Regards non-private endowment funds, tax-exempt organizations

As Introduced

136th
General Assembly

Regular
Session
H. B. No. 720

2025-2026

Representative Young

To
amend
sections
117.30, 117.36, and
1715.51
and to enact sections
117.281,

1715.60,
1715.61, 1715.62, 1715.63, 1715.64, 1715.65, 1715.66, 1715.67,
1715.68, 1715.69, 1715.70, and 1715.71 of the Revised Code
to
establish standards for transparency and oversight of non-private
endowment funds and to permit the state to recover public money
provided to tax-exempt organizations that fail to comply with federal
tax regulation and reporting law.

BE
IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF OHIO:

Section
1.
That

sections
117.30, 117.36, and
1715.51
be amended and sections
117.281,

1715.60,
1715.61, 1715.62, 1715.63, 1715.64, 1715.65, 1715.66, 1715.67,
1715.68, 1715.69, 1715.70, and 1715.71 of the Revised Code be enacted
to read as follows:

Sec.
117.281.
(A)
As used in this section:

(1)
"Covered organization" means any organization exempt from
income tax under section 501 of the Internal Revenue Code.

(2)
"Internal Revenue Code" has the same meaning as in section
5747.01 of the Revised Code.

(B)
Where an audit report, accounting, or any other investigation sets
forth that a public office has placed or deposited public money into
a fund or account of a covered organization that has failed to adhere
to any regulation or reporting required by the Internal Revenue Code
or any regulation adopted thereunder, the officer receiving the
report or accounting, the auditor of state, or the auditor of state's
appointee may, within one hundred twenty days after receiving the
report, accounting, or investigation findings, institute a civil
action in the proper court in the name of the public office from
which the public money was received for the recovery of the money or
property and prosecute the action to final determination.

(C)
The auditor of state shall notify the attorney general in writing of
every audit report, accounting, or investigation that sets forth that
any public money has been placed or deposited into a fund or account
of a covered organization that has failed to adhere to any regulation
or reporting required by the Internal Revenue Code or any regulation
adopted thereunder, and of the date that the report was filed or that
the accounting or investigation was completed.

(D)
Within one hundred twenty days after receiving a certified copy of
the audit report, accounting, or investigation findings, the officer,
auditor of state, or the auditor of state's appointee shall notify
the attorney general in writing of whether any legal action has been
taken. If no legal action has been taken, the officer, auditor of
state, or the auditor of state's appointee, within the same period,
shall notify the attorney general in writing of the reason why legal
action has not been taken. The attorney general or the attorney
general's assistant may appear in any action on behalf of the public
office and may, either in conjunction with, or independent of the
officer, auditor of state, or auditor of state's appointee, prosecute
an action to final determination. The attorney general may bring the
action in any case where the officer, auditor of state, or auditor of
state's appointee fails to do so within one hundred twenty days after
the audit report has been filed.

(E)
The provisions of this section apply to public money deposited into a
fund or account of a covered organization on or after the effective
date of this section.

Sec.
117.30.
Where
an audit report made of any office of an officer receiving a report
pursuant to section 117.27 of the Revised Code sets forth that public
money has been illegally expended, or that any public money collected
has not been accounted for, or that any public money due has not been
collected, or that any public property has been converted or
misappropriated,

or where an audit report, accounting, or investigation sets forth
that a public office has placed or deposited public money into a fund
or account of a covered organization that has failed to adhere to any
regulation or reporting required by the Internal Revenue Code, as
defined by section 5747.01 of the Revised Code, or any regulation
adopted thereunder,

a certified copy of the report
,
accounting, or investigation findings

shall be filed with the attorney general. Within one hundred twenty
days after receiving the copy, the attorney general may institute
appropriate legal action in the proper court on behalf of the public
office.

Sec.
117.36.
The
civil actions provided for in this chapter may be entertained, heard,
and determined by any court having jurisdiction of the amount
involved or having jurisdiction to afford the remedy prayed for,
notwithstanding the absence of any other law authorizing such civil
actions to be filed by the governor, the attorney general,
or

the
officer receiving a report pursuant to section 117.27 of the Revised
Code
,
or the auditor of state or the auditor of state's appointee pursuant
to section 117.281 of the Revised Code
.
In any action it is sufficient for the plaintiff to allege in the
petition so much of the factual information contained in the report
of the auditor of state as relates to the claim or action against the
defendant therein and that the amount claimed against the defendant
is unpaid. The plaintiff is not required to state separately and
number in
his
the
plaintiff's

petition any separate causes of action, or the factual findings of
the report, upon whatever claims or circumstances based, since they
are deemed to constitute a single cause of action; nor is
he
the
plaintiff

required to set forth any other or further factual matter relating to

his
the

claim or action. A certified copy of any portion of the report
containing factual information is prima-facie evidence in determining
the truth of the allegations of the petition.

