Relates to compensation of executives of certain not-for-profit corporations.
Sponsor: MARCELLINO / Committee: FINANCE
Law Section: Executive Law / Law: Amd S63, Exec L; amd SS202, 717, 719 & 720, add SS727 & 728, N-PC L
Sponsor: MARCELLINO / Committee: FINANCE
Law Section: Executive Law / Law: Amd S63, Exec L; amd SS202, 717, 719 & 720, add SS727 & 728, N-PC L
- May 22, 2012: REPORTED AND COMMITTED TO FINANCE
- Apr 13, 2012: REFERRED TO INVESTIGATIONS AND GOVERNMENT OPERATIONS
S6930-2011 MeetingsInvestigations and Government Operations: May 15, 2012, Investigations and Government Operations: May 22, 2012
VOTE: COMMITTEE VOTE: - Investigations and Government Operations - May 22, 2012
BILL NUMBER:S6930 TITLE OF BILL: An act to amend the executive law and the not-for-profit corporation law, in relation to compensation of executives of certain not-for-profit corporations PURPOSE: To provide clear and concise requirements and procedures to ensure that compensation paid to executives at not-for-profits funded by the State are reasonable and not excessive. SUMMARY OF PROVISIONS: Section 1 adds a new subdivision 14 to Section 63 of the executive law which allows the prosecution of all actions in connection with section 728 of the not-for-profit corporation law. Section 2 amends sub-paragraph 12 of paragraph a of section 202 of the not-for-profit corporation law to include section 727 of this chapter when defining compensation. Section 3 amends paragraph a of section 717 of the not-for-profit corporation law to include language that any compensation provided to directors, officers, employees and other agents of the corporation shall be reasonable and, where applicable, is subject to section 727 of the not-for-profit corporation law. Section 4 amends paragraph a of section 719 of the not-for-profit corporation law adding a new sub-paragraph 6 that reads "the provision of excessive compensation to directors, officers, employees and other agents of the corporation in violation of section 727, where applicable. Section 5 amends paragraph d of section 719 of the not-for-profit corporation law to add a new subparagraph 6 to read that upon reimbursement to the corporation of the amount of any excessive compensation provided in violation of section 727 to be subrogated to the rights of the corporation against a director, officer, employee or other agent who received excessive compensation. Section 6 amends clauses A and B of subparagraph 1 of paragraph A of section 720 of the not-for-profit corporation law to include the failure to perform or any other duties including violations of section 727 pursuant to section 717. Section 7 amends the not-far-profit corporation law to include a new section 727 that defines the compensation of executives, compensation, executive and family member. It also requires that compensation exchanged by a not-for-profit corporation for the performance of services by an executive must be reasonable consider factors including but not limited to: compensation levels at similar situated organizations; availability of similar services in the geographic area of the applicable service provider; current compensation surveys by independent outside consultants or entities and actual written offers from similar institutions competing for the services of the applicable executive. Section 7 also requires that if a not-for-profit corporation receives over twenty-five thousand dollars from the state the corporation must annually submit completed internal revenue service form 990 or a comparable form developed to the state and filed with the Attorney General and these forms shall be publicly available upon request and if the organization maintains a website it shall be posted on the organizations website. The Commissioners of Developmental Disabilities, Mental Health, Alcoholism and Substance Abuse Service, Children and Family Services, Health, Criminal Justice Services and the Director of the Office of the Aging shall jointly develop a form for use by these not-for-profit corporations who are not required by federal law to complete an Internal Revenue Service form 990. This form will not require more information than what is required on the 990 form. The Commissioners will also promulgate regulations and establish a uniform procedure for reviewing submitted forms and if determining compensation to be excessive and in violation of the standards established in this section, referring such cases to the Attorney General for further inquiry. Section 8 amends the not-for-profit corporation law adding a new section 728 which requires a written policy on various aspect of the board, its composition and voting rights. All written policies shall be available for review by the Attorney General upon request. JUSTIFICATION: The majority of the Not-for-Profits in our State are complying with Internal Revenue Service standards for executive compensation. In addition there are a large number of organization executives that are under-compensated for their dedication and service to our State's residents. Unfortunately there are few egregious actors who have skirted current law and have utilized public funding for excessive personal gain. This legislation is intended to close current loopholes in State law and provide a streamlined and fair system across the board for all not-for-profit corporations in New York State while also providing safeguards that can be reviewed by State Agencies, the Attorney General and the public. LEGISLATIVE HISTORY: New Bill. FISCAL IMPLICATIONS: Minimal. EFFECTIVE DATE: This act shall take effect on the 180th day after it shall have become law; provided the Commissioners of the Office of People with Developmental Disabilities, Mental Health, Alcoholism and Substance Abuse Services, Children and Family Services, Health, Criminal Justice Services and the Director of the office of Aging immediately take the necessary steps to ensure that forms and regulations required in section seven of the act are in place on the effective date; and provided, further, the authority to promulgate regulations and make rules is derived from an express or implicit statutory grant provided by the legislature, all agencies and divisions and Departments of the State are prohibited from promulgating regulations and making rules or that otherwise address the extent and nature of a provider's administrative costs and executive compensation, except as required and necessary to implement the provision of section six of this act.
