Tax-Exempt Organizations and Political Activity
As the 2024 election nears, now is a good time for your tax-exempt organization to review the rules and regulations regarding political activity.
A 501(c)(3) tax-exempt organization can engage in limited amounts of political activity so long as it remains nonpartisan, and it may also engage in legislative lobbying provided it is not a substantial amount of activity. These limitations also extend to grantee organizations that receive grant money from a 501(c)(3) organization, including 501(c)(4) organizations and fiscal sponsors.
501(c)(3) Grants and Fiscal Sponsors
When a 501(c)(3) makes grants or fiscally sponsors another organization, the funds dispersed are restricted for use to exclusively engage in the specific charitable, education, or other permissible activities under Section 501(c)(3) of the Internal Revenue Code (the “Code”.) Once the 501(c)(3) disburses any funds, it must receive reports or other documentation showing that this requirement has been honored so it does not jeopardize its tax-exempt status.
Political Activity
Under section 501(c)(3) of the Code, a tax-exempt organization must NOT participate in or intervene in any political campaign on behalf of (or in opposition to) a candidate for public office, nor publishing or distributing statements of the kind. A 501(c)(3) organization may, however, take positions on public policy issues, which include issues that divide candidates, so long as the organization avoids any advocacy issues that function as a political campaign intervention. Any “political” agitation either director or indirect is enough to revoke an organization’s tax-exempt status because that would cause the organization’s activity to fall outside it’s exclusively charitable purposes.
It is important that a 501(c)(3) organization take extra caution in their communication because even if a statement does not expressly tell an audience to vote for or against a specific candidate, a tax-exempt organization delivering the statement is at risk of violating political campaign intervention prohibited activity if there is any message factoring a candidate.
A 501(c)(3) organization can participate in specific voter education political activity so long as it remains neutral and nonpartisan.
If an organization posts something on its website that favors or opposes a candid for public office, the organization will be treated the same as if it is distributing printed materials or oral statements. A tax-exempt organization is responsible for the links that are on its website. When an organization establishes a link to another website, the organization is responsible for the consequences of establishing and maintaining that link, even if that organization does not have control over the content of the linked site. Be mindful of any links on your website that may may lead to prohibited political activity.
Lobbying Activity
A 501(c)(3) may engage in lobbying, which includes carrying out propaganda or otherwise attempting to influence legislation, so long as it does not constitute a substantial amount of the organization’s activity. Despite this limitation, the following activities are allowed and not counted toward the organization’s lobbying limits:
- making available the results of a nonpartisan analysis,
- providing technical advice or assistance to a governmental body, appearances before, or communication to a legislative body with respect to a possible decision which might affect the existence of the organization,
- communication between tax-exempt organization and its bona fide members with respect to legislation or proposed legislation, and
- any communication with a government official or employees other than the attempt to influence legislation.
There are two types of lobbying recognized by the law: direct lobbying and grassroots lobbying. Direct lobbying is an attempt to influence legislation by communicating directly with government officials, and grassroots lobbying is an attempt to influence legislation by communicating with the general public. If an organization engages in grassroots lobbying, it is limited to twenty-five percent (25%) of the organization’s total lobbying allowance.
Learn How an Experienced Attorney Can Assist with Any Questions Regarding Political Activity or Lobbying for a Tax-Exempt Organization
Ensuring that your organization is complying with the rules and regulations regarding political activity or lobbying is essential to maintaining its tax-exempt status. Even if it’s not an election year, a tax-exempt organization must still adhere to the rules and restrictions. At Abelaj Law, PC, we are committed to assisting tax-exempt organizations with all of their legal needs so they can focus on achieving their mission and purpose. Contact our experienced legal team today at 212-328-9568 to learn more.