Sec.
1715.51.
As
used in sections 1715.51 to
1715.59

1715.71

of
the Revised Code:

(A)
"Charitable purpose" means any purpose the achievement of
which is beneficial to the community, including the relief of
poverty, the advancement of education or religion, the promotion of
health, and the promotion of a governmental purpose.

(B)
"Institution" means any of the following:

(1)
A person, other than an individual, organized and operated
exclusively for charitable purposes;

(2)
A governmental organization to the extent that it holds funds
exclusively for a charitable purpose;

(3)
A trust that had both charitable and noncharitable interests and the
noncharitable interests have terminated.

(C)
"Institutional fund" means a fund that is held by an
institution exclusively for charitable purposes. "Institutional
fund" does not include any of the following:

(1)

Program
related
Program-related

assets;

(2)
A fund held for an institution by a trustee that is not an
institution;

(3)
A fund in which a beneficiary that is not an institution has an
interest other than an interest that may arise upon a violation of or
the failure of the purposes of the fund.

(D)
"Endowment fund" means an institutional fund or any part
thereof that, under the terms of a gift instrument, is not wholly
expendable by the institution on a current basis. "Endowment
fund" does not include assets that an institution designates as
an endowment fund for its own use.

(E)
"Gift instrument" means a record or records, including an
institutional solicitation, under which property is granted to,
transferred to, or held by an institution as an institutional fund.

(F)

"Non-private
endowment fund" means an endowment fund held by a non-private
institution.

(G)
"Non-private institution" means an institution that is not
a private institution, private college, or private university,
including any institution incorporated under Chapter 1713. of the
Revised Code.

(H)

"Person"
means an individual, corporation, business trust, estate, trust,
partnership, limited liability company, association, joint venture,
public corporation, governmental organization, or any other legal or
commercial entity.

(G)
(I)

"
Program
related
Program-related

asset"
means an asset held by an institution primarily to accomplish a
charitable purpose of the institution and not primarily for
investment.

(H)
(J)

"Record" means information that is inscribed on a tangible
medium or that is stored in an electronic or other medium and is
retrievable in perceivable form.

Sec.
1715.60.
The
donor who establishes a non-private endowment fund may appoint a
representative to oversee the use, management, investment, and
appropriation of that non-private endowment fund.

Sec.
1715.61.
(A)
A non-private institution shall not make any transfer between a
donor-restricted non-private endowment fund and any other fund,
including an institutional fund, unless at least one of the following
applies:

(1)
The gift instrument expressly permits transfers between the
non-private endowment fund and another fund.

(2)
The establishing donor of the non-private endowment fund consents in
a record.

(3)
The gift instrument is modified pursuant to section 1715.55 of the
Revised Code to permit transfers between the endowment fund and
another fund.

(B)
The establishing donor of a non-private endowment fund to a
non-private institution or a representative appointed pursuant to
section 1715.60 of the Revised Code may submit to the charitable law
section of the office of the attorney general a written notice of
concern if the donor or representative has a reasonable belief that
the non-private institution has violated division (A) of this
section.

Sec.
1715.62.
A
non-private institution has discretion over the use of any funds in a
non-private endowment fund that are not donor-restricted, provided
that the non-private institution makes publicly available an
accurate, complete, and clear accounting of the amount of such funds
expended and the purpose for their expenditure.

Sec.
1715.63.
(A)
Beginning on the first day of January following the effective date of
this section, a non-private institution that manages and invests a
donor-restricted non-private endowment fund, the value of which
exceeds five million dollars, shall annually prepare and file with
the office of the attorney general and the non-private institution's
governing board, or equivalent body, a report that contains all of
the following information:

(1)
The market value of the non-private endowment fund;

(2)
The non-private institution's investment asset allocation;

(3)
The non-private institution's spending policy;

(4)
The non-private institution's spending rate with respect to the
non-private endowment fund;

(5)
Annual appropriations to the non-private endowment fund;

(6)
Deficits for the non-private endowment fund;

(7)
Material deviations from donor restrictions;

(8)
Any suspension or override of investment or spending policies.

