of what the brand, what their products are, what their product line or what their business is, but they can't go so far as to start doing comparative advertising that this brand that donates to charity is better than that brand that doesn't donate, or this brand's products are better than that brand's. They can't endorse the brand's products. So bottom line, keep in mind that the charity should only be acknowledging and not advertising on behalf of the brand. Some of the information we've learned from the New York Attorney General about commercial co-ventures are basically best practices to clearly describe the promotion, which is what I went over before, needs to be done and should be done clearly. Tell the consumer, if you buy this, we will donate this. Be as specific as possible so the consumer knows what they need to purchase to trigger a donation from the charity. Don't imply that the donation's coming from the consumer. Be transparent. And it's a good idea, there isn't the legal requirement in any of the states, but the Attorney General suggested it's a good practice to tell the public at the end, how much money was raised. It makes the public, give them the confidence that this is a legitimate promotion, and it actually helps your brand a lot too, by advertising to the public all of the good that your brand has done to make these donations to charity. So consider at the end of a promotion, telling, making a public announcement in some way that we've donated $100,000 or whatever it happens to be to charities. I mentioned before the issue of the proceeds to charity, all proceeds to charity, all profits to charity, those terms are too ambiguous. No one, and possibly everybody in the company, includes the word no one, knows how much all proceeds or all profits to charity means. Does that mean 10 cents? Does that mean 90 cents? Does that mean 15%? No one knows what that particularly means, especially the consumer. So, don't use terms like all profits or a portion of the proceeds. Be specific about how much exactly is being donated to charity. Now, I mentioned with this, the all profits to charity, if your company always donates all profits to charity, if your company always donates half of their profits to charity, half of their proceeds to charity or something that is done all of the time as part of your company business operations, it's arguable that you are now not a charitable solicitation sales campaign, because it's not a promotion, it's not a campaign, it's a business practice. And therefore, companies that say all profits to charity, could argue that it's not a charitable sales campaign, it's not within the definition of a commercial co-venture because it is not a campaign or a promotion. It is a business activity that we always do. And therefore, we don't need to comply with the commercial co venture statutes in the various states. That, as I point out, when that is being done all the time, that argument could possibly be made. I mentioned before that you should put in your contract and your advertising, any minimum or maximum donations. When you are doing this, think about what the minimum and the maximum are. Because even though you are disclosing to the consumers that you will have a minimum donation of $100,000 or a maximum donation of a million dollars, that does not convey to the consumer, that when the consumer is standing there deciding whether or not to make a purchase, because you said you were going to donate 50% of the sales price to charity, they do not know at that timeframe, whether you have met the minimum, whether you have met the maximum and whether their particular purchase is going to trigger the donation. States are generous enough that they allow minimum or maximum donation to be part of the deal between the charity and the brand. But watch when you're doing it, so that, I would say, the vast majority of your purchases are going to be in the area that isn't covered by the maximum or the minimum and that the purchase will actually trigger the donation because your ads are typically gonna say, buy this, buy this, buy this and we'll donate that. And therefore you wanna make sure that when you tell them that when they buy this, you'll donate that, that their purchase actually triggers a donation. And it's not just going to be a mandatory minimum donation that you guarantee in any event. The last thing I wanna mention in this regard is the three, what I called goodwill states, Alabama, Massachusetts and Mississippi, they, as I said, their statutes are broader than just making a purchase. What typical activity comes up a lot of times is, where you may be asked to like a page. And if you like a page, that brand will donate X amount to charity every time you like the page online or something along those lines, which does not require a purchase, but is an activity, an event that triggers a donation. You will need to consider whether or not you should be registering in the three goodwill states when it's a non purchase activity. But otherwise in action required by the consumer to trigger a donation. To some extent that, you know, maybe a risk. Tolerance decision, on behalf of the brand to be safe in any of those triggering situations when you're actually asking a consumer to do something even if it's not going to his or her pocket, but to do something, to trigger a donation, the conservative way to go would be to register in the goodwill states. So now, I wanna segue just briefly, as we know, there are promotions that are involved where the donation is not by the company, but where the donation is made by the consumer and situations where this is related to a promotion from a brand itself but the donation's being made by a consumer. Three common examples of this, I have posted here, the roundup at the register. You go to the checkout counter or you're online and you're asked, do you wanna round up your purchase and have the extra cents donated to a particular charity? And that is where basically the brand is helping to solicit your donation, where that's your money that gets taken from your debit card or credit card that then goes usually first to the brand, then to the charity. So, that's where it's a donation by the consumer. Another example, it could be a donor's choose where you might just be choosing where the store should make the donation, where the branch should make the donation. You pick, which charity. It could be tied in with the roundup where it could be your donation, where you wanna round up and you can pick