Senate Bill No. 254

(By Senator Bailey)

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[Introduced January 30, 1998; referred to the Committee
on Government Organization.]
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A BILL to amend and reenact sections one, two, four, five, seven, eight, nine and ten, article five-b, chapter thirty-five of the code of West Virginia, one thousand nine hundred thirty- one, as amended; and to further amend said article by adding thereto a new section, designated section nineteen, all relating to including preneed crematory company contracts to regulation pursuant to the provisions of article five-b, chapter thirty-five of the code, which currently solely apply to preneed cemetery company contracts.

Be it enacted by the Legislature of West Virginia:
That sections one, two, four, five, seven, eight, nine and ten, article five-b, chapter thirty-five of the code of West Virginia, one thousand nine hundred thirty-one, as amended, be amended and reenacted; and that said article be further amended by adding thereto a new section, designated section nineteen, all to read as follows:
ARTICLE 5B. PRENEED CEMETERY COMPANY OR PRENEED CREMATORY COMPANY PROPERTY, GOODS AND SERVICES; RELATED CONTRACTS.
§35-5B-1. Definitions.

The following words and phrases as used in this article, unless a different meaning is clearly indicated by the context, have the following meanings:
(1) "Burial vault" means a protective container for a casket which is used to prevent a grave from sinking.
(2) "Cemetery" means and includes all land and appurtenances including roadways, office buildings, outbuildings and other structures used or intended to be used for or in connection with the interment of human remains. The sprinkling of ashes or their burial in a biodegradable container on church grounds or their placement in a columbarium on church property does not constitute the creation of a cemetery.
(3) "Cemetery company," crematory company or "seller" means any person, partnership, firm or corporation engaged in the business of operating a cemetery or crematory or selling property, goods or services used in connection with interring, cremating or disposing of the remains or commemorating the memory of a deceased human being, where delivery of the property or goods or performance of the service may be delayed later than one hundred twenty days after receipt of the initial payment on account of such sale. Such property, goods or services include, but are not limited to, burial vaults, mausoleum crypts, lawn crypts, memorials, marker bases, alternative caskets, cremation interment containers, urns and opening and closing and/or interment services, but do not include graves or incidental additions such as dates, scrolls or other supplementary matter representing not more than ten percent of the total contract price.
(4) "Alternative casket" means a receptacle, other than a casket, in which human remains are transported to a crematory and placed in a creation chamber for cremation.
(5) "Cremation" means the technical process, using heat and flame, that reduces human remains to bone fragments, and shall include the processing, and may include the pulverization, of bone fragments.
(6) "Crematory" means the building or portion of a building that houses the holding facility and the cremation room in which the cremation chamber is located. A crematory must be owned and operated by a West Virginia funeral establishment licensed by the West Virginia board of funeral directors and embalmers; must have been issued a permit to conduct cremations by the West Virginia division of environmental protection; and must meet all environmental requirements imposed upon cremation chambers and the process of cremation by all federal, state and local regulatory agencies having jurisdiction over the construction, installation and operation of the process of cremation of human remains.
(7) "Cremation interment container" means a rigid outer container composed of concrete, steel, fiberglass or similar material in which an urn is placed prior to being entered into the ground.
(4) (8) "Commissioner" or "tax commissioner" means the secretary of the West Virginia department of tax and revenue.
(5) (9) "Compliance agent" means a natural person who owns or is employed by a cemetery company or crematory company to assure the compliance of the cemetery company or crematory company with the provisions of this article.
(10) "Division" means the West Virginia division of environmental protection.
(11) "Funeral director" means a person licensed by the state of West Virginia to practice funeral directing or funeral directing and embalming.
(12) "Funeral establishment" means a building or separate portion of a building licensed by the state of West Virginia, which is devoted to activities relating to the shelter, care, custody and preparation of a deceased human body.
(13) "Urn" means a receptacle designed to encase cremated remains with the deceased's name, date of birth and date of death permanently inscribed thereon.
(6) (14) "Cost requirement" means the total cost to the seller of the property, goods or services subject to the deposit requirements of section four of this article required by that seller's total contracts.
(7) (15) "Delivery" means that the seller has transferred physical possession of the identified goods, has attached or installed such goods at the designated interment space or has actually furnished preneed cemetery company contract services or preneed crematory company contract services. In the case of preneed goods which are identified with the name of the buyer or other contract beneficiary, "delivery" may also occur when: (A) The seller pays for and stores the goods at the cemetery or crematory where they are intended to be used; or (B) the seller has paid the supplier of such goods and the supplier has caused such merchandise to be manufactured and stored, has caused title to such merchandise to be transferred to the buyer or other contract beneficiary and has agreed to ship such merchandise upon his or her request.
(8) (16) "Grave" means a below-ground right of interment.
(9) (17) "Interment" means the disposition of human remains by earth burial, entombment or inurnment.
(10) (18) "Lawn crypt" means a burial receptacle, usually constructed of reinforced concrete, installed underground in quantity on gravel or tile underlay. Each crypt becomes an integral part of the given garden area and is considered real property.
(11) (19) "Marker base" means the visible part of the base or foundation upon which the memorial, marker or monument rests and is considered personal property.
(12) (20) "Mausoleum crypt" means a burial receptacle usually constructed of reinforced concrete and usually constructed or assembled above the ground and is considered real property.
(13) (21)"Memorials, markers or monuments" means the object used to identify the deceased including the base and is considered personal property.
(14) (22) "Opening and closing or interment service" means any service associated with the excavation and filling in of a grave in a manner which will not disturb or invade adjacent grave sites.
(15) (23) "Preneed" means at any time other than either at the time of death or while death is imminent.
(16) (24) "Preneed cemetery company contract" or "preneed crematory contract" means a contract for the sale of real and personal property, goods or services used in connection with interring, cremating or disposing of the remains or commemorating the memory of a deceased human being, where delivery of the property or performance of the service may be delayed for more than one hundred twenty days after the receipt of initial payment on account of such sale. Such property, goods or services include, but are not limited to, burial vaults, mausoleum crypts, lawn crypts, memorials, marker bases, alternative caskets, cremation interment containers, urns and opening and closing and/or interment services, but do not include graves or incidental additions such as dates, scrolls or other supplementary matter representing not more than ten percent of the total contract price.
(17) (25) "Seller's trust account" means the total specific funds deposited from all of a specific seller's contracts, plus income on such funds allotted to that seller.
(18) (26) "Specific trust funds" means funds identified with a certain preneed cemetery company contract or preneed crematory contract for personal property, goods or services.
(19) (27) "Trustee" means any natural person, partnership or corporation, including any bank, trust company, broker-dealer, foreign state charter trust, savings and loan association or credit union which receives money in trust pursuant to any agreement or contract made pursuant to the provisions of this article.
§35-5B-2. Information filing; fees, compliance agent.