(B)
The establishing donor of a non-private endowment fund to a
non-private institution or a representative appointed pursuant to
section 1715.60 of the Revised Code may submit to the charitable law
section of the office of the attorney general a written notice of
concern if the donor or representative has a reasonable belief that
the non-private institution is not in compliance with the charitable
purpose or endowment obligations of the non-private endowment fund or
a restriction contained in a gift instrument regarding the use,
management, or investment of the non-private endowment fund.

Sec.
1715.64.
(A)
Beginning on the first day of January following the effective date of
this section, and at least once during each five-year period
thereafter, a non-private institution that manages and invests a
non-private endowment fund shall conduct a sustainability review and
produce a written report with its details, findings, and conclusions.
The sustainability review shall do both of the following:

(1)
Contain all of the same information required for the annual report
under section 1715.63 of the Revised Code;

(2)
Evaluate all of the following:

(a)
Compliance with the non-private institution's fiduciary duties;

(b)
Compliance with the donor's intent;

(c)
Compliance with prudence standards;

(d)
The duration and preservation of the non-private endowment fund;

(e)
The purposes of the institution and the non-private endowment fund;

(f)
General economic conditions;

(g)
The possible effect of inflation or deflation;

(h)
The expected total return from income and the appreciation of
investments;

(i)
Other resources of the non-private institution;

(j)
The investment policy of the non-private institution.

(B)
A non-private institution that manages and invests a non-private
endowment fund shall submit to the attorney general a written summary
of each sustainability review conducted under division (A) of this
section.

(C)
A non-private institution that manages and invests a non-private
endowment fund shall retain and make available to the public the
written report created pursuant to division (A) of this section. The
non-private institution shall redact confidential or personal
identifying information in the publicly available written report.

(D)
The establishing donor of a non-private endowment fund to a
non-private institution or a representative appointed pursuant to
section 1715.60 of the Revised Code may submit to the charitable law
section of the office of the attorney general a written notice of
concern if the donor or representative has a reasonable belief that
the non-private endowment fund is unsustainable based on the
sustainability review produced by the non-private institution.

Sec.
1715.65.
(A)(1)
The appropriate court, upon application of a non-private institution
or the attorney general, shall modify the endowment obligations of a
non-private endowment fund or a restriction contained in a gift
instrument regarding the use, management, or investment of a
non-private endowment fund if the sustainability review conducted
pursuant to section 1715.64 of the Revised Code concludes that the
endowment obligations or restriction are, or will become,
unsustainable under the charitable purpose of the non-private
endowment fund. To the extent practicable, any modification made
under this section shall be done in accordance with the donor's
probable intention.

(2)
The court, upon application of a non-private institution or the
attorney general, may modify the charitable purpose of a non-private
endowment fund if the sustainability review conducted pursuant to
section 1715.64 of the Revised Code concludes that the specific
charitable purpose is, or will become, unsustainable. Any
modification shall be made in a manner consistent with the charitable
purposes expressed in the gift instrument.

(B)
The attorney general is a necessary party to and shall be served with
process in all proceedings pertaining to an application under this
section.

(C)
In making a modification pursuant to division (A) of this section,
the court shall modify the obligations of the non-private endowment
fund, charitable purpose, or restriction contained in the gift
instrument to the least extent necessary to ensure the non-private
endowment fund's sustainability. If a non-private endowment fund
expires upon a given date or upon the occurrence of a specified
condition, any modification shall be made with the purpose of
sustaining the non-private endowment fund only until the occurrence
of that date or condition.

(D)
Nothing in this section requires a court to modify the endowment
obligations of a non-private endowment fund, charitable purpose, or
restriction contained in a gift instrument when the non-private
endowment fund is not perpetual under the terms of the gift
instrument.

Sec.
1715.66.
The
attorney general has sole authority to enforce the provisions of
sections 1715.60 to 1715.71 of the Revised Code.

Sec.
1715.67.
(A)
The attorney general shall review any notice of concern submitted by
a donor or representative appointed under section 1715.61, 1715.63,
or 1715.64 of the Revised Code and conduct an investigation to
determine whether any of the following applies to a non-private
institution or non-private endowment fund identified in the notice of
concern:

(1)
The non-private institution is not in compliance with the charitable
purpose or endowment obligations of the non-private endowment fund or
a restriction contained in a gift instrument regarding the use,
management, or investment of the non-private endowment fund.

