Montana Code 50-4-720. Distribution of proceeds — annual report
50-4-720. Distribution of proceeds — annual report. (1) Except as provided in subsection (5), the proceeds of a conversion transaction that are public assets must be distributed to an existing or new foundation or other nonprofit organization to be held in a trust that meets the following requirements:
Terms Used In Montana Code 50-4-720
- Assets: (1) The property comprising the estate of a deceased person, or (2) the property in a trust account.
- Commissioner: means the Montana state auditor and ex officio commissioner of insurance provided for in 2-15-1903. See Montana Code 50-4-701
- conversion transaction: means the sale, transfer, lease, exchange, transfer by exercise of an option, optioning, conveyance, merger, affiliation, mutualization, joint venture, or other disposition by a nonprofit health entity or another person or entity resulting in the transfer of control or governance to a person or entity other than the nonprofit health entity of the lesser of:
(i)more than 10% in fair market value of the assets or operations of a nonprofit health entity; or
(ii)assets of a nonprofit health entity amounting to a fair market value of $5 million or more. See Montana Code 50-4-701
- Corporation: A legal entity owned by the holders of shares of stock that have been issued, and that can own, receive, and transfer property, and carry on business in its own name.
- Nonprofit health entity: means :
(i)a nonprofit health maintenance organization; or
(ii)a nonprofit health service corporation. See Montana Code 50-4-701
- Oversight: Committee review of the activities of a Federal agency or program.
- Person: includes a corporation or other entity as well as a natural person. See Montana Code 1-1-201
- Public assets: include :
(a)assets held for the benefit of the public or the community;
(b)assets in which the public has an ownership interest;
(c)assets owned by a governmental entity; and
(d)assets owned by a nonprofit corporation to the extent that the corporation holds assets in a charitable trust. See Montana Code 50-4-701
(a)The foundation or nonprofit organization shall operate pursuant to 26 U.S.C. § 501(c)(3) or 501(c)(4), and regardless of whether the foundation is classified as a private foundation under 26 U.S.C. § 509, the foundation or nonprofit organization shall operate in accordance with the restrictions and limitations that apply to private foundations in 26 U.S.C. § 4941 through 4945.
(b)The foundation or nonprofit organization must have a mission statement that is as close as possible to the mission of the converting nonprofit health entity.
(c)The foundation or nonprofit organization’s assets may not be used to supplant government funds.
(d)The foundation or nonprofit organization may not be an agent or instrumentality of the government.
(e)The foundation or nonprofit organization and its directors, officers, and staff must be and shall remain independent of the parties to the conversion transaction and their affiliates. A person who is an officer, director, or staff member of a nonprofit health entity submitting a conversion plan at the time that the plan is submitted or at the time of the conversion transaction or within 5 years after the conversion may not be an officer, director, or staff member of the foundation. A director, officer, agent, or employee of the nonprofit health entity submitting the plan or the foundation receiving the charitable assets may not benefit directly or indirectly from the transaction. Public officials, elected or appointed, may not serve as an officer, director, or staff member of the foundation or nonprofit organization.
(f)A foundation or nonprofit organization must have or shall establish formal mechanisms to avoid conflicts of interest and to prohibit grants benefiting:
(i)any party to the conversion transaction or members of the board of directors and management of a party to the conversion transaction; or
(ii)the foundation or nonprofit organization’s board of trustees, directors, agents, or employees.
(g)Boards of trustees or directors of the foundation or nonprofit organization shall reflect the geographic, ethnic, gender, age, socioeconomic, and other factors that the board considers to represent the diversity of the nonprofit health entity applicant’s service area. In addition, trustees or directors must have the following qualifications and qualities:
(i)interest in and concern for the foundation or nonprofit organization and its mission;
(ii)objectivity and impartiality;
(iii)willingness and ability to commit time and thought to the foundation or nonprofit organization’s affairs; and
(iv)commitment to the foundation or nonprofit organization as a whole and not to a special interest.
(h)Boards of trustees or directors must include persons with special knowledge, expertise, and skills in investments and asset management, finance, and nonprofit administration.
(2)A foundation or nonprofit organization that receives a distribution of public assets shall submit an annual report to the commissioner and to the attorney general regarding the award of grants and other charitable activities of the entity related to its use of the public assets received.
(3)The annual report submitted under subsection (2) must be made available to the public at the principal office of the foundation or nonprofit organization.
(4)The attorney general shall retain oversight and monitoring authority over the foundation or nonprofit organization that receives the proceeds of a proposed conversion transaction.
(5)Notwithstanding any other provision of this section, the proceeds of a conversion transaction that are public assets of a nonprofit mutual benefit corporation in which all of the members are nonprofit public benefit corporations may be distributed to the member nonprofit public benefit corporations if the articles of incorporation of the nonprofit mutual benefit corporation provide for that distribution.