An amendment to AB 1181 establishes an effective date of January 1, 2021 for the revised reporting requirement to go into effect.
My understanding (for whatever that may be worth!) is that bills passed by the California legislature go into effect on January 1 of the following year unless there is an urgency clause, in which case the bill goes into effect immediately.
This means the new reporting requirement to value donated medicine restricted by donors for distribution overseas at the overseas values would be effective on January 1, 2020. This further means (if my thought process is correct) that reports filed with the Registry of Charitable Trusts in 2020 would have to be compliant. This finally means that financial statements for years ending 12/31/19 would have to reflect the new valuations.
That is a really, reaaaaaally short time to implement.
A revision to AB 1181 posted on September 6, 2019 sets the effective date at January 1, 2021.
It does two other things.
First, retains the AICPA as an official source of GAAP. Um, this might be a surprise to those of us who have read the ASC, but that is topic for another day. Might also be a surprise to FASB and FAF.
That definition of the AICPA as an official source of GAAP expires on January 1, 2021.
Second, the AG is authorized to “adopt rules and regulations” needed to carry out the new valuation requirement.
Second reading
Now that the bill has been amended again, it has to go back to the Senate floor for second read. That is scheduled for Monday 9/9/19. Having watched the Senate action a bit over the last two weeks, it will take a few moments at the start of the session to do a second read of every bill in that status. (That’s a few moments as in “the bills listed for second read are deemed read.”)
After that official step the bill may be called up for third reading and voted on during that reading.
At least that is my newly found understanding. If I’m missing something, let me know.
Amendments made on 9/6/19
I will quote the changes made on September 6, 2019 so you may see the change for yourself and assess whether my description is accurate.
You may find the text by going to this page and comparing the current version to the 8/12/19 version.
Blue italic is new text on 9/6/19. Red strikeout shows text deleted on 9/6/19.
The main change is to Section 1, which is the current text modified to essentially sunset as of 1/1/21.
SECTION 1.
Section 17510.5 of the Business and Professions Code is amended to read:
17510.5.
(a) The financial records of a soliciting organization shall be maintained on the basis of generally accepted accounting principles as established by the Financial Accounting Standards Board and the Governmental defined by the American Institute of Certified Public Accountants, the Governmental Accounting Standards Board, or the Financial Accounting Standards Board.
(b) The disclosure requirement of paragraph (4) (7) of subdivision (a) of Section 17510.3 shall be based on the same accounting principles used to maintain the soliciting organization’s financial records.
(c) (1) This Notwithstanding subdivision (a), if a noncash pharmaceutical drug, nonprescription drug, medication, medical device, or medical supply contribution received by a charitable organization is restricted by the donor so that it cannot be used in the United States, the contribution shall be valued using the fair value of the end recipient market or a reasonable estimate thereof if the end recipient market value cannot be ascertained following a reasonable inquiry. If the end recipient market is unknown when the noncash pharmaceutical drug, nonprescription drug, medication, medical device, or medical supply contribution is received, the charitable organization shall value the contribution using only those markets in which the contribution is reasonably likely to be distributed or used, taking into consideration all facts and circumstances that are consistent with any restrictions, including donor restrictions, and with the charitable organization’s mission and charitable purpose. section shall remain in effect only until January 1, 2021, and as of that date is repealed.
(2) This subdivision does not apply to noncash grants awarded by the United States, any state, territory, or possession of the United States, the District of Columbia, the Commonwealth of Puerto Rico, or any of their agencies or governmental subdivisions that provide valuations for their noncash grants to the charitable organization.
(d) For the purposes of this section:
(1) “End recipient market” means the market in the country where the noncash contribution is to be ultimately distributed.
(2) “Fair value” means the price that the receiving charitable organization would receive if it sold the noncash contribution in the end recipient market.
Modification to 17510.5 (a) goes from “established by” to “defined by” and reinstates the AICPA as a source of GAAP.
Subparagraph (c) says this section expires on 1/1/21. I think that refers to the portion I quoted above, which leaves the current accounting requirements in place until then. Let me know if you think I misunderstood that revised section.
The new Section 2 essentially moves the changes out of Section 1 and into a new Section 2.
The critical change is to add the effective date of 1/1/21 in a new subparagraph (f).
SEC. 2.
Section 17510.5 is added to the Business and Professions Code, to read:
17510.5.
(a) The financial records of a soliciting organization shall be maintained on the basis of generally accepted accounting principles established by the Financial Accounting Standards Board and the Governmental Accounting Standards Board.
(b) The disclosure requirement of paragraph (4) of subdivision (a) of Section 17510.3 shall be based on the same accounting principles used to maintain the soliciting organization’s financial records.
(c) (1) Notwithstanding subdivision (a), if a noncash pharmaceutical drug, nonprescription drug, medication, medical device, or medical supply contribution received by a charitable organization is restricted by the donor so that it cannot be used in the United States, the contribution shall be valued using the fair value of the end recipient market or a reasonable estimate thereof if the end recipient market value cannot be ascertained following a reasonable inquiry. If the end recipient market is unknown when the noncash pharmaceutical drug, nonprescription drug, medication, medical device, or medical supply contribution is received, the charitable organization shall value the contribution using only those markets in which the contribution is reasonably likely to be distributed or used, taking into consideration all facts and circumstances that are consistent with any restrictions, including donor restrictions, and with the charitable organization’s mission and charitable purpose.
(2) This subdivision does not apply to noncash grants awarded by the United States, any state, territory, or possession of the United States, the District of Columbia, the Commonwealth of Puerto Rico, or any of their agencies or governmental subdivisions that provide valuations for their noncash grants to the charitable organization.
(d) For the purposes of this section:
(1) “End recipient market” means the market in the country where the noncash contribution is to be ultimately distributed.
(2) “Fair value” means the price that the receiving charitable organization would receive if it sold the noncash contribution in the end recipient market.
(e) The Attorney General may adopt rules and regulations as necessary to carry out the purposes of this section.
(f) This section shall become operative on January 1, 2021.
Another subtle yet important change is the comment in subsection (e) which authorizes the AG to write implementing and interpreting regulations.
I think that means we can expect to see rules and regs from the AG’s office. After watching a fair amount of action on the floor of the Senate over the last few weeks, I think this means the AG won’t have to go through the entire legislative process every time they have an interpretation or want to make an change in the very detailed implementation protocol.
What do you think?
Did I interpret the changes correctly? Did I miss something?
Any thoughts on the amendments?
If you wish, please leave a comment below. Professional comments, as interpreted by me, will be approved.