Protecting Non-Profit Volunteers From Liability
Many nonprofit organizations rely on volunteers to accomplish their goals and serve their causes. Just like workplaces with paid employees, nonprofits that use volunteers need to be aware of potential liabilities related to these activities. Fortunately, the federal Volunteer Protection Act of 1997 protects volunteers from liability in many situations, and several states have their own volunteer liability protection laws. However, volunteer liability is a complicated legal concept, and there are some circumstances in which a volunteer can be held liable for injuries or property damage. To learn more about protecting nonprofit volunteers from liability, and to ensure that your nonprofit organization is legally protected, contact the nonprofit lawyers of the Jennifer V. Abelaj Law Firm at 212-328-9568.
Understanding the Volunteer Protection Act
In 1997, the United States Congress passed the Volunteer Protection Act in an effort to promote volunteerism. This law protects nonprofit volunteers from civil liability for injuries or property damage as long as the volunteer:
- Was acting within the scope of their volunteer duties;
- Had proper licensing, if needed;
- Did not cause injuries or damage due to gross negligence, willful misconduct, recklessness, or a conscious disregard for the safety of the person injured;
- Was not using a motor vehicle, aircraft, or any other vehicle when the injuries or damage happened
Although state volunteer protection laws vary, this federal law uniformly protects nonprofit volunteers in all 50 states. However, the VPA does not protect the nonprofit organization from liability, only individual volunteers. Nonprofit organizations can still be held liable for negligence by their volunteers. Additionally, nonprofit volunteers can sue an organization they volunteered for if they suffered an injury due to the organization’s negligence.
New York Courts and Nonprofit Volunteer Liability
The New York State Supreme Court recently dismissed a negligence claim filed against a nonprofit volunteer, ruling that the defendant was statutorily immune from liability according to the federal Volunteer Protection Act. In Jeraci v. Cooper, the plaintiff and defendant were both members of the Sullivan County ATV Association, which is a 501(c)(3) nonprofit that raises charity funds through all-terrain vehicle rallies. The plaintiff sued the defendant, the ATV Association, and other parties for personal injuries he sustained during trail maintenance before an event.
In this example of the VPA in action, the plaintiff suffered an injury when his saw got stuck in a tree and the defendant used an excavator on the tree trunk, causing it to move suddenly and break the plaintiff’s leg. The defendant and his legal team filed a motion to dismiss the complaint, which was opposed by the plaintiff’s legal team. However, the court sided with the defense and dismissed the claim based on the protections guaranteed by the VPA.
How Can Nonprofits Minimize Volunteer Liability Risks?
While federal law protects nonprofit volunteers from liability in most situations, nonprofit organizations also have a responsibility to do what they can to reduce the risk of potential liability for both the organization and its volunteers. You can learn about minimizing nonprofit liability risks and protecting nonprofit volunteers from liability by contacting the experienced nonprofit lawyers of the Jennifer V. Abelaj Law Firm.
Some general best practices that can help minimize liability risk include:
- Use reasonable care when deciding whether to accept or reject volunteer applicants, including a screening process to identify risky volunteers.
- Properly train volunteers and provide professional guidance.
- Write and distribute a volunteer handbook with instructions for reporting and resolving any issues that arise.
- Have rules for the supervision of volunteers.
- Terminate volunteer agreements when the volunteer shows that they are unable to safely perform their duties.
- The nonprofit board members should be familiar with state and federal volunteer liability laws and situations in which a volunteer could be exempt from liability.
- Make sure that insurance policies adequately cover the potential liability risks for volunteers.
What Happens When a Nonprofit Volunteer is Sued?
If a nonprofit volunteer causes injuries or other losses due to negligence or another circumstance not covered by the Volunteer Protection Act, they could face liability. For example, imagine that a volunteer is on the way to conduct an errand for a nonprofit and causes a car accident, which injures the other driver. This incident would not be covered by the VPA because the injury involved a motor vehicle. Thus, the other driver would have the option to seek financial compensation by filing an insurance claim. In some cases, the injured person may have grounds to file a personal injury lawsuit for damages beyond the volunteer’s insurance coverage.
Lawsuits Against Nonprofits for Volunteer Negligence
If someone is injured in an incident involving a nonprofit volunteer but is unable to seek damages from the volunteer directly, they may consider filing a lawsuit against the nonprofit organization itself. While tort lawsuits against nonprofits are relatively rare, they can be extremely costly if the court awards a judgment to the party filing the lawsuit, or if the nonprofit needs to offer a settlement based on the facts of the case.
