Bill Summary – FastDemocracy

CERTIFICATION OF ENROLLMENT
                      SUBSTITUTE SENATE BILL 5034
                       Chapter 176, Laws of 2021
                               67th Legislature
                             2021 Regular Session
                           NONPROFIT CORPORATIONS
 EFFECTIVE DATE: January 1, 2022—Except for section 5204, which
                 becomes effective July 1, 2022.
Passed by the Senate April 14, 2021                 CERTIFICATE
  Yeas 48 Nays 0
                                       I, Brad Hendrickson, Secretary of
                                       the   Senate   of   the   State  of
              DENNY HECK               Washington, do hereby certify that
President of the Senate                the attached is SUBSTITUTE SENATE
                                       BILL 5034 as passed by the Senate
                                       and the House of Representatives on
                                       the dates hereon set forth.
Passed by the House April 9, 2021
  Yeas 97 Nays 1
                                                BRAD HENDRICKSON
            LAURIE JINKINS                                         Secretary
Speaker of the House of
Representatives
Approved May 3, 2021 2:30 PM                           FILED
                                                    May 3, 2021
                                               Secretary of State
              JAY INSLEE                       State of Washington
Governor of the State of Washington
                           SUBSTITUTE SENATE BILL 5034
                             AS AMENDED BY THE HOUSE
                   Passed Legislature - 2021 Regular Session
     State of Washington         67th Legislature        2021 Regular Session
     By Senate Law & Justice (originally sponsored by Senators Pedersen,
     Padden, and Mullet; by request of Washington State Bar Association)
     READ FIRST TIME 01/22/21.
     AN   ACT  Relating   to   nonprofit   corporations;   amending   RCW
 11.110.020, 23.95.255, 23.95.305, 7.60.025, 9.46.0209, 15.105.020,
 18.100.050,    18.100.130,      18.100.134,    23.95.105,     24.50.010,
 28A.710.010, 35.67.020, 35.67.190, 35.92.020, 36.89.080, 36.94.140,
 39.34.030, 39.34.055, 41.04.382, 43.06.335, 43.07.120, 43.07.190,
 43.15.030, 43.105.020, 43.210.020, 43.210.040, 43.330.135, 46.19.020,
 48.30.135, 48.180.010, 64.34.300, 64.38.025, 64.90.400, 66.24.495,
 66.24.680, 68.20.020, 70.45.070, 70.290.030, 79A.30.030, 79A.30.040,
 79A.35.130,    79A.70.030,     82.04.4251,    82.04.4264,     82.04.431,
 82.04.4328,  82.08.0203,    82.08.0293,   82.12.0293,   88.46.065,   and
 89.08.405; reenacting and amending RCW 19.142.010, 48.62.021, and
 74.15.020; adding a new section to chapter 74.15 RCW; adding a new
 chapter to Title 24 RCW; repealing RCW 24.03.005, 24.03.009,
 24.03.010, 24.03.015, 24.03.017, 24.03.020, 24.03.025, 24.03.027,
 24.03.030, 24.03.035, 24.03.040, 24.03.043, 24.03.045, 24.03.046,
 24.03.047, 24.03.048, 24.03.050, 24.03.055, 24.03.060, 24.03.065,
 24.03.070, 24.03.075, 24.03.080, 24.03.085, 24.03.090, 24.03.095,
 24.03.100, 24.03.103, 24.03.1031, 24.03.105, 24.03.110, 24.03.113,
 24.03.115, 24.03.120, 24.03.125, 24.03.127, 24.03.130, 24.03.135,
 24.03.140, 24.03.145, 24.03.150, 24.03.155, 24.03.160, 24.03.165,
 24.03.170, 24.03.175, 24.03.180, 24.03.183, 24.03.185, 24.03.190,
 24.03.195, 24.03.200, 24.03.205, 24.03.207, 24.03.210, 24.03.215,
 24.03.217, 24.03.220, 24.03.225, 24.03.230, 24.03.235, 24.03.240,
                                       p. 1                       SSB 5034.SL
 24.03.245, 24.03.250, 24.03.255, 24.03.260, 24.03.266, 24.03.271,
 24.03.276, 24.03.295, 24.03.300, 24.03.302, 24.03.305, 24.03.310,
 24.03.315, 24.03.325, 24.03.332, 24.03.334, 24.03.335, 24.03.340,
 24.03.345, 24.03.350, 24.03.360, 24.03.365, 24.03.370, 24.03.380,
 24.03.390, 24.03.395, 24.03.405, 24.03.417, 24.03.420, 24.03.425,
 24.03.430, 24.03.435, 24.03.440, 24.03.445, 24.03.455, 24.03.460,
 24.03.465, 24.03.470, 24.03.480, 24.03.490, 24.03.500, 24.03.510,
 24.03.520, 24.03.530, 24.03.540, 24.03.550, 24.03.900, 24.03.905,
 24.03.915, 24.03.920, and 24.03.925; prescribing penalties; and
 providing effective dates.
