RULES AND REGULATIONS
Title 19--CORPORATIONS AND BUSINESS ASSOCIATIONS
DEPARTMENT OF STATE
[19 PA. CODE CH. 41]
Nonprofit Corporations
[28 Pa.B. 799] The Department of State (Department) amends § 41.4 (relating to stated purposes) by deleting subsection (d) to read as set forth in Annex A. This subsection is being deleted because it does not accurately reflect Commonwealth law.
The first part of subsection (d) provided that a nonprofit corporation may not conduct professional services. Section 5301(a) of the Nonprofit Corporation Law of 1988, 15 Pa.C.S. § 5301(a), provides, in part, however, that a corporation may be incorporated as a nonprofit corporation for any lawful purpose including, but not limited to, a ''professional'' purpose. Accordingly this part of the subsection is overbroad and contrary to statute.
The second part of the subsection provided that only a professional corporation may render professional services. Many licensing acts, however, specifically provide that a business corporation may provide professional services. See 63 P. S. § 34.13(c) (relating to architectural services); 63 P. S. § 153 (relating to engineering services); 63 P. S. § 479.8 (relating to funeral services); 63 P. S. § 244.6(i) (relating to optometry); 63 P. S. § 390-4 (relating to pharmacy services); 63 P. S. § 1202 (relating to the practice of psychology); and 63 P. S. § 455.513 (relating to providing real estate services). Accordingly, this part of the subsection is also overbroad and does not reflect the current state of the law.
Additionally, many other forms of business associations, in addition to professional corporations, are statutorily permitted to provide professional services. These different forms of business associations are set forth in 15 Pa.C.S. (relating to corporations and unincorporated associations) (act) and include: general partnerships under sections 8301--8363 of the act (relating to Uniform Partnership Act); limited partnerships under sections 8501--8594 of the act (relating to Uniform Limited Partnership Act); registered limited liability partnerships under sections 8201--8221 of the act (relating to registered limited liability partnerships); and limited liability companies under sections 8901--8998 of the act (relating to Limited Liability Company Law of 1994). These statutes each permit business associations to render professional services.
The official committee comment to section 8921 of the act (relating to powers and capacity) rendered by the Pennsylvania Bar Association's Title 15 Task Force Committee (Committee) also supports the deletion of § 41.4(d). The Committee concluded that there is no policy reason to differentiate between the various forms of organization authorized by the act for purposes of determining the appropriate form for the conduct of a profession. This condemnation of the regulation is echoed in a commentary to the regulation found in W. Zeiter, Pennsylvania Associations Code and Related Materials. (3rd Edition West Pub. Co. 1992), at p. A-66. Accordingly, subject to a specific limitation in a particular licensing statute on the forms of organization that may be used in that profession, a profession is permitted to be conducted in any of the forms of organization authorized by the act.
Public notice of intention to amend the regulation under the procedures specified in sections 201 and 202 of the act of July 31, 1968 (P. L. 769, No. 240) (45 P. S. §§ 1201 and 1202) (CDL), has been omitted as authorized by section 204(3) of the CDL (45 P. S. § 1204(3)), because the Department finds that these procedures are, under the circumstances, unnecessary. Public comment is unnecessary and under the circumstances impractical because this rulemaking is intended merely to amend a regulation for which there is no statutory basis. Specific statutory provisions of the act permit various business associations to render professional services, and for that reason, § 41.4(d) has never been given effect. The Corporation Bureau (Bureau) has been accepting filings of documents creating associations, other than professional corporations, which provide professional services. Therefore, filers have been given actual notice that the regulation has not been enforced. Accordingly, no substantive rights of any person will be directly affected by this rulemaking.
Compliance With Executive Order 1996-1
The Department reviewed this rulemaking and considered its purpose and likely impact on the public and the regulated population under the directives of Executive Order 1996-1, Regulatory Review and Promulgation. The Department's preliminary proposal to delete the regulation was endorsed by the Committee of the Corporation, Banking and Business Law Section of the Pennsylvania Bar Association at its meeting held on May 14, 1997. Additionally, various agencies of State government, including the Department of Health, the Department of Public Welfare and the Game Commission, have shared their concerns regarding the lack of statutory basis for the subsection. Because § 41.4(d) has no clear statutory basis, the deletion of subsection (d) addresses a compelling public interest as described in this Preamble and otherwise complies with Executive Order 1996-1.
Statutory Authority
The general authority of the Department to amend this regulation is in section 506 of The Administrative Code of 1929 (71 P. S. § 186). Authority is also specifically granted under section 133 of the act (relating to powers of Department of State), which provides that the Department shall have the power and authority reasonably necessary to enable it to administer the act.
Fiscal Impact and Paperwork Requirements
The amendment will have no negative fiscal impact on the Commonwealth or its political subdivisions. The Department will realize a positive impact because it will no longer need to expend resources explaining to the public that § 41.4(d) has no statutory basis and does not accurately reflect the current state of the law. The public will realize a positive fiscal impact from not being confused by a regulation that has no statutory basis and does not reflect the current state of the law.