Nonprofit leaders should take preventative measures to minimize the risk of injuries and subsequent lawsuits. Board members should regularly evaluate the organization for potential risks and make specific plans for minimizing those risks. A well-managed organization with strong safety and supervision guidelines can drastically limit the organization’s risk of facing liability for preventable injuries.
Learn More From Our Nonprofit Lawyers
Liability is one of several important legal considerations for nonprofit organizations. Nonprofit leaders must account for their liability risks and take all appropriate measures to reduce these risks as much as possible. However, identifying these risks and crafting effective solutions can be a difficult process. This is why many nonprofit organizations enlist the help of experienced nonprofit lawyers who understand how to evaluate risks and take action to minimize these risks.
At the Jennifer V. Abelaj Law Firm, our team of veteran nonprofit lawyers has experience helping nonprofits limit their liability risks, respond to lawsuits for alleged negligence, and handle all other legal matters related to running a nonprofit. If you have questions related to protecting nonprofit volunteers from liability, you can learn more by contacting the Jennifer V. Abelaj Law Firm today at 212-328-9568.
Trademarks And Non-Profit Organizations
It is becoming necessary for non-profits to compete for funding and donations. Name recognition is more important than ever. For that reason, non-profit organizations must protect their name and brand. Federal trademarking provides protection and is a great way to spread awareness. Incorporating and registering as tax-exempt from the Internal Revenue Service provides some protections. However, a federal trademark is still vital to protect the intellectual property of a non-profit organization. Registering a trademark on a non-profit organization’s brand will add safeguarding and value to the business. If you ever decide to merge, expand, or sell the company, the organization’s value will also be higher than those without a trademark. A trademark will provide you with legal benefits and branding rights you otherwise will not have. If you have questions about trademarks and non-profit organizations or would like to begin the process, call a knowledgeable attorney at Jennifer V. Abelaj Law Firm at 212-328-9568.
Requirements for Registering a Trademark with the Federal Government
According to the Legal Information Institute, a trademark identifies the seller or maker of goods or products. It may be a symbol, design, name, sound, fragrance, or any combination the business uses to promote or identify itself. There are two significant requirements for trademark registration.
The company must use the trademark for commerce purposes, and the mark must be unique. While the use of a logo provides some protections on its own, there are limitations. Thus, registered trademarks receive significant advantages over those without legal ownership. A knowledgeable lawyer at Jennifer V. Abelaj Law Firm could answer questions and provide more information on trademarks and non-profit organizations.
The Legal Benefits of a Federal Trademark for Non-profits
Trademark rights are automatic when the business uses a symbol to represent the brand. Yet, the laws limit those rights to the company’s region. Federal trademark registration provides a higher level of protection and protects the non-profit’s intellectual property. Filing will also ensure they do not infringe on the rights of others. Some of the other legal benefits of federal trademark registration are detailed below.
Nationwide Protection
The business acquires some automatic rights in the state where they operate. It happens after simply using the trademark. Yet, federal registration is nationwide. Federal law protects the non-profit mark in all 50 states. It provides protection even when the company only does business within one state.
Federal Court Protection
If another business uses a registered trademark, the non-profit business owners will have legal rights. They can take them to federal court, and the judge will immediately order the infringing business to stop using the symbol. The court may also hold the infringing company accountable and allow the non-profit to collect damages.
Public Awareness
Registering the trademark will mean notification to the public. People will know that the brand represents a specific non-profit organization. They can quickly identify and distinguish it from other non-profit organizations.
Evidence of Ownership
The organization will receive proof of registration. After completing the process, they will receive a federal trademark registration certificate showing ownership.
The United States Patent and Trademark Office‘s Online Database
Upon the USPTO’s approval and registration of the trademark, they will list it on the online database. The website will offer trademark owners more benefits.