S T A T E O F N E W Y O R K
6930 I N SENATE April 13, 2012
Introduced by Sen. MARCELLINO -- read twice and ordered printed, and when printed to be committed to the Committee on Investigations and Government Operations AN ACT to amend the executive law and the not-for-profit corporation law, in relation to compensation of executives of certain not-for-pro fit corporations THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM BLY, DO ENACT AS FOLLOWS:
Section 63 of the executive law is amended by adding a new subdivision 14 to read as follows:
14. PROSECUTE ALL ACTIONS IN CONNECTION WITH SECTION SEVEN HUNDRED TWENTY-SEVEN AND SEVEN HUNDRED TWENTY-EIGHT OF THE NOT-FOR-PROFIT CORPO RATION LAW.
S 2. Subparagraph 12 of paragraph (a) of section 202 of the not-for profit corporation law is amended to read as follows:
(12) To elect or appoint officers, employees and other agents of the corporation, define their duties, fix their reasonable compensation and the reasonable compensation of directors, and to indemnify corporate personnel. Such compensation shall be commensurate with services performed, AND SUBJECT, WHERE APPLICABLE, TO SECTION SEVEN HUNDRED TWEN TY-SEVEN OF THIS CHAPTER.
S 3. Paragraph (a) of section 717 of the not-for-profit corporation law, as amended by chapter 490 of the laws of 2010, is amended to read as follows:
(a) Directors and officers shall discharge the duties of their respec tive positions in good faith and with the care an ordinarily prudent person in a like position would exercise under similar circumstances. The factors set forth in subparagraph one of paragraph (e) of section 552 (Standard of conduct in managing and investing an institutional fund), if relevant, must be considered by a governing board delegating investment management of institutional funds pursuant to section 514 (Delegation of investment management). For purposes of this paragraph, the term institutional fund is defined in section 551 (Definitions). FURTHERMORE, ANY COMPENSATION PROVIDED TO DIRECTORS, OFFICERS, EMPLOYEES EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets [ ] is old law to be omitted. LBD15308-02-2
S. 6930 2 AND OTHER AGENTS OF THE CORPORATION SHALL BE REASONABLE AND, WHERE APPLICABLE, IS SUBJECT TO SECTION 727 (COMPENSATION OF EXECUTIVES).
S 4. Paragraph (a) of section 719 of the not-for-profit corporation law is amended by adding a new subparagraph 6 to read as follows:
(6) THE PROVISION OF EXCESSIVE COMPENSATION TO DIRECTORS, OFFICERS, EMPLOYEES AND OTHER AGENTS OF THE CORPORATION IN VIOLATION OF SECTION 727 (COMPENSATION OF EXECUTIVES), WHERE APPLICABLE.
S 5. Paragraph (d) of section 719 of the not-for-profit corporation law is amended by adding a new subparagraph 6 to read as follows:
(6) UPON REIMBURSEMENT TO THE CORPORATION OF THE AMOUNT OF ANY EXCES SIVE COMPENSATION PROVIDED IN VIOLATION OF SECTION 727 (COMPENSATION OF EXECUTIVES), TO BE SUBROGATED TO THE RIGHTS OF THE CORPORATION AGAINST A DIRECTOR, OFFICER, EMPLOYEE OR OTHER AGENT WHO RECEIVED THE EXCESSIVE COMPENSATION.