On or after the first day of July, one thousand nine hundred ninety-three eight, no person, partnership, firm or corporation may engage in the business of operating a cemetery company or a crematory company in this state without having first paid an annual registration fee established by the tax commissioner in an amount not to exceed four hundred dollars, and filing with the tax commissioner certain information which shall include the name and addresses of all officers, owners and directors of the cemetery company or crematory company and the name of the designated compliance agent. The cemetery company or crematory company shall notify the tax commissioner of any changes in the information required to be filed within ninety days of the date on which the change occurs. A new filing shall also be required if there is a change in the ownership of the cemetery company or crematory company or if there is a change in the name of the compliance agent designated by the cemetery company or crematory company. The cemetery company or crematory company shall pay an additional fee as established by the commissioner in connection with the reporting of such changes, not to exceed one hundred dollars. There is hereby created in the state treasury a special account to be known as the "cemetery and crematory company account" into which all fees collected under this article shall be deposited: Provided, That amounts collected which are found from time to time to exceed funds needed for the purposes set forth in this article may be transferred to other accounts or funds and redesignated for other purposes by appropriation of the Legislature. Funds in this account shall be expended upon appropriation of the Legislature by the secretary of tax and revenue in connection with the administration of this article.
§35-5B-4. Deposit in preneed trust required; who may serve as trustee.