(2)
The non-private institution has violated division (A) of section
1715.61 of the Revised Code.

(3)
The non-private endowment fund is unsustainable.

(B)
Upon receipt of a report submitted in accordance with section 1715.63
or 1715.64 of the Revised Code, the attorney general may conduct an
investigation as described in division (A) of this section.

(C)
In any investigation conducted pursuant to this section, the attorney
general may administer oaths, adduce evidence, and request the
production of any book, document, record, or other relevant matter.

Sec.
1715.68.
(A)(1)
The attorney general shall issue a notice of noncompliance to a
non-private institution if the attorney general determines through an
investigation conducted pursuant to section 1715.67 of the Revised
Code that either of the following apply to the non-private
institution:

(a)
The non-private institution is not in compliance with the charitable
purpose or endowment obligations of the non-private endowment fund or
a restriction contained in a gift instrument regarding the use,
management, or investment of the non-private endowment fund.

(b)
The non-private institution has violated division (A) of section
1715.61 of the Revised Code.

(2)
The attorney general shall issue a notice of unsustainability to a
non-private institution if the attorney general determines through an
investigation conducted pursuant to section 1715.67 of the Revised
Code that a non-private endowment fund held by that non-private
institution is unsustainable.

(B)
The attorney general shall clearly explain in a notice issued under
division (A)(1) or (2) of this section the manner in which the
institution is in noncompliance or in which the non-private endowment
fund is unsustainable.

(C)
When a notice of noncompliance is issued, the attorney general shall
require the non-private institution to submit a corrective action
plan to the attorney general. In the notice, the attorney general
shall indicate the form and manner in which the corrective action
plan is to be submitted and clearly specify the date by which the
non-private institution is required to submit the plan. The date that
is specified shall not be less than thirty days after the notice is
sent.

(D)
If a non-private institution has misused or improperly appropriated
any portion of a non-private endowment fund, the attorney general
shall require, as part of the corrective action plan, that the
misused or misappropriated funds be repaid to the non-private
endowment fund.

(E)
A non-private institution that receives a notice of noncompliance
shall submit to the attorney general a corrective action plan in the
form and manner indicated, and by the date specified, in the notice.
In the plan, the non-private institution shall provide a detailed
description of the corrective action the non-private institution will
take to address each instance of noncompliance identified by the
attorney general. The non-private institution shall specify the date
by which it will complete the corrective action. The date that is
specified shall not be more than ninety days after the plan is
submitted.

(F)
A corrective action plan is subject to review and approval by the
attorney general. After the attorney general reviews and approves the
plan, the attorney general shall monitor and evaluate the non-private
institution's compliance with the plan.

(G)
A non-private institution that complies with and completes a
corrective action plan in accordance with this section is not subject
to a civil action under section 1715.69 of the Revised Code regarding
the noncompliance or violation remedied by the corrective action.

(H)
A non-private institution that receives a notice of unsustainability
shall, within ninety days, apply to a court of competent jurisdiction
for a modification of the obligations of the non-private endowment
fund, charitable purpose, or restriction contained in the gift
instrument regarding the use, management, or investment of the
non-private endowment fund in accordance with section 1715.65 of the
Revised Code.

Sec.
1715.69.
If
a non-private institution has not completed a corrective action plan
in accordance with section 1715.68 of the Revised Code within one
hundred twenty days after the attorney general sends a notice under
section 1715.68 of the Revised Code, the attorney general shall file
a complaint in a court of competent jurisdiction seeking any or all
of the following:

(A)
An order requiring the repayment of all misused or misappropriated
funds to the non-private endowment fund;

(B)
Injunctive relief ordering compliance with a non-private endowment
fund's charitable purpose, endowment obligations, or restrictions
contained in the gift instrument;

(C)
Graduated corrective measures, as determined by the court, to
supplement the corrective action plan;

(D)
A temporary injunction limiting discretionary endowment spending;

(E)
Enhanced reporting, as determined by the court;

(F)
Other appropriate relief, as determined by the court.

Sec.
1715.70.
Nothing
in sections 1715.60 to 1715.71 of the Revised Code shall be construed
to create or modify criminal liability under the laws of this state.

Sec.
1715.71.
Sections
1715.60 to 1715.70 of the Revised Code apply only to non-private
endowment funds established on and after the effective date of this
section.

Section
2.
That
existing
sections
117.30, 117.36, and
1715.51
of the Revised Code
are

hereby
repealed.