S 6. Clauses (A) and (B) of subparagraph 1 of paragraph (a) of section 720 of the not-for-profit corporation law are amended to read as follows:
(A) The neglect of, [
or] THE failure to perform, or ANY other violation of his duties in the management and disposition of corporate assets committed to his charge. (B) The acquisition by himself, transfer to others, loss or waste of corporate assets due to any neglect of, [ or] THE failure to perform, or ANY other violation of his duties, INCLUDING VIOLATIONS OF SECTION 727 (COMPENSATION OF EXECUTIVES), PURSUANT TO SECTION 717 (DUTY OF DIRECTORS AND OFFICERS).
S 7. The not-for-profit corporation law is amended by adding a new section 727 to read as follows:
S 727. COMPENSATION OF EXECUTIVES. (A) DEFINITIONS. FOR THE PURPOSES OF THIS SECTION, UNLESS OTHERWISE EXPRESSLY STATED OR CONTEXT CLEARLY REQUIRES:
(1) "COMPENSATION" MEANS THE AGGREGATE VALUE OF ECONOMIC BENEFITS CONFERRED IN EXCHANGE FOR THE PERFORMANCE OF SERVICES THAT ARE INCLUDED FOR PURPOSES OF DETERMINING REASONABLENESS UNDER SECTION 26 U.S.C. 4958, AS FURTHER SPECIFIED IN 26 CFR S53.4958-4(B)(II)(B), OR SUCCEEDING PROVISIONS. (2) "EXECUTIVE" MEANS ANY PERSON WHO HAS ULTIMATE RESPONSIBILITY FOR IMPLEMENTING THE DECISIONS OF THE GOVERNING BODY OR FOR SUPERVISING THE MANAGEMENT, ADMINISTRATION, OR OPERATION OF THE ORGANIZATION, AS REFER ENCED IN 26 U.S.C. S4958(F)(1)(A) AND FURTHER SPECIFIED IN 26 CFR S53.4958-3(C)(2), OR SUCCEEDING PROVISIONS. (3) "FAMILY MEMBER" MEANS A SPOUSE, SIBLING (BY WHOLE OR HALF BLOOD), SPOUSE OF A SIBLING (BY WHOLE OR HALF BLOOD), PARENT, GRANDPARENT, CHILD, GRANDCHILD, GREAT-GRANDCHILD, AND SPOUSE OF A CHILD, GRANDCHILD, AND GREAT-GRANDCHILD. (B) COMPENSATION EXCHANGED BY A NOT-FOR-PROFIT CORPORATION FOR THE PERFORMANCE OF SERVICES BY AN EXECUTIVE MUST BE REASONABLE CONSIDERING FACTORS INCLUDING, BUT NOT LIMITED TO: COMPENSATION LEVELS PAID BY SIMI LARLY SITUATED ORGANIZATIONS, WHETHER OR NOT THEY QUALIFY AS A NOT-FOR PROFIT CORPORATION AS DEFINED IN SECTION 102 (DEFINITIONS); THE AVAIL ABILITY OF SIMILAR SERVICES IN THE GEOGRAPHIC AREA OF THE APPLICABLE PROVIDER OF SERVICES; CURRENT COMPENSATION SURVEYS COMPILED BY INDEPEND ENT OUTSIDE CONSULTANTS OR ENTITIES; AND ACTUAL WRITTEN OFFERS FROM SIMILAR INSTITUTIONS COMPETING FOR THE SERVICES OF THE APPLICABLE EXECU TIVE. (1) FOR THE PURPOSES OF THIS SECTION, WHETHER AN ORGANIZATION IS SIMI LARLY SITUATED SHALL BE DETERMINED BASED ON FACTORS INCLUDING, BUT NOT S. 6930 3 LIMITED TO: GROSS ANNUAL REVENUE; GEOGRAPHIC LOCATION; AND THE DIVERSI TY AND COMPLEXITY OF PROGRAMS. (2)(A) IF A NOT-FOR-PROFIT CORPORATION RECEIVES OVER TWENTY-FIVE THOU SAND DOLLARS FROM THE STATE, THE NOT-FOR-PROFIT CORPORATION MUST ANNUAL LY SUBMIT A COMPLETED INTERNAL REVENUE SERVICE FORM 990, OR A COMPARABLE FORM DEVELOPED PURSUANT TO SUBCLAUSE (I) OF CLAUSE (B) OF THIS SUBPARA GRAPH, TO THE STATE AND FILED WITH THE ATTORNEY GENERAL. SUCH COMPLETED FORM OR INTERNAL REVENUE SERVICE FORM 990 SHALL BE PUBLICLY AVAILABLE UPON REQUEST AND IF THE ORGANIZATION MAINTAINS A WEBSITE, IT SHALL BE POSTED ON THE ORGANIZATION'S WEBSITE. (B) THE COMMISSIONERS OF DEVELOPMENTAL DISABILITIES, MENTAL HEALTH, ALCOHOLISM AND SUBSTANCE ABUSE SERVICES, CHILDREN AND FAMILY SERVICES, HEALTH, CRIMINAL JUSTICE SERVICES AND THE DIRECTOR OF THE OFFICE FOR THE AGING SHALL JOINTLY:
(I) DEVELOP A FORM FOR USE BY THOSE NOT-FOR-PROFIT CORPORATIONS WHO ARE NOT REQUIRED BY FEDERAL LAW TO COMPLETE AN INTERNAL REVENUE SERVICE FORM 990. SUCH FORM SHALL REQUIRE NO MORE INFORMATION THAN THAT WHICH MUST BE SUBMITTED ON INTERNAL REVENUE SERVICE FORM 990; (II) PROMULGATE REGULATIONS THAT ALLOW A NOT-FOR-PROFIT CORPORATION TO SUBMIT ONE COMPLETED INTERNAL REVENUE SERVICE FORM 990, OR ONE COMPLETED COMPARABLE FORM, THROUGH THE POSTAL SERVICE OR ELECTRONICALLY, FOR DISTRIBUTION TO ALL AGENCIES THAT PROVIDE FUNDING TO THE NOT-FOR-PROFIT CORPORATION; AND (III) ESTABLISH UNIFORM PROCEDURES FOR REVIEWING SUBMITTED FORMS; AND, UPON A DETERMINATION THAT EXECUTIVE COMPENSATION APPEARS TO BE EXCESSIVE IN VIOLATION OF THE STANDARDS ESTABLISHED IN THIS SECTION, FOR REFERRING SUCH CASES TO THE ATTORNEY GENERAL FOR FURTHER INQUIRY. (C) ANNUAL COMPENSATION EXCHANGED BY A NOT-FOR-PROFIT CORPORATION FOR THE PERFORMANCE OF SERVICES BY AN EXECUTIVE SHALL BE CONSIDERED REASON ABLE IF IT DOES NOT EXCEED LEVEL I OF THE FEDERAL GOVERNMENT'S RATES OF BASIC PAY FOR THE EXECUTIVE SCHEDULE PROMULGATED BY THE UNITED STATES OFFICE OF PERSONNEL MANAGEMENT. (D) ANNUAL COMPENSATION EXCHANGED BY A NOT-FOR-PROFIT CORPORATION FOR THE PERFORMANCE OF SERVICES BY AN EXECUTIVE THAT DOES EXCEED LEVEL I OF THE FEDERAL GOVERNMENT'S RATES OF BASIC PAY FOR THE EXECUTIVE SCHEDULE SHALL BE PRESUMED TO BE REASONABLE IF THE FOLLOWING FOUR CONDITIONS ARE SATISFIED:
(1) THE COMPENSATION IS APPROVED IN ADVANCE BY THE GOVERNING BODY (I.E., THE BOARD OF DIRECTORS, BOARD OF TRUSTEES, OR EQUIVALENT CONTROL LING BODY) OF THE NOT-FOR-PROFIT CORPORATION THAT IS COMPOSED ENTIRELY OF INDIVIDUALS WHO DO NOT HAVE A CONFLICT OF INTEREST WITH RESPECT TO THE COMPENSATION ARRANGEMENT. (A) FOR THE PURPOSES OF DETERMINING WHETHER THE REQUIREMENTS OF THIS PARAGRAPH HAVE BEEN MET WITH RESPECT TO A SPECIFIC COMPENSATION ARRANGE MENT, AN INDIVIDUAL IS NOT INCLUDED IN THE GOVERNING BODY WHEN IT IS REVIEWING A TRANSACTION IF THAT INDIVIDUAL MEETS WITH OTHER MEMBERS ONLY TO ANSWER QUESTIONS, AND OTHERWISE RECUSES HIMSELF OR HERSELF FROM THE MEETING AND IS NOT PRESENT DURING DEBATE AND VOTING ON THE COMPENSATION ARRANGEMENT. (B) A MEMBER OF THE GOVERNING BODY DOES NOT HAVE A CONFLICT OF INTER EST WITH RESPECT TO A COMPENSATION ARRANGEMENT ONLY IF THE MEMBER:
(I) IS NOT AN EXECUTIVE PARTICIPATING IN, OR ECONOMICALLY BENEFITING FROM, THE COMPENSATION ARRANGEMENT; AND IS NOT A FAMILY MEMBER OF SUCH AN EXECUTIVE; S. 6930 4 (II) IS NOT IN AN EMPLOYMENT RELATIONSHIP SUBJECT TO THE DIRECTION OR CONTROL OF ANY EXECUTIVE, OR THE FAMILY MEMBER OF ANY EXECUTIVE, PARTIC IPATING IN OR ECONOMICALLY BENEFITING FROM THE COMPENSATION ARRANGEMENT; (III) DOES NOT RECEIVE COMPENSATION OR OTHER PAYMENT SUBJECT TO APPROVAL BY ANY EXECUTIVE, OR THE FAMILY MEMBER OF ANY EXECUTIVE, PARTICIPATING IN OR ECONOMICALLY BENEFITING FROM THE COMPENSATION ARRANGEMENT; (IV) HAS NO MATERIAL FINANCIAL INTEREST AFFECTED BY THE COMPENSATION ARRANGEMENT; AND (V) DOES NOT APPROVE A TRANSACTION PROVIDING ECONOMIC BENEFITS TO ANY EXECUTIVE, OR THE FAMILY MEMBER OF ANY EXECUTIVE, PARTICIPATING IN THE COMPENSATION ARRANGEMENT, WHO IN TURN HAS APPROVED OR WILL APPROVE A TRANSACTION PROVIDING ECONOMIC BENEFITS TO THE MEMBER. (2) THE GOVERNING BODY OBTAINED AND RELIED UPON APPROPRIATE DATA AS TO COMPARABILITY PRIOR TO MAKING ITS DETERMINATION. (A) A GOVERNING BODY HAS APPROPRIATE DATA AS TO COMPARABILITY IF, GIVEN THE KNOWLEDGE AND EXPERTISE OF ITS MEMBERS, IT HAS INFORMATION SUFFICIENT TO DETERMINE WHETHER THE COMPENSATION ARRANGEMENT IN ITS ENTIRETY IS REASONABLE. RELEVANT INFORMATION INCLUDES, BUT IS NOT LIMIT ED TO: COMPENSATION LEVELS PAID BY SIMILARLY SITUATED ORGANIZATIONS, WHETHER OR NOT THEY QUALIFY AS A NOT-FOR-PROFIT CORPORATION AS DEFINED IN SECTION ONE HUNDRED TWO OF THIS CHAPTER; THE AVAILABILITY OF SIMILAR SERVICES IN THE GEOGRAPHIC AREA OF THE APPLICABLE PROVIDER OF SERVICES; CURRENT COMPENSATION SURVEYS COMPILED BY INDEPENDENT FIRMS; AND ACTUAL WRITTEN OFFERS FROM SIMILAR INSTITUTIONS COMPETING FOR THE SERVICES OF THE APPLICABLE EXECUTIVE. (B) HOWEVER, FOR SMALL ORGANIZATIONS WITH ANNUAL GROSS RECEIPTS (INCLUDING CONTRIBUTIONS) OF LESS THAN ONE MILLION DOLLARS REVIEWING COMPENSATION ARRANGEMENTS, THE GOVERNING BODY WILL BE CONSIDERED TO HAVE APPROPRIATE DATA AS TO COMPARABILITY IF IT HAS DATA ON COMPENSATION PAID BY THREE COMPARABLE PROVIDERS OF SERVICES IN THE SAME OR SIMILAR COMMU NITIES FOR SIMILAR SERVICES. (I) FOR THE PURPOSES OF DETERMINING WHETHER THE ABOVE RULE FOR SMALL ORGANIZATIONS APPLIES, AN ORGANIZATION MAY CALCULATE ITS ANNUAL GROSS RECEIPTS BASED ON AN AVERAGE OF ITS GROSS RECEIPTS DURING THE THREE PRIOR TAXABLE YEARS. IF ANY APPLICABLE NOT-FOR-PROFIT CORPORATION IS CONTROLLED BY OR CONTROLS ANOTHER ENTITY, THE ANNUAL GROSS RECEIPTS OF SUCH ORGANIZATIONS MUST BE AGGREGATED TO DETERMINE APPLICABILITY. (II) FOR PURPOSES OF THIS PARAGRAPH, CONTROL BY AN APPLICABLE NOT-FOR-PROFIT CORPORATION MEANS:
1. IN THE CASE OF A STOCK CORPORATION, OWNERSHIP (BY VOTE OR VALUE) OF MORE THAN FIFTY PERCENT OF THE STOCK IN SUCH CORPORATION; 2. IN THE CASE OF A PARTNERSHIP, OWNERSHIP OF MORE THAN FIFTY PERCENT OF THE PROFITS INTERESTS OR CAPITAL INTERESTS IN THE PARTNERSHIP; 3. IN THE CASE OF A NONSTOCK ORGANIZATION (I.E., AN ENTITY IN WHICH NO PERSON HOLDS A PROPRIETARY INTEREST), THAT AT LEAST FIFTY PERCENT OF THE DIRECTORS OR TRUSTEES OF THE NOT-FOR-PROFIT CORPORATION ARE EITHER REPRESENTATIVES (INCLUDING TRUSTEES, DIRECTORS, AGENTS, OR EMPLOYEES) OF, OR DIRECTLY OR INDIRECTLY CONTROLLED BY, AN APPLICABLE TAX-EXEMPT ORGANIZATION; OR 4. IN THE CASE OF ANY OTHER ENTITY, OWNERSHIP OF MORE THAN FIFTY PERCENT OF THE BENEFICIAL INTEREST IN THE ENTITY. (3) THE GOVERNING BODY ADEQUATELY DOCUMENTED THE BASIS FOR ITS DETER MINATION CONCURRENTLY WITH MAKING THAT DETERMINATION. (A) FOR A DECISION TO BE DOCUMENTED ADEQUATELY, THE WRITTEN OR ELEC TRONIC RECORDS OF THE GOVERNING BODY MUST NOTE:
S. 6930 5 (I) THE TERMS OF THE TRANSACTION THAT WAS APPROVED, AND THE DATE IT WAS APPROVED; (II) THE MEMBERS OF THE GOVERNING BODY WHO WERE PRESENT DURING DEBATE ON THE TRANSACTION THAT WAS APPROVED, AND THOSE WHO VOTED ON IT; (III) THE COMPARABILITY DATA OBTAINED AND RELIED UPON BY THE GOVERNING BODY, AND HOW THE DATA WAS OBTAINED; AND (IV) ANY ACTIONS TAKEN WITH RESPECT TO CONSIDERATION OF THE TRANS ACTION BY ANYONE WHO IS OTHERWISE A MEMBER OF THE GOVERNING BODY BUT WHO HAD A CONFLICT OF INTEREST WITH RESPECT TO THE TRANSACTION. (B) IF THE GOVERNING BODY DETERMINES THAT REASONABLE COMPENSATION FOR A SPECIFIC ARRANGEMENT IS HIGHER OR LOWER THAN THE RANGE OF COMPARABILI TY DATA OBTAINED, THE GOVERNING BODY MUST RECORD THE BASIS FOR ITS DETERMINATION. FOR A DECISION TO BE DOCUMENTED CONCURRENTLY, RECORDS MUST BE PREPARED BEFORE THE LATER OF THE NEXT MEETING OF THE GOVERNING BODY OR SIXTY DAYS AFTER THE FINAL ACTION OR ACTIONS OF THE GOVERNING BODY ARE TAKEN. RECORDS MUST BE REVIEWED AND APPROVED BY THE GOVERNING BODY AS REASONABLE, ACCURATE AND COMPLETE WITHIN A REASONABLE TIME PERI OD THEREAFTER. (4) THE COMPENSATION PROVIDED TO THE EXECUTIVE BY THE GOVERNING BODY DOES NOT EXCEED THE HIGHEST COMPENSATION PROVIDED BY A SIMILARLY SITU ATED ORGANIZATION FOR SIMILAR SERVICES, AS IDENTIFIED IN THE COMPARABIL ITY DATA, BY MORE THAN TEN PERCENT. (E) IF THE FOUR CONDITIONS OF PARAGRAPH (D) OF THIS SECTION ARE SATIS FIED, THEN THE PERSON OR ENTITY BRINGING AN ACTION FOR RELIEF PURSUANT TO SECTION SEVEN HUNDRED TWENTY OF THIS ARTICLE MAY REBUT THE PRESUMP TION THAT ARISES UNDER PARAGRAPH (D) OF THIS SECTION ONLY IF IT DEVELOPS SUFFICIENT CONTRARY EVIDENCE TO REBUT THE PROBATIVE VALUE OF THE COMPAR ABILITY DATA RELIED UPON BY THE GOVERNING BODY. WITH RESPECT TO ANY FIXED PAYMENT, REBUTTAL EVIDENCE IS LIMITED TO EVIDENCE RELATING TO FACTS AND CIRCUMSTANCES EXISTING ON THE DATE THE PARTIES ENTER INTO THE CONTRACT PURSUANT TO WHICH THE PAYMENT IS MADE (EXCEPT IN THE EVENT OF SUBSTANTIAL NONPERFORMANCE). WITH