Regulatory Review
Under section 5.1(c) of the Regulatory Review Act (71 P. S. § 745.5a(c)), on November 26, 1997, the Department submitted a copy of the amendment with proposed rulemaking omitted to the Independent Regulatory Review Commission (IRRC) and to the Chairpersons of the Senate Committee on State Government and House Committee on State Government. On the same date, the amendment was submitted to the Office of Attorney General for review and approval under the Commonwealth Attorneys Act (71 P. S. §§ 732-101--732-506) and other laws.
Under section 5.1(d) of the Regulatory Review Act, the amendment was deemed approved by the Senate Committee and by the House Committee on December 16, 1997. Under section 5.1(e) of the Regulatory Review Act, the amendment was approved by IRRC on January 13, 1998.
Additional Information
Individuals who desire information regarding this amendment are invited to submit inquiries to John T. Henderson, Jr., Deputy Chief Counsel, Department of State, Room 302 North Office Building, Harrisburg, PA 17120, (717) 787-6802.
Findings
The Department finds that:
(1) Public notice of intention to amend the regulation as adopted by this order under the procedure specified in sections 201 and 202 of the CDL, has been omitted under the authority contained in section 204(3) of the CDL, because the Department has, for good cause, found that the procedures specified in sections 201 and 202 of the CDL, are in this circumstance unnecessary. The regulation is overbroad, has no statutory basis and is contrary to other statutory provisions.
(2) Persons affected by this amendment have been or will be given actual notice of the Department's intention to amend the regulation under section 204(2) of the CDL.
(3) The adoption of the amendment in the manner provided in this order is necessary and appropriate for the administration by the Department of the act and related statutes.
Order
The Department, acting under its statutory authority, orders that:
(a) The regulations of the Department, 49 Pa. Code Chapter 41, are amended by amending § 41.4 to read as set forth in Annex A.
(b) The Department shall submit this order and Annex A to the Office of General Counsel and the Office of Attorney General for approval as to legality as required by law.
(c) The Department shall certify this order and Annex A and deposit them with the Legislative Reference Bureau as required by law.
(d) This order shall become effective immediately upon publication in the Pennsylvania Bulletin.
YVETTE KANE,
Secretary of the Commonwealth(Editor's Note: For the text of the order of the Independent Regulatory Review Commission relating to this document, see 28 Pa.B. 588 (January 31, 1998).)
Fiscal Note: 16-16. No fiscal impact; (8) recommends adoption.
Annex A
TITLE 19. CORPORATIONS AND BUSINESS ASSOCIATIONS
PART I. DEPARTMENT OF STATE
Subpart B. CORPORATION BUREAU
ARTICLE II. DOMESTIC CORPORATION MATTERS
CHAPTER 41. NONPROFIT CORPORATIONS GENERALLY
Subchapter A. INCORPORATION § 41.4. Stated purposes.
(a) Section 5301 of the code (relating to purposes) provides that a nonprofit corporation may be incorporated for a lawful purpose including one or more of the following or similar purposes:
(1) Athletic.
(2) A lawful business purpose to be conducted on a not-for-profit basis.
(3) Beneficial.
(4) Benevolent.
(5) Cemetery.
(6) Charitable.
(7) Civic.
(8) Control of fire.
(9) Cultural.
(10) Educational.
(11) Encouragement of agriculture or horticulture.
(12) Fraternal.
(13) Health.
(14) Literary.
(15) Missionary.
(16) Musical.
(17) Mutual improvement.
(18) Patriotic.
(19) Political.
(20) Prevention of cruelty to persons or animals.
(21) Professional, commercial, industrial, trade, service or business associations.
(22) Promotion of the arts.
(23) Protection of natural resources.
(24) Religious.
(25) Research.
(26) Scientific.
(27) Social.
(b) The stated purposes of a nonprofit corporation may not consist of solely a statement to the effect that its corporate purpose is to engage in all lawful business for which corporations may be incorporated under 15 Pa.C.S. Subpart A (relating to nonprofit corporations). Compare with 15 Pa.C.S. § 1301 (relating to purposes).
(c) Under section 5108 of the code (relating to limitation on incorporation), a corporation which might be incorporated under the code may not be incorporated under another statute. Accordingly, domestic corporations not-for-profit shall be incorporated under the code, except:
(1) Electric cooperative corporations, which are incorporated under Chapter 73 of the code (relating to the Electric Cooperative Law of 1990).
(2) Fraternal benefit societies, which continue to be incorporated under the Fraternal Benefit Society Code (40 P. S. §§ 1141-101--1141-1001).
[Pa.B. Doc. No. 98-251. Filed for public inspection February 13, 1998, 9:00 a.m.]
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