 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:
                                PART I
                   FORMATION AND GENERAL CONDITIONS
                               ARTICLE 1
                          GENERAL PROVISIONS
     NEW SECTION. Sec. 1101. SHORT TITLE. This chapter may be known
 and cited as the Washington nonprofit corporation act.
     NEW SECTION.    Sec. 1102.   DEFINITIONS. The definitions in this
 section apply throughout this chapter unless the context clearly
 requires otherwise.
     (1) "Address," unless otherwise specified, means either a
 physical mailing address or an electronic address.
     (2) "Articles" or "articles of incorporation" means the original
 articles of incorporation as modified by all amendments thereof, as
 filed by the secretary of state. If any record filed under this
 chapter restates the articles in their entirety, thenceforth the
 articles shall not include any prior filings.
     (3) "Board" or "board of directors" means the team or body of
 individuals ultimately responsible for the management of the
 activities and affairs of the nonprofit corporation, regardless of
 the name used to refer to the team or body.
     (4) "Bylaws" means the code or codes of rules, other than the
 articles, adopted for the regulation and governance of the internal
 affairs of the nonprofit corporation, regardless of the name or names
 used to refer to those rules, excluding separate policies or
 procedures adopted by the board.
                                     p. 2                      SSB 5034.SL
     (5)   "Charitable   corporation"  means   a    domestic nonprofit
 corporation that is operated primarily or exclusively for one or more
 charitable purposes.
     (6) "Charitable purpose" means a purpose that:
     (a) Would make a corporation organized and operated exclusively
 for that purpose eligible to be exempt from taxation under section
 501(c)(3) of the Internal Revenue Code; or
     (b) Is considered charitable under applicable law other than this
 chapter or the Internal Revenue Code.
     (7) "Contribution" means the payment, donation, or promise, for
 consideration or otherwise, of any money or property of any kind or
 value which contribution is wholly or partly induced by a
 solicitation.
     (8) "Corporation" means a domestic nonprofit corporation, unless
 otherwise specified.
     (9) "Delegate" means a person elected or appointed to vote in a
 representative capacity for the election of directors or on other
 matters.
     (10) "Deliver" or "delivery" of a record means delivery by hand,
 United States mail, private courier service, electronic transmission,
 or other methods of delivery used in conventional commercial
 practice, except that delivery to the secretary of state means actual
 receipt by the secretary of state.
     (11) "Director" means an individual designated, elected, or
 appointed, by that or any other name or title, to act as a member of
 the board of directors, while the individual is holding that
 position.
     (12) "Domestic," with respect to an entity, means governed as to
 its internal affairs by the law of this state.
     (13) "Domestic corporation" or "domestic nonprofit corporation"
 means a domestic corporation incorporated under or subject to this
 chapter.
     (14) "Domestic unincorporated entity" means an unincorporated
 entity whose internal affairs are governed by the laws of this state.