Benefits of the Trademark Database
After listing a non-profit on the website, businesses can access the online data. Searches are a vital first step in the registration of any new trademark. They can review current registrations and those already in process. Searching will ensure they do not go through the filing process for a symbol that is in use or too similar for approval. Some other benefits of listing a registered trademark in the database include:
- Potential trademark owners will see that the non-profit organization’s brand is already in use.
- The non-profit can search for the misuse of a trademark by other entities.
- Organizations can conduct searches before making business decisions. Searches can help them decide on significant financial transactions, expansion, or mergers.
The trademark database provides a more manageable process and helps with monitoring after completion.
More Benefits of Federal Trademark Registration
When thinking of a trademark, most think of for-profit businesses. Yet, they are also critical for the future success of non-profit companies. A popular or known brand will help identify new ways to generate revenue. That will allow the business to continue investing time and resources into essential work. It will ensure a positive future for the company’s mission and the reason for the operation. Federal registration will provide many other perks for the non-profit organization. Some benefits include:
- Registering the trademark will mean countrywide brand awareness.
- The non-profit controls the name and logo licensing for marketing and fundraising purposes.
- The trademark is an asset and will add value to the non-profit corporation.
- More brand awareness gives a higher potential to expand the entity in the future.
- There is a more straightforward process for international trademarking rights after federal registration.
- The non-profit business has legal rights to use the registered trademark symbol.
Trademarks are critical for non-profit organizations for many reasons. After registration, the law considers the non-profit business’s trademark as intellectual property. Potential sponsors may be more likely to make donations or support the charity. Most are more likely to give to a charity or cause to organizations they are familiar with and recognize.
Call an Experienced Attorney About Trademarking a Non-Profit Business Today
For non-profit organizations, reputation and promotion are of the utmost importance. By registering your trademark, you would increase brand awareness while promoting public awareness. Federal registration of the business’s trademark is imperative for long-term goals and success. The law does not require that companies operating within the United States retain a lawyer for the trademark application process, however, the United States Patent Trademark Office encourages it. An attorney experienced with trademark law can help you through the complex process. They could ensure no avoidable delays or potentially losing rights to the trademark. To hear more about trademarks and non-profit organizations, call a seasoned lawyer at Jennifer V. Abelaj Law Firm. You can reach them at 212-328-9568.
Non-Profit Directors Vs. Officers
When working with non-profits, a question often arises about the difference between non-profit directors vs. officers. Both directors and officers have their distinct roles within a non-profit organization. According to a report by the Office of the New York State Comptroller, New York accounted for the second-highest number of non-profit organizations in the United States. As of 2019, the number of non-profits in New York was over 33,700. Often, the smooth and efficient operation of a non-profit organization depends on both directors and officers. However, it is important to understand the difference between the two roles because each has its distinct duties and responsibilities. At Jennifer V. Abelaj Law Firm, we assist non-profit organizations with various legal needs. Whether you need help setting up a non-profit organization or counsel for your existing organization, consider calling 212-328-9568 to schedule a consultation.
Who Are Non-Profit Directors?
The board of directors is the governing body of the non-profit organization. Non-profit directors make high-level decisions that affect the organization and focus on its accountability. The primary duty of directors is the financial management of the non-profit organization. Key decisions that non-profit directors make include but are not limited to:
- Determining the organization’s mission
- Approving the organization’s annual budget
- Providing proper financial oversight
- Ensuring legal and ethical integrity
- Establishing governance policies
- Interviewing and electing officers and other managerial positions
- Maintaining the organization’s accountability
The non-profit organization’s bylaws usually govern how and when the board of directors will vote on issues affecting the organization. New members can join the board of directors if a designated individual or entity appoints them or the board of directors elects them. A non-profit director cannot make any key decisions on behalf of the non-profit organization unless the board votes on the issue or he or she has permission from the board.
Who Are Non-Profit Officers?