RESPECT TO ALL OTHER PAYMENTS, REBUTTAL EVIDENCE MAY INCLUDE FACTS AND CIRCUMSTANCES UP TO AND INCLUD ING THE DATE OF PAYMENT. (F) A NOT-FOR-PROFIT IS PROHIBITED FROM: (1) ENGAGING IN ANY ACT THAT THE INTERNAL REVENUE SERVICE DETERMINES CONSTITUTES AN "EXCESS BENEFIT TRANSACTION" UNDER SECTION 4958 OF THE INTERNAL REVENUE CODE; OR (2) ENGAGING IN ANY ACT THAT WOULD CONSTITUTE AN "EXCESS BENEFIT TRANS ACTION" UNDER THE STANDARDS OF SECTION 4958 OF THE INTERNAL REVENUE CODE.
S 8. The not-for-profit corporation law is amended by adding a new section 728 to read as follows:
S 728. WRITTEN POLICY REQUIRED. (A) THE GOVERNING BODY OF A NOT-FOR-PROFIT CORPORATION SHALL HAVE A WRITTEN POLICY ON:
(1) EMPLOYEES SERVING ON SUCH GOVERNING BODY, THEIR VOTING RIGHTS, RECUSAL FROM DECISIONS OF THE GOVERNING BODY, AND THE PERCENTAGE OF THE MEMBERSHIP OF THE GOVERNING BODY THAT MUST BE INDEPENDENT OF THE ORGAN IZATION; (2) HIRING OF FAMILY MEMBERS OF EMPLOYEES AND GOVERNING BODY MEMBERS; AND (3) CONFLICT OF INTEREST COVERING BUSINESS INTERESTS. (B) EMPLOYEES OF A NOT-FOR-PROFIT CORPORATION ARE PROHIBITED FROM:
(I) SERVING AS THE CHAIR OF SUCH ORGANIZATION'S GOVERNING BODY; AND (II) SERVING AS A VOTING MEMBER OF SUCH ORGANIZATION'S GOVERNING BODY. S. 6930 6 (C) NO PERSON WHO IS RELATED TO ANY EXECUTIVE AS DEFINED IN SUBPARA GRAPH TWO OF SUBPARAGRAPH (A) OF SECTION 727 (COMPENSATION OF EXECU TIVES) OR ANY MEMBER OF A GOVERNING BODY BY BLOOD OR MARRIAGE SHALL BE EMPLOYED BY SUCH ORGANIZATION, EXCEPT WITH THE APPROVAL OF TWO-THIRDS OF THE MEMBERS OF THE GOVERNING BODY. (D) ALL WRITTEN POLICIES REQUIRED IN PARAGRAPH (A) OF THIS SECTION SHALL BE AVAILABLE FOR REVIEW BY THE ATTORNEY GENERAL UPON REQUEST.
S 9. This act shall take effect on the one hundred eightieth day after it shall have become a law; provided, however, that the commissioners of the offices for people with developmental disabilities, mental health, alcoholism and substance abuse services, children and family services, health, criminal justice services and the director of the office for the aging shall immediately take the necessary actions to ensure that forms and regulations required by section seven of this act are in place on such effective date; and provided, further, whereas the authority to promulgate regulations and make rules is derived from an express or implicit statutory grant provided by the legislature, all agencies, divisions and departments of the state are hereby prohibited from promulgating regulations and making rules pursuant to section 8.38 of title 9 of the official compilation of the New York Codes, Rules and Regulations, or that otherwise address the extent and nature of a provider's administrative costs and executive compensation, except as required and necessary to implement the provisions of section six of this act.