S T A T E   O F   N E W   Y O R K
________________________________________________________________________

                                 4783--A

                       2013-2014 Regular Sessions

                            I N  S E N A T E

                             April 23, 2013
                               ___________

Introduced  by  Sens.  MARCELLINO, RANZENHOFER -- read twice and ordered
  printed, and when printed to be committed to the Committee on Investi-
  gations and Government Operations -- recommitted to the  Committee  on
  Investigations  and  Government  Operations  in accordance with Senate
  Rule  6,  sec.  8  --  committee  discharged,  bill  amended,  ordered
  reprinted as amended and recommitted to said committee

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  1. 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 (COMPENSATION OF EXECUTIVES).
  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

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD05075-04-4
              

S. 4783--A                          2

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
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. Clauses (A) and (B) of subparagraph 1 of paragraph (a) of section
720  of the not-for-profit corporation law, as amended by chapter 549 of
the laws of 2013, 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  8.  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-

S. 4783--A                          3

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
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:

S. 4783--A                          4

  (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;
  (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  102  (DEFINITIONS); 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.

S. 4783--A                          5

  (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:
  (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 720 (ACTIONS AGAINST DIRECTORS, OFFICERS AND  KEY  EMPLOYEES)
MAY  REBUT  THE  PRESUMPTION  THAT  ARISES  UNDER  PARAGRAPH (D) OF THIS
SECTION ONLY IF IT DEVELOPS SUFFICIENT CONTRARY EVIDENCE  TO  REBUT  THE
PROBATIVE  VALUE  OF THE COMPARABILITY 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 INCLUDING THE DATE OF PAYMENT.
  (F) A NOT-FOR-PROFIT CORPORATION 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 BENE-

S. 4783--A                          6

FIT TRANSACTION" UNDER THE STANDARDS OF SECTION  4958  OF  THE  INTERNAL
REVENUE CODE.
  S  9.  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:
  (1) SERVING AS THE CHAIR OF SUCH ORGANIZATION'S GOVERNING BODY; AND
  (2) SERVING AS A VOTING MEMBER OF SUCH ORGANIZATION'S GOVERNING BODY.
  (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  10.  This  act  shall  take effect on the one hundred eightieth day
after it shall have become a law; provided, however,  that  the  commis-
sioners  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 eight 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; and provided further, that the amendments to clauses  (A)  and
(B)  of  subparagraph  1 of paragraph (a) of section 720 of the not-for-
profit corporation law made by section seven  of  this  act  shall  take
effect  on  the  same  date and in the same manner as chapter 549 of the
laws of 2013, takes effect.