The board of directors can interview and elect non-profit officers. The primary duty of non-profit officers is to run the organization’s day-to-day operations within the limits of the authority that was delegated by the non-profit directors. Usually, the organization’s bylaws will indicate whether or not the elected officer must be a member of the board of directors. The most common positions for non-profit officers are secretary, president, and treasurer. However, the organization may also require officers to serve in the capacity of:
- Executive Director (Chief Executive Officer)
- Chief Financial Officer
- Chief Operating Officer
The duties and responsibilities of these non-profit officers include recruiting and retaining, paying the organization’s bills, keeping records, and more.
What Is the Difference Between Non-Profit Directors vs. Officers?
Unlike non-profit officers, directors do not run the day-to-day operations of the organization. The duties and responsibilities of non-profit directors include delegating authorities related to the management of the organization to non-profit officers. The main comparison of non-profit directors vs. officers is that directors control and monitor the day-to-date operations of the non-profit organization while officers are the ones who run the daily operations in a way that aligns with the vision and mission of the organization. The success of the non-profit organization depends on the good management and leadership skills of directors and the officers’ ability to fulfill key objectives when running the day-to-day operations. Without non-profit officers, directors would have to hold meetings and vote on every daily decision that must be made on behalf of the organization.
Can Non-Profit Directors Also Serve as Officers?
Yes, non-profit directors can also be officers. However, doing so can cause a conflict of interest. For this reason, most non-profit organizations choose to have separate people to serve as non-profit directors and officers to avoid unnecessary disagreements and conflicts. However, it is not uncommon for non-profit directors to also serve as officers. When one individual serves as both a non-profit director and officer, the organization usually pays that person as an independent contractor for serving as the director and as an employee for performing the duties of the officer.
However, if a non-profit organization appoints a director to also serve as the officer, it is critical to have a conflict-of-interest policy in place to address situations when a director/officer may benefit from personal or financial interests. At Jennifer V. Abelaj Law Firm, we assist non-profits with resolving their conflicts of interest and helping them with a wide range of other legal issues.
Non-Profit Directors and Officers: Avoiding Conflict of Interest
When a non-profit director also serves as the organization’s officer, there may be the potential for a conflict of interest. Many states, therefore, require non-profit organizations to adopt a conflict-of-interest policy. New York is one of those states. Under the New York Non-Profit Revitalization Act of 2013, all non-profits must have a conflict-of-interest policy. The Act also offers guidelines for drafting the policy and requires that non-profit directors, officers, and employees act in the best interest of the non-profit organization.
A well-drafted and valid conflict-of-interest policy must contain a provision requiring parties in conflict to disclose the details of the conflict. The policy must also prohibit members of the board of directors from voting on a matter in which they may have a potential conflict of interest. The policy must also contain the mechanisms for resolving and managing potential conflicts. In fact, IRS Form 990 specifically asks whether or not the non-profit organization has a conflict-of-interest policy and whether the policy establishes mechanisms for managing conflicts within the organization.
Non-Profit Attorneys Can Help
Directors and officers serve crucial roles in a non-profit organization, which is why it is essential to understand non-profit directors vs. officers to ensure efficient management of the organization. Jennifer V. Abelaj Law Firm provides non-profits in New York with personalized legal representation in various legal matters, including forming the organization, managing conflicts of interests, drafting bylaws and governing documents, and many more. Consider calling 212-328-9568 to schedule a case review with our experienced non-profit attorneys.
The IRS Now Mandates Electronic Filing For All Non-Profits
Even though the Internal Revenue Service (IRS) has long accepted electronic tax filings, tax-exempt organizations have been able to rely exclusively on paper returns and filings until recently. The IRS now mandates electronic filing for all non-profits. The new mandate is designed to streamline the filing process, modernize technology, and improve tax compliance in the tax-exempt sector. To help your non-profit organization comply with the new mandate, consider contacting the Jennifer V. Abelaj Law Firm at 212-328-9568 before the next tax deadline.
New Requirements for Non-Profit Electronic Filing
In the years prior to 2019, exempt organizations were only required to electronically file returns if they had at least 245 employees or reported assets of $10 million or more. However, on July 1, 2019, President Donald J. Trump signed the Taxpayer First Act into law, requiring all tax-exempt organizations to e-file their returns.