which charity you want your money to go to. So, there's a lot of different variations, but the concept is, you get to pick the charity this is going to. What's called peer to peer promotions or basically where people or consumers for lack of a better word are asking that donations be made to a particular charity. And the consumer sets the terms on what's going to happen with the money, but the money is coming from other consumers. So, those are other items that happen both offline and online. And they get important when we look at the new California Law AB 488. As I said, this becomes effective January 1st, 2023. It was past last October with the intent that the California legislature will start implementing regulations because of the numerous changes that were made to the California Government code by this act. And they needed time for implementation and time for people to get their hands around what the requirements are and how it's going to happen. It's my understanding that as of yet, there are not finalized regulations, but a long set of proposed regulations are available on the California's website of where they're going with the specific requirements. To a large extent, the regulations follow the provisions of the statute, which in itself is a very long statute covering a lot of different areas. Besides being called the AB, which was the build name, 488, the actual title is now, The Supervision of Trustees and Fundraisers for Charitable Purposes Act. So, let's look into that new act. The new act starts giving new terms as if we didn't have enough in this area. The statute now has new terms that basically are unique to California itself, but aren't unique in the sense of, they're basically covering situations and entities that we already know who they are. So for instance, the main term, that's the center of all of the registration and other regulations is the charitable fundraising platform. For lack of a better word, that's the charity. And it's given such a fancy name because it gets into the online issue of this law. This law only applies to online charitable promotions, charitable solicitations. Everything needs to be online to be within this new law. So if you have a, let's say. traditional commercial co-venture or a traditional roundup at the register, and it's physically at the register, or if you have something else that's non web based and it's in charitable solicitation land, this new statute is not going to apply. But if it is involving the internet in any way, you need to consider whether this new law is going to apply. And because of that, the charity is now given the fancy name of the Charitable Fundraising Platform. So, it's now a charity that uses the internet to provide a website service or other platform so that people in California could do certain acts of solicitation. And it has its own exceptions to what that term means. A lot of the definitions just are there so that they could start working their way into what the lawmakers are getting at in terms of what is being regulated. So they do have these fancy terms, but the bottom line is if you have something online that the charity is online or the promotion itself is online, then you're going to be covered here. As I said, the platform charity, it's another term they use. That's the actual company, the charity, that facilitates the acts of solicitation on a Charitable Fundraising Platform. So, the platform is where it's happening. The platform charity is the charity that is making it happen on its platform. And the statute, as you would expect, goes into detail about how they wanna define platform charity and what it actually doesn't mean. The terms also include the recipient charitable organization, which is the charity that receives the donation, the commercial fundraiser for charitable purposes. And that gets into the basically, what is known as the professional fundraiser, as I mentioned before, is the person or company that solicits and they get paid for doing the solicitation and they are receiving, or they're controlling the initial funds that are being donated, that then they will hand over to the charity and typically either take their portion as payment for their actions. The Fundraising Council is basically the online version of the professional fundraisers. Sorry, Professional Fundraising Council, it's mentioned in many of the other existing statutes. Here, there is an exception, Online Fundraising Council, you need to be over $25,000 a year to be regulated by the new statute. So, besides the commercial fundraisers and Fundraising Council, who I am not getting into, but mentioning in the context of charitable solicitations, whether it's in California or anywhere, those are heavily regulated areas which are beyond the scope of this presentation, but I want you to be aware of them. So, for companies that or charities that have typical sales promotions, who is going to be affected by this new California law. So, if you're a brand that conducts online charitable promotions in California, you will be affected by this new law. You need to consider whether the new law is going to apply to what you are doing with regard to your online charitable promotions that involve California residents. This will include the roundup at checkout. If it's a online sales or partially online, if it's donors choose that's online or partially online, if there's peer to peer donations, where you are allowing someone on your site to drum up donations for a charity, that if it's online, is going to be regulated and you will be affected by that, your company will be affected by that. And last of all, if you're running a charitable sales campaign, a commercial co-venture where there's a sale, and it's at least partly online, that's triggering the donation, you may be affected by the new California law. But the law is drafted so that if you are conducting a commercial co-venture, it only applies if you donate to seven or more different charities during a calendar year. Therefore, if you have a charitable sales campaign, a commercial co-venture, where it's one campaign, but you have 10 different charities that you're going to make donations to, during this one campaign, you're gonna be subject to the requirements of the new California law. If you have seven different promotions, seven different commercial co-ventures throughout the year, and a different charity each time, you will be subject to the new law. If you have seven different commercial co-ventures, but they're all in the same year