The Health Care Workforce Recruitment and Retention Act passed by the New York State Legislature in January 2002 created the New York Charitable Asset Foundation (now renamed the New York Health Foundation). The relevant part of the Act amended the Insurance Law of the State of New York §7317(k) as follows:
(k) (1) A charitable organization shall be established for the purpose of receiving the charitable asset and shall operate as a tax exempt organization pursuant to section 501(c)(3) of the federal internal revenue code for the purposes of receiving the charitable asset. Whether or not the charitable organization is classified as a private foundation under section 509 of the internal revenue code, as amended or any comparable provision of any successor law, it shall be subject to the restrictions and limitations that apply to private foundations in sections 4941 through 4945 of the federal internal revenue code, as amended or any comparable provision of any successor law. The superintendent shall provide in an opinion and decision approving the conversion for the timely transfer of the charitable asset consistent with the purposes of this chapter.
(2) The charitable organization shall be governed by a board of directors composed of nine members, three of whom shall be voting members and six of whom shall be non-voting members, which shall be appointed as follows: one voting member and two non-voting members shall be appointed by each of the governor, the temporary president of the senate, and the speaker of the assembly. Each member shall have a term of three years and may be reappointed at the end of said term by the same person that made the original appointment. A vacancy in the membership of the board shall be filled for the unexpired portion of the term provided for by the original appointment by the same person that made the original appointment. Members may not be officers or employees of the state or any municipal subdivision thereof. The board of such charitable organization shall be broadly representative of the community and include representatives of patient, consumer and public interest organizations and individuals with expertise in public health, health care delivery and financing, patient health issues, investments and philanthropic administration, provided further, no more than three board members of the entire board shall be representatives from any one organization or provider group and board vacancies shall be filled from eligible representatives who are not represented or who are under represented on the board. The charitable organization’s structure shall provide mechanisms for ongoing community consultation and engagement including, but not limited to, the establishment of a community advisory board.
(3) The mission of such charitable organization shall include: (A) expansion of access to health care by extending health insurance coverage to state residents who cannot afford to purchase their own coverage or who have coverage that is inadequate to meet their needs; (B) expansion and enhancement of access to health care by augmenting and creating health care programs that deliver services to populations that are unable to access health care or that improve public health; and (C) augmentation of its other program priorities by supporting programs that inform and educate New Yorkers about public health issues and empower communities to address these issues by becoming more effective at identifying and articulating health care needs and implementing solutions. Programs or initiatives instituted by the charitable organization shall not neglect the residents or institutions served by the applicant prior to the conversion.
(4) The members of the board of directors of the charitable organization shall serve without compensation for their services as members, but shall be entitled to reimbursement for actual and necessary expenses incurred in the performance of their official duties. Such members, except as otherwise provided by law, may engage in private employment, or in a profession or business.
(5) The members of the board of directors of the charitable organization and its corporate existence shall continue until there are no longer any assets or moneys comprising the charitable asset available for distribution.
(6) The affirmative vote of all three voting members of the board of directors of the charitable organization shall be necessary for the transaction of any business or the exercise of any power or function of such board. Such board may delegate to one or more of its members, or its agents, such powers and duties as it may deem proper.
(7) The members of the board of directors of the charitable organization shall have the power to make and execute contracts and all other instruments, and to exercise such other powers, necessary or convenient for the exercise of its powers and functions. In directing investments pursuant to this subparagraph, the board of directors of the charitable organization shall not be limited by any restrictions on investments contained in any other section of law, subject only to the board’s obligations and the considerations set forth above.
(8) (A) Neither the members of the board of directors of the charitable organization nor any agent or other person or persons acting on its behalf, while acting within the scope of their authority as members or agents of the board, shall be subject to any personal liability resulting from the carrying out of the powers conferred hereunder; and (B) the provisions of section seventeen of the public officers law shall apply to members of the board and agents or other persons acting on its behalf, in connection with any and all claims, demands, suits, actions or proceedings which may be made or brought against any of them arising out of any determination made or actions taken or omitted to be taken in compliance with any obligations under or pursuant to the terms of this section or section four thousand three hundred one of this chapter. The provisions of this subparagraph shall be severable from and shall survive any legal challenge to the legality, validity, or constitutionality of this section.
(9) The charitable organization receiving the charitable asset agrees in writing to register and file annual financial reports with the attorney general in compliance with section 8-1.4 of the estates, powers, and trusts law and to post its registration filing and annual reports electronically on the internet.
(10) The charitable organization receiving the charitable asset, its directors, officers, and staff shall be and will remain independent of any control or influence by the surviving corporation or other surviving entity organized for pecuniary profit and its affiliates and successors. Such requirement shall not prevent the charitable organization from voting its equity shares in the for-profit organization in accordance with the voting and shareholders rights agreement entered into by the board with respect to the public asset and the charitable organization shall be subject to such voting and shareholders rights agreement and the asset preservation agreement between the board with respect to the public asset and the converted corporation. No person who is an officer, director, or staff member of the applicant at the time such corporation applies to the superintendent for permission to convert, or thereafter shall be an officer, director, or staff member of the charitable organization receiving the charitable asset. No director, officer, agent, or employee of the applicant or the charitable organization receiving the charitable asset will receive additional compensation arising from the conversion transaction.
(11) The charitable organization receiving the charitable asset will establish formal mechanisms to avoid conflicts of interest and to prohibit grants benefitting the surviving corporation or other surviving entity organized for pecuniary profit, or its affiliates or successors, directors, management, and staff.
(12) Any action or proceeding in which any question arises as to the validity of any provision in this subsection or in section seven thousand three hundred seventeen of this chapter, shall be preferred over all other civil causes except election causes in all courts of the state of New York and shall be heard and determined in preference to all other civil business pending therein except election causes, irrespective of position on the calendar. The same preference shall be granted upon application of counsel to the board in any action or proceeding questioning the validity of any provision herein in which he or she may be allowed to intervene.
(13) To assist in carrying out its functions, the board shall be authorized to hire independent financial, legal and other experts and consultants.
(14) Inconsistent provisions of other laws are superseded. Insofar as any provision herein is inconsistent with the provisions of any other law, general, special or local, the provisions herein shall be controlling.
(15) This section, being necessary for the welfare of the state and its inhabitants, shall be liberally construed so as to effectuate its purposes. (l) For the purposes of this section, fair market value shall consist of either; (i) one hundred percent of the stock that is transferred, provided that a portion of the shares may be sold in an initial public offering and that the net proceeds shall be transferred, together with the remaining unsold shares, (provided further that additional stock may be sold for fair market value that is transferred to the converted corporation), or (ii) in the case where one hundred percent of the stock is not transferred and a public stock offering is not anticipated, an independent valuation that takes into account market value, investment or earnings value and not asset value. Within five days of the superintendent’s final determination of the fair market value, the superintendent shall forward to the attorney general such independent valuation. The attorney general may, within thirty days after having received such valuation, provide the superintendent with written objections to such valuation. The superintendent shall respond to such written objections within seven days stating either that the superintendent accepts such objections and has modified his or her determination accordingly, or that the superintendent rejects such objections. The attorney general may, thereafter, pursue an action in supreme court seeking to have the valuation adjusted in accordance with the attorney general’s objections. Such action shall be preferred over all other civil causes except election causes in all courts of the state of New York and shall be heard and determined in preference to all other civil business pending therein except election causes, irrespective of position on the calendar.