Smaller exempt organizations were initially provided some relief by being allowed to file paper returns if they filed Form 990-EZ, Short Form Return of Organization Exempt for Income Tax. However, the IRS has stopped accepting paper returns even for this purpose as of July 31, 2021. Due to the new IRS update, all exempt organizations, including those that filed Form 990-EZ, must file their returns electronically.
Forms to Be Electronically Filed
Since the IRS now mandates electronic filing for all non-profits, the following Form 990 series must be electronically filed:
- Form 990, Return of Organization Exempt from Income Tax
- Form 990-EZ, Return of Organization Exempt from Income Tax (Short Form)
- Form 990-PF, Return of Private Foundation or Section 4947(a)(1) Trust Treated as Private Foundation
- Form 990-N, Electronic Notice
- Form 990-T, Exempt Organization Business Income Tax Return
Additionally, tax-exempt organizations that file any of the following forms must now file them electronically:
- Form 8872, Political Organization Report of Contributions and Expenditures
- Form 1120-POL, United States Income Tax Return for Certain Political Organizations
- Form 4720, Return of Certain Excise Taxes Under Chapters 41 and 42 of the Internal Revenue Code
- Form 1065, United States Return of Partnership Income
About Form 990
The IRS Form 990 series provides transparency and accountability for the non-profit sector. These forms can generally be viewed and inspected by the public and are the primary source for basic information about the non-profit organization. However, the filing of paper returns often created a lag between the time when the non-profit organization submitted its required forms and when the public had access to view the contents. That made it difficult for the public to have accurate and timely information about many organizations in the non-profit sector. The new mandate is expected to provide more timely data for donors, regulators, and other stakeholders.
The IRS does not require certain non-profit organizations to file Form 990 or even Form 990-EZ. These include:
- Certain religious organizations
- Certain government organizations
- Certain political organizations
- Organizations with gross receipts less than $50,000 (although they must file Form 990-N)
- Certain organizations that file different kinds of annual information returns, such as private charitable entities exempt under section 501(c)(3) and described in section 509(a), private charitable entities terminating their status by becoming a public charity, religious or apostolic organizations described in section 501(d), and stock bonus, pension, or profit-sharing trusts that qualify under section 401.
E-Filing Deadline
The electronic filing deadline for non-profit organizations is July 31. Although smaller exempt organizations were provided with transitional relief to give them more time to switch over from filing paper returns to electronic filing, all tax-exempt organizations except those with a specific exemption must now prepare electronic filings. All entities, including the ones that previously used Form 990-EZ, were required to electronically file forms 990 and 990-EZ with tax years ending July 31, 2021, and later.
How to Comply with the New Mandate
Organizations that previously filed paper tax forms were sent a letter from the IRS notifying them that the IRS now mandates electronic filing for all non-profits. If organizations filed a paper return after the applicable deadline, the IRS might have responded by saying that they needed to redo the return electronically. The IRS might have flagged the return as late when providing this notification. To abide by the new tax law, exempt organizations can engage the services of an outside tax professional or use one of the IRS’s pre-approved software providers to prepare their electronic return.
Because tax-exempt organizations may have complex reporting requirements that are substantially different than for regular taxpayers, they may wish to work with a tax consultant or legal professional who has more experience with the system. The Jennifer V. Abelaj Law Firm works closely with non-profit organizations and is well-versed in the laws and regulations that affect them. Consider contacting the office for help with tax filings and answers to any questions you have.
Contact a Non-Profit Lawyer for Help
If you are uncertain about how to comply with the current requirements for tax filings since the IRS now mandates electronic filings for all non-profits, you might consider reaching out to a lawyer who focuses in this area of the law. The Jennifer V. Abelaj Law Firm has years of experience working with various non-profit organizations, including public charities, private foundations, social welfare organizations, business associations, and more. We also assist with estate planning so that your non-profit organization can benefit from legacy gifts. Numerous charities and non-profit organizations depend on us for help with their creation, governance, transaction assistance, advocacy, tax compliance, and dissolution. We are also prepared to handle any potential legal issues that arise during tax filing season. Because we know all about the new mandate, we can help to ensure compliance and help you achieve your non-profit’s objectives by explaining whether the new mandate applies to your organization, how to transition from paper returns to electronic returns, and how to electronically file a return. Consider contacting the Jennifer V. Abelaj Law Firm at 212-328-9568 to discuss your non-profit organization’s current challenges, tax filing status, and goals.