     (15) "Electronic" means relating to technology having electrical,
 digital, magnetic, wireless, optical, electromagnetic, or similar
 capabilities.
     (16) "Electronic transmission" means an electronic communication:
     (a) Not directly involving the physical transfer of a record in a
 tangible medium; and
                                     p. 3                      SSB 5034.SL
     (b) That may be retained, retrieved, and reviewed by the sender
 and the recipient thereof, and that may be directly reproduced in a
 tangible medium by such a sender and recipient.
     (17) "Electronically transmitted" means that the sender of an
 electronic transmission initiated the electronic transmission.
     (18) "Eligible entity" means a domestic or foreign unincorporated
 entity, a domestic nonprofit corporation incorporated under a
 corporations statute other than this chapter or its predecessor
 statutes, or a domestic or foreign for-profit corporation.
     (19) "Employee" does not include an individual serving as an
 officer or director who is not otherwise employed by the corporation.
     (20) "Entitled to vote" means entitled to vote on the matter
 under consideration pursuant to the articles or bylaws of the
 nonprofit corporation or any applicable controlling provision of law.
     (21) "Entity" means an organization or artificial legal person
 that either has a separate legal existence or has the power to
 acquire an estate in real property in its own name and includes, but
 is not limited to:
     (a) A domestic or foreign for-profit corporation;
     (b) A domestic or foreign nonprofit corporation;
     (c) A domestic or foreign general or limited partnership;
     (d) A domestic or foreign limited liability partnership;
     (e) A domestic or foreign limited liability company;
     (f) Any other domestic or foreign unincorporated entity;
     (g) A domestic or foreign estate or trust;
     (h) The federal government;
     (i) A tribal government; and
     (j) A state or local government, foreign government, or
 governmental subdivision.
     (22) "Ex officio director" means an individual who becomes a
 member of the board of directors not through the regular elections
 process but by virtue of another position that he or she holds.
 Unless the articles or bylaws specifically state that an ex officio
 director does not have the right to vote, such a director has the
 same right to vote as any other director.
     (23) "Execute" or "executed" means:
     (a) Signed, with respect to a written record;
     (b) Electronically transmitted along with sufficient information
 to determine the sender's identity and intent to execute; or
                                     p. 4                      SSB 5034.SL
     (c) With respect to a record to be filed by the secretary of
 state, in compliance with the standards for filing as prescribed by
 this chapter; chapter 23.95 RCW; or the secretary of state.
     (24) "Federal government" includes a district, authority, bureau,
 commission, department, and any other agency of the federal
 government of the United States.
     (25) "Filing entity" means an unincorporated entity that is
 created by filing a public organic record.
     (26)    "For-profit   corporation"    or   "domestic    for-profit
 corporation" means a domestic business corporation incorporated under
 or subject to Title 23B RCW or any successor provisions.
     (27) "Foreign," with respect to an entity, means governed as to
 its internal affairs by the law of a jurisdiction other than this
 state.
     (28) "Foreign for-profit corporation" means a foreign corporation
 that would be a for-profit corporation if incorporated under the law
 of this state.
     (29) "Foreign corporation" or "foreign nonprofit corporation"
 means a foreign corporation that would be a nonprofit corporation if
 incorporated under the law of this state.
     (30) "Foreign unincorporated entity" means an unincorporated
 entity whose internal affairs are governed by an organic law of a
 jurisdiction other than this state.
     (31) "Fundamental transaction" means an amendment of the articles
 or bylaws, merger, sale of all or substantially all of the assets,
 domestication, conversion, or dissolution of a nonprofit corporation.
     (32) "Gift instrument" means a record or records under which
 property is donated to, transferred to, granted to, or held by the
 corporation. A solicitation constitutes a gift instrument with
 respect to a donation, transfer, or grant of property made in
 response to the solicitation only if:
     (a) The solicitation was in the form of a record, including but
 not limited to, invitations made by electronic transmission or in
 electronic media, or was documented in the form of a record created
 no later than ninety days after the solicitation was made; and
     (b) The donation, transfer, or grant of property was made within
 one year of the solicitation.
     (33) "Governmental subdivision" includes an authority, county,
 district, and municipality formed or authorized by any federal,
 state, or local government.
                                     p. 5                      SSB 5034.SL
     (34) "Includes" denotes a partial definition.
     (35) "Individual" means a natural person.
     (36) "Interest" means either or both of the following rights
 under the organic law of an unincorporated entity:
     (a) The right to receive distributions from the entity either in
 the ordinary course or upon liquidation; or
     (b) The right to receive notice or vote on issues involving its
 internal affairs, other than as an agent, assignee, proxy, or person
 responsible for managing its business, activities, or affairs.
     (37) "Interest holder" means a person who holds of record an
 interest.
     (38) "Interest holder liability" means personal liability for a
 debt, obligation, or liability of a domestic or foreign for-profit or
 nonprofit corporation or unincorporated entity that is imposed on a
 person:
     (a) Solely by reason of the person's status as a shareholder,
 interest holder, or member; or
     (b) By the articles, bylaws, or an organic record pursuant to a
 provision of the organic law authorizing the articles, bylaws, or an
 organic record to make one or more specified shareholders, interest
 holders, or members liable in their capacity as shareholders,
 interest holders, or members for all or specified debts, obligations,
 or liabilities of the entity.
     (39) "Internal Revenue Code" means Title 26 U.S.C., the federal
 Internal Revenue Code of 1986, as amended, or any successor statute.
     (40) "Jurisdiction," when used to refer to a political entity,
 means the United States, a state, a foreign country, or a political
 subdivision of a foreign country.
     (41) "Jurisdiction of formation" means the jurisdiction whose law
 includes the organic law of an entity.
     (42) "Material interest" means an actual or potential benefit or
 detriment, other than one that would devolve on the nonprofit
 corporation or the members generally, that would reasonably be
 expected to impair the objectivity of an individual's judgment when
 participating in the action to be taken.
     (43) "Material relationship" means a familial, financial,
 professional, employment, or other relationship that would reasonably
 be expected to impair the objectivity of an individual's judgment
 when participating in the action to be taken.
     (44) "Means" denotes an exhaustive definition.
                                     p. 6                      SSB 5034.SL
     (45) "Member" means:
     (a) Where the articles state that the corporation has members, a
 person who has a right set forth in the articles or bylaws, not as a
 delegate, to select or vote for the election of directors or
 delegates or to vote on at least one type of fundamental transaction.
     (b) For a corporation formed before January 1, 2022, the articles
 of which do not state that the corporation has members, a person who:
     (i) Is defined as a member in the bylaws; and
     (ii) Has a right provided in the bylaws, not as a delegate, to
 select or vote for the election of directors or delegates or to vote
 on at least one type of fundamental transaction.
     (c) A delegate or group of delegates, to the extent:
     (i) The powers, functions, or authority of the members have been
 vested in, or are exercised by, such a delegate or group of
 delegates; and
     (ii) The provision of this chapter in which the term appears is
 relevant to the discharge by the delegate or group of delegates of
 its powers, functions, or authority.
     (46) "Membership" means the rights and any obligations of a
 member in a nonprofit corporation.
     (47) "Membership corporation" means a nonprofit corporation whose
 articles provide that it has members, or that has members as defined
 in subsection (45) of this section.
     (48) "Nonfiling entity" means an unincorporated entity that is
 not created by filing a public organic record.
     (49) "Nonmembership corporation" means a nonprofit corporation
 whose articles do not provide that it has members and that does not
 have members as defined in subsection (45)(b) of this section.
     (50)   "Nonprofit   corporation"  means    a  domestic   nonprofit
 corporation, unless otherwise specified.
     (51) "Notice" has the same meaning as described in section 1103
 of this act.
     (52) "Notify" means to provide notice as defined in section 1103
 of this act.