Proposed GIK legislation in California passes Senate Judiciary Committee

Capitol Building in Sacramento. Image courtesy of Adobe Stock.

AB 1181, which will require specific accounting treatment for GIKs when donors require the donation be used overseas, was approved by the Senate Judiciary Committee on a 7 to 1 vote, with 1 committee member not voting.

The bill was referred to the Senate Appropriations Committee. Mark Hrywna (@mhrywna) reports the committee will hold  hearings on August 12. The last day to approve bills is September 13, when the legislature adjourns for this session.

FAF and FASB input

The Financial Accounting Foundation is the parent organization of FASB and GASB.  The committee report indicates FAF has concerns about the legislations but is not formally opposed.

FAF reports that FASB has a working group looking at the issue.

The report has an assessment of the likelihood and timing of any changes by FASB, which is:

FAF has stated that FASB is currently reviewing the issue of noncash donations through a working group; however, it is unclear what the result of the working group will be and any changes would need to be adopted by FASB after a stakeholder process, which could take many months or even years.

I have not seen public comments describing what planned approach the working group is taking so won’t mention anything about specifics.

In terms of process and timing, the committee seems to have a good understand of FASB’s process. The due diligence steps (staff research, consider whether to add to agenda, add to agenda, prepare exposure draft, vote to release ED, wait for stakeholder input, consider responses to ED, revise/reconsider ED, possible rewrite, possible re-release, final vote, wait for effective date) take a long time.

The committee’s assessment of seeing a final rule in “months” is extremely optimistic. Seems to me any changes coming out of FASB would be one or two years down the road plus a wait for the effective date.

I have no experience in assessing how the legislature works, but will make a really wild, uneducated guess that the possibility of some yet-to-be-identified changes going into effect several years down the road is not going to satisfy the legislature.

Opposition

The committee analysis reports the bill is opposed by the California Society of CPAs and the California Board of Accountancy. The CBA’s opposition is new, based on what I’ve previously read.

Trade groups opposing the legislation include Accord Network, InterAction, and PQMD.

The committee report lists about 50 individual charities in opposition. The list looks to me to be a roster of the charities that receive substantial volumes of GIKs. Looks like the list includes just about all the charities which have been in the news over the last decade for GIK valuation issues. I can think of one charity with lots of news coverage for their GIK valuation which is not listed in opposition.

Don’t recognize all the names, but the concentration seems to be evangelical organizations.

Recap of votes

The votes thus far on AB 1181 are:

yes no NVR
11 0 0 Privacy & Consumer Protection
17 0 1 Assembly Appropriations
69 1 10 Assembly vote
7 1 1 Senate Judiciary
Senate Appropriations
Senate vote
Conference process?

 

“NVR” means no vote recorded.

The ‘no’ in the assembly was Marie Waldron, who is the minority leader of the Assembly. I don’t know what the rules are in place for the Assembly, but wonder if the no vote has some parliamentary significance. I’ve read that in the U.S. Congress a no vote by the Speaker or Majority Leader will preserve some sort of privilege to readdress a vote.

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