(a) Each cemetery or crematory company shall deposit into an interest bearing trust fund forty percent of the receipts from the sale of property, goods or services purchased pursuant to a preneed cemetery company or preneed crematory contract including sales of opening and closing or interment services, when the delivery thereof will be delayed more than one hundred twenty days from the initial payment on said contract. However, should the proceeds from the sale be financed through a lending institution, it shall be considered a cash sale. Deposits are required to be made by the cemetery or crematory company within thirty days after the close of the month in which said receipts are paid to it.
(b) If payment is made on an installment or deferred payment basis, the seller shall have the option of depositing into the trust fund forty percent of the amount of the principal initially, or alternatively, depositing forty percent of the principal of each payment within thirty days after the close of the month in which said receipts are paid to it.
(c) (1) The trustee of the trust fund shall be appointed by the person owning, operating, or developing a cemetery or crematory company. If the trustee is other than a bank, savings and loan or other federally insured investment banking institution, the trustee shall be approved by the tax commissioner. A trustee that is not a bank, savings and loan or other federally insured investment banking institution shall apply to the tax commissioner for approval, and the tax commissioner shall approve the trustee when satisfied that:
(A) The applicant employs and is directed by persons who are qualified by character, experience, and financial responsibility to care for and invest the funds of others; and
(B) The applicant will perform its duties in a proper and legal manner and the trust funds and interest of the public generally will not be jeopardized.
(2) If the trustee is other than a bank, savings and loan or other federally insured investment banking institution, the trustee shall furnish a fidelity bond with corporate surety thereon, payable to the trust established, in a sum equal to but not less than one hundred percent of the value of the principal of the trust estate at the beginning of each calendar year, which bond shall be deposited with the tax commissioner.
(3) If the trustee is other than a bank, savings and loan or other federally insured investment banking institution, and if it appears that an officer, director or employee of the trustee is dishonest, incompetent or reckless in the management of a trust fund required by the provisions of this article, the tax commissioner may bring an action in the circuit courts of this state to remove the trustee and to impound the property and business of the trustee as may be reasonably necessary to protect the trust funds.
§35-5B-5. Requirements for preneed cemetery or crematory company contracts.

A preneed cemetery company or preneed crematory company contract shall:
(1) Be written in clear understandable language and printed in easy-to-read type, size and style;
(2) Identify the seller, the contract buyer and the person for whom the contract is bought if other than the contract buyer;
(3) Contain a complete description of the property, goods or services bought;
(4) Clearly disclose whether the price of the property, goods or services bought is guaranteed;
(5) Provide that if the particular property, goods and services specified in the contract are unavailable at the time of delivery, the seller shall be required to furnish property, goods and services similar in size and style and at least equal in quality of material and workmanship and that the representative of the deceased has the right to reasonably choose the property, goods or services to be substituted; and
(6) Be executed in duplicate and a signed copy given to the buyer.
§35-5B-7. Corpus of trust account and income to remain in preneed trust account; exception.