for the same charity, you will not be subject to this law. If you conduct less than seven commercial co-ventures during the year, you will not be subject to this law. So, it gets into the issue because it's based on a specific number, because it's based on a calendar year, it's something that companies and charities that are working with the companies need to consider in their advanced planning of their promotions of whether or not they're going to trigger the California law throughout the year given what they have been doing. Are they gonna meet this seven charities requirement? Basically, I think what the state was getting at was, where this happens a lot. I will tell you that most companies are not gonna necessarily have seven different charities or at least seven different commercial co-venture promotions throughout a given year and they're going to pick seven different charities. So, the state was more concerned with someone that's really doing a lot of charitable sales campaigns, and really wanted to make sure that these types of companies are towing the line, let's say, with their requirements, and to make sure that the people of California are comfortable with these types of promotions by the state. The state implementing the registration and other requirements when you come within this new law. So the bottom line is, for commercial co-ventures. A typical company may not end up being affected by the new California law for the commercial co-ventures. But you still may, if you're one of these companies that do roundup, donors choose, or other times of online charitable promotions that don't involve sales and aren't commercial co-ventures, all of those are going to apply to the new law. They do not have a seven or more requirement. So, if you do come within the mandates of the new California law, you're basically going to have a few requirements that we will go into in a little bit more detail. Your requirements are going to essentially be, you're going to need to register. Every year, you're register with the California Attorney General. You do it before you start any of your solicitation activities. They don't require a bond but they do require a fee. Every year, you file an annual report. So at the end of 2023, the first full year, when the law comes into effect, by July 15, 2024, you are going to have, you the company, the brand, right now we're talking about the brand's requirements, the brand is going to have to file a annual report on what they did throughout 2023 by July 15th, 2024. As I mentioned that this law also applies to charities who do have an online presence or are receiving donations based upon online solicitations. So, they're gonna have to register it. They're gonna have to file annual reports. And if you're doing this all the time, you're renewing your registration every year by January, 15th. When you're the company, obviously the charity who's having online solicitation activities in California is going to have to register and they will then become in good standing in California. If you're a company that's doing business with a charity for online solicitations, and you're gonna be subject to the new California law, you, before you go about with your campaign, you are going to have to confirm that the charity is in good standing. by manually, that's in the statute, manually going to the Registry of the Charitable Trust Database in California, and making sure that your charity is not listed on the, may not operate for solicit or solicited for charitable purposes list. So if they're on the naughty list, then you cannot be doing business with that charity. Or if they're not listed on the nice list, you cannot be doing business with that charity. If you are going to do an online solicitation program for charitable donations, that will be affected by the new law. If they're on the naughty list, if your charity's on the naughty list, you could still use that charity as long as they get on within five business day grace period. Once you confirm that your charity is on the good list and not on the bad list, you need to have the charities consent to this promotion. Now, non-commercial co-venture world, which I've identified here as non sales promotions, so these are the donors choose, these are the promotions where you're gonna round up, something that doesn't involve a, you buy this, we buy that situation. In all of those situations, if it's online in California, you need the charity's consent. What does it mean to get the charity's consent? That means you need to have a written agreement with the charity, signed by an officer. You have in that agreement, you're gonna tell when you're gonna send these donations to the charity. So, you have a promotion that says that, we're gonna ask consumers to round up to the nearest dollar, and we will make all of those donations by date certain, to charity. You're going to have to hold these donations in a separate account. So now, when you have this promotion of, at checkout with the roundup to charity, you need to segregate the money that is then donated to the charity. You need to segregate that in a separate account until you make that donation to charity. When you make that donation to charity, you're gonna provide accounting to the charity on how you made the calculation of how much the donation ended up being. If you are taking any fees for your activities, you're going to have to put in the contract, all the fees that will be deducted. So, if you're taking any type of administrative fee that we're gonna take a penny for every time a transaction occurs to cover our costs or whatever it happens to be, you need to disclose the specific amount of the fees from those donations. Part of the importance of having the written agreement with the charity is, you need to allow the charity to approve your information about the charity in your names, and to give them the opportunity to remove any advertising, which does not comply with what they said you could do in your ads. You need to allow the charity to acknowledge any particular donors. If you are the donor, your brand is the donor, the charity needs to be able to have permission to acknowledge you as the donor. And if there are a number of companies involved, there has to be an opt-in provision in the contract itself. Once you have this written agreement, it's going to be subject to inspection by the California Attorney General. And because you really only need the charity consent to comply with the statute itself, you could get away with