Guide To Non-Profit Board Meetings: Minutes and Agendas
Holding a productive board meeting requires thorough planning. Crafting a well-structured agenda can help ensure that all of the organization’s most pertinent concerns are covered. During the non-profit board meeting, minutes will serve as an official recording of what takes place. Proficient handling of both minutes and agendas can add significant benefit to the structure of nonprofit board meetings. You can learn more about these and other nonprofit strategies by contacting the experienced New York nonprofit lawyers at the Jennifer V. Abelaj Law Firm (abelajlaw.com): call today at 212-328-9568.
What Should a Nonprofit Include in Board Meeting Minutes?
The Internal Revenue Service (IRS) and most states legally require nonprofit organizations (and all other corporations) to record and keep copies of their board meeting minutes. According to the New York Department of State, not-for-profit corporations must maintain minutes for the proceedings of members, the board of directors, and the executive committee. Minutes should be treated as a concise summary of the meeting. While there are several key components that should be included, it is not necessary to transcribe the meeting word-for-word.
Nonprofits should consider including the following information in their minutes records:
- The time and date that the meeting is held
- The name of the venue where the meeting is held
- Name of the organization holding the meeting
- The names of participants, as well as board members who were absent
- Names of other non-board member attendees
- Identify who is recording the minutes
- Purpose of the meeting
- A record that the previous meeting’s minutes have been approved
- A summary of motions, including an exact transcription of any motion statements, the name of the person who made the motion, and the results of the vote
- The time the meeting ends and a signature from the individual who recorded the minutes
Legal Considerations For Board Meeting Minutes
In order to protect from potential future liability issues, it is usually best to keep minutes as concise as possible. Unnecessary information may provide little value while potentially opening up the possibility of legal complications. Showing legal compliance with both IRS and state standards is one of the main benefits of keeping a concise yet accurate minutes record.
Some organizations choose to employ legal counsel for minutes recording on the basis of confidentiality and to ensure all legal standards are met. You can learn more about the legal aspects of keeping minutes for nonprofit board meetings by contacting the Jennifer V. Abelaj Law Firm.
Creating an Effective Board Meeting Agenda
A well-prepared board meeting agenda can help determine the course of the meeting. A thoroughly researched agenda will address all of the most worthwhile topics for the organization at the time of the meeting, and ideally, arrive at valuable answers to many of the organization’s current concerns. Conversely, poorly prepared board meeting agendas might waste time and make nonprofit board meetings much less productive.
What Information Should a Nonprofit Board Meeting Agenda Contain?
While each board meeting agenda will vary, there are a few types of information commonly found in these documents:
- Header – This should only include basic information, such as the name of the nonprofit, contact information for the organization, and the board meeting date, time, and location.
- Call to order – The call to order starts the meeting, usually with a statement from the chair to the board, company mission statements, and introductions.
- Agenda changes – Following the call to order, the chair may ask if anyone would like to suggest changes to the agenda, including adding or deleting information.
- Minutes approval – During this stage, board members can either approve the minutes of the previous meeting or suggest corrections. The board can provide final approval for these minutes after the secretary has finished correcting any errors.
- Reports – The Executive Director and Financial Director may each provide reports to board members, which cover the nonprofit’s operations, projects, business outlook, finances, and more.
- Old and new business concerns – Unresolved previous business concerns and new business items may be discussed at this stage.
- Special announcements – If applicable, the chair can make special announcements regarding the organization. Board members may also be given the opportunity to make announcements or mention other business concerns.
- Adjournment – The board chair may formally end the meeting, including a statement of the ending time which can be included in the board meeting minutes. The next meeting date may also be mentioned during the adjournment.
Board Room Agenda Best Practices
Every nonprofit will have its own needs and unique strategy for board meeting agendas. However, there are a few best practices that most organizations will benefit from adhering to:
- Set a beginning and end time for the meeting.
- Budget time towards discussing the most important organizational concerns and voting on these issues.
- Organize and distribute all relevant information regarding the board meeting topics to all board members. This includes research, reports, and background information.
- Include a list of questions for board members, carefully considering how they are phrased, the order in which they will be asked, and who will be asked to answer.
The nonprofit chair and board secretary should collaborate to plan the agenda, which may be a combination of standard best practices and unique concerns of the business.
Learn More About Minutes and Agendas by Contacting an Experienced New York Nonprofit Lawyer
New nonprofits and existing ones alike can often benefit from the assistance of legal counsel. At the Jennifer V. Abelaj Law Firm, our experienced New York nonprofit lawyers are available to assist not-for-profit organizations with a variety of legal matters. We are prepared to help organizations get off the ground during the early stages, make sure they are tax-compliant and adherent to state and federal legal standards, and assist with other related matters.
If you are looking for guidance regarding agendas, minutes, or any other concerns related to nonprofit board meetings, you can learn more about your organization’s options in a free consultation: give us a call today at 212-328-9568.
Ongoing Tax and Governance Compliance for Tax-Exempt Organizations
Existing not-for-profit organizations (“NPO”) must ensure that they annually comply with corporate and tax laws. The failure to do so may impact the NPO is minor ways or in significant ways.
Tax Compliance
Annual Tax Return Filing (Form 990)
An existing NPO must file a Return of Organization Exempt from Income Tax (Form 990) as soon as it completes its first fiscal year of existence. Occasionally, the NPO may still be awaiting a determination letter from the IRS approving its tax-exempt status. However, the NPO must file the appropriate Form 990 based on the activities and gross receipts within the first year.
An amended return can be filed if the IRS determines that the NPO is tax-exempt under a tax section which differs from the application request. For example, an NPO may apply for exemption as a public charity. However, the IRS may approve the application as a private foundation. In such a case, the organization would be able to file an amended Form 990-PF for the year in question.
Following receipt of the determination letter, and assuming the NPO agrees with the IRS’s determination, the NPO must file an annual Form 990. In some cases, it may be as simple as the online filing of Form 990-N for organizations with gross receipts of less than $50,000 in the taxable year (and less than $250,000 in assets). An NPO that requires a full Form 990 must ensure that they provide their CPA with annual financials necessary for timely and complete preparation.
Failure to file a Form 990 for three consecutive years automatically revokes the organization’s tax-exempt status. The process to reinstate tax-exempt status requires the assistance of your attorney and accountant.
Estimated Tax Payments on Unrelated Business Income
If an NPO has unrelated business income in excess of $500 a year, it is required to pay quarterly taxes on Form 990-W. Unrelated business income is a complex area and beyond the scope of this article, but it is generally an investment by the NPO that is not related to its charitable activities in which it expects to receive an income. The IRS allows an NPO to receive UBI without losing its tax-exempt status if the UBI is not significant. The challenge is that there is no formula to determine the amount is not significant.
Failure to monitor UBI could place the organization in jeopardy of losing its tax-exempt status.
Tax Payments on Net Investment Income for Private Foundations
A private foundation must pay taxes on its annual net investment income. The payment may be done at the time of filing the tax return (Form 990-PF) or in quarterly estimated payments.
Governance Compliance
Registration and Filing with the Office of Attorney General
NPOs that fundraise within New York State must register with the Charities Bureau of the New York State Office of Attorney General (“Charities Bureau”). The initial registration is completed contemporaneously with filing of the Application for Tax-Exempt status or shortly following receipt of the IRS determination letter.
An NPO must file an annual report with the Charities Bureau, along with a copy of their Form 990. A filing fee may be required as determined by the NPO’s annual gross receipts. The annual filing, including the Form 990, is publicly available on the Charities