The corpus of the trust account shall remain intact until the property or goods are delivered or services performed as specified in the contract: Provided, That the net income from the preneed trust account may be used to pay any appropriate trustee and auditor fees, commissions and costs. The net income from the preneed trust account, after payment of any appropriate trustee and auditor fees, commissions and costs, shall remain in the account and be reinvested and compounded. Any trustee fees, commissions and costs in excess of income shall be paid by the cemetery company and not from the trust. However, the trustee shall, as of the close of the cemetery company's or crematory company's fiscal year, upon the written assurance to the trustee by a certified public accountant employed by the seller, return to the seller any income in the seller's account which, when added to the corpus of the trust account is in excess of the current cost requirements for all undelivered property, goods or services included in the seller's preneed cemetery company or preneed crematory contracts including all outstanding preneed cemetery company or preneed crematory company contracts entered into prior to the first day of July, one thousand nine hundred ninety-three eight. The seller's cost requirements shall be based upon wholesale cost and certified in its records by a sworn affidavit by the compliance agent and shall be determined by the seller as of the close of the cemetery or crematory company's fiscal year.
§35-5B-8. Disbursement of trust funds upon performance of contract; mausoleum construction required.
(a) Upon performance of the preneed cemetery company or preneed crematory company contract, the seller shall certify to the trustee by affidavit the amount of specific funds in the trust, identified with the contract performed, which the trustee shall pay to the seller. The seller may in its records itemize the property, goods or services and the consideration paid or to be paid therefor, to which the deposit requirements of this article apply. In such case the seller may, upon certification to the trustee of performance or delivery of such property, goods or services and of the amount of specific trust funds identified in its records with such items, request disbursement of that portion of the specific funds deposited pursuant to the contract, which the trustee shall pay to the seller.
(b) If the preneed contract provides for two or more persons, the seller may, at its option, designate in its records the consideration paid for each individual in the preneed cemetery company or preneed crematory contract. In such case, upon performance of that portion of the contract identified with a particular individual, the seller may request, by certification in the manner described above, the disbursement of trust funds applicable to that portion of the contract, which the trustee shall pay to the seller.
(c) Any cemetery or crematory company that sells space in an unconstructed mausoleum must commence construction within seven years from the date of the first sale or when eighty percent of the spaces in the original mausoleum plan are sold, whichever occurs first.
§35-5B-9. Seller required to keep records.

Each seller of a preneed cemetery company or preneed crematory contract shall record and keep detailed accounts of all contracts and transactions regarding preneed cemetery company or preneed crematory contracts and the records shall be subject to examination by the tax commissioner.
§35-5B-10. Financial report and written assurance required.

(a) The cemetery or crematory company shall report the following information to the tax commissioner within four months following the close of the cemetery or crematory company's fiscal year:
(1) The total amount of principal in the preneed trust account;
(2) The securities in which the preneed trust account is invested;
(3) The income received from the trust and the source of that income during the preceding fiscal year;
(4) An affidavit executed by the compliance agent that all provisions of this article applicable to the seller relating to preneed trust accounts have been complied with;
(5) The total receipts required to be deposited in the preneed trust account;
(6) All expenditures from the preneed trust account; and
(7) If the trustee is other than a bank, savings and loan or other federally insured investment banking institution, proof, in a manner determined by the tax commissioner, that the fidelity bond required by the provisions of section four of this article has been secured and that it is in effect.
(b) The cemetery or crematory company shall employ an independent certified public accountant who is to audit the account and provide assurance, which assurance shall be forwarded with the report required by subsection (a) of this section, that forty percent of the cash receipts from the sale of preneed property, goods or services which will not be delivered or performed within one hundred twenty days after receipt of the initial payment on account has been deposited in the account within thirty days after the close of the month in which the payment was received.
§35-5B-19. Issuance of crematory permits.
On or after the first day of July, one thousand nine hundred ninety-eight, no person, partnership, firm or corporation may construct, install or operate a crematory or engage in the process or business of cremation without first obtaining a permit for that purpose from the division of environmental protection, which shall be issued only to a funeral establishment employing a funeral director on a full and continuous basis: Provided, That any funeral establishment which on the first day of January, one thousand nine hundred ninety-eight, held a valid crematory permit issued by the division, shall not be required to obtain another such permit from the division. The director may issue such permits in accordance with regulations based upon appropriate air quality requirements. The director may restrict the number of such permits issued by the division based upon population or other relevant factors which may affect the air quality of the area to be served by the applicant for a crematory: Provided, however, That no more than one permit for a crematory may be issued in any county without substantial evidence of the need for additional permits in a county.


NOTE: The purpose of this bill is to include preneed crematory company contracts to regulation pursuant to the provisions of article five-b, chapter thirty-five, which currently solely apply to preneed cemetery company contracts.

Strike-throughs indicate language that would be stricken from the present law, and underscoring indicates new language that would be added.

§35-5B-19 is new; therefore, strike-throughs and underscoring have been omitted.