just having consent, but that's only when you will reference the charity's name and address that in your ads, you conspicuously disclose that they've not provided their consent and have not reviewed the ad content and you could remove the charity name upon request. So to review, if I might have misstated that, you do not need charity consent to have a promotion online in California if you are only referencing the charity's name, address, phone, et cetera. If you're not using their logos, if you're not saying anything more about the charity itself, and you're conspicuously disclosing that the charity has not provided consent and they have not reviewed the content of this ad. And if you then let the charity, once they find out that you're doing this, say, take that down, that you will then take this down upon their request. So, you can get away with not having a charity consent, but you must meet those requirements in order to do so. Commercial co-ventures, we get back to the issue of charity. California specifically requires in any event, a written agreement with the charity. So, you are gonna have to have the charity consent for all commercial co-ventures in California that are going to be subject to the new law. And as I mentioned, because California had an existing registration requirement, if it's an offline promotion to get around that registration, if you have it signed by two officers, and you have the every 90 days provisions of the donations being made with an accounting, then you could get away with not having to register as a commercial co-venture in and of itself disregarding the new law if it's not online. For disclosures to be made under the law, the bottom line is that if there is a restriction on, that you have the agreement with the charity or the charity has certain restrictions on how these donations are to be made, basically tell the consumers that the donation, even though you think it could be used by the charity for a particular purpose, it can be used by the charity for any purpose. So you need to tell them, a charity could use this donation for any purpose, and that needs to be conspicuously disclosed even if you are also advertising that you are expecting the charity to be using this donation for perhaps a particular project or what have you. So, there can't be any limitations, that you need to tell the people there's gonna be no limitations on what the charity could use this for. When the donation is made by the consumer, you need to provide a tax deduction receipt within five business days, and you need to notify the consumers when donations were sent to the charity, unless the consumers specifically say, we do not want this notification. So, perhaps at the time of the donation, perhaps at the time of roundup, you could have the consumers agree that they will not require any further notice from you. That may be a good business practice to avoid having to then let them know within 15 days of when the donation is made. The commercial co-ventures, the typical laws are gonna apply. Your ads are gonna have to say the traditional items for any commercial co-venture that existed even before the statute came into effect. There are requirements in the new law for sending donations to charity. They break down between once again, the non-sales promotions and the commercial co-ventures. So, for non sales related promotions, you have timeframes depending on whether it's a consenting charity or a non consenting charity. And it also depends on whether the donations are going to be made directly from the consumer to the charity or whether they're going to be made first to the brand and then the brand is gonna hand the money over to the charity. So, depending on how the particular promotion is set up, will depend upon what your requirements, the brand requirements are to send the donation to the charity. Along with this, the charity must also provide, sorry, the charity must also provide additional information to the consumer. Sorry. They must provide additional donations to the charity. So, when they provide the donation, they have to tell the charity their full name, when the donations were made, when they were sent, how much was made, how much was taken out? Basically, a lot to cover this situation. You might have a non-consenting charity, the charity doesn't even know you're making these donations, it'll apply to both, but it really is helpful for the charity that doesn't know that donations may be made. As I mentioned, the CCBs do have the requirements. The new requirements under the law if you have this seven or more CCBs throughout a year for seven different charities or more, then you still have the requirements of 90 days to make the donation to include the accounting with the donation. So, a lot of that is essentially the same as what you're going to have beforehand. So finally, you need to remember that the California law only applies to online charitable solicitations. It does require pre-planning because you need to know what you are going to be doing in the charitable realm throughout the upcoming year. There's new rules for non-commercial co-ventures. A lot of these roundup at donation or other consumer based charitable solicitations were not regulated before in any of the states. California is one of the first states to start having any kind of regulations for these types of promotions, in particular online promotions here. So if you're having these, you now need to consider whether the new law is going to apply. If it does apply and if you aren't complying, there's gonna be late fees. There could be monetary fines for not complying. And the Attorney General may not allow you to register. It could revoke your registration if you're either the charity or the company. And the Attorney General can have an enforcement action within the state of California to regulate your activity and to perhaps get the cost in Attorney's fees from any enforcement action that they may have to do as a result of your activities or your inactivities. So there's a new area to consider for online charitable promotions with the California law. So, when something like this is happening, make sure you think about it, take a look at it, see if it applies. Hopefully it will run smoothly enough, notwithstanding the wording of the statute. So, I thank you very much. If I can be of any help, let me know. There's my name, number, phone and email. And thank you. A pleasure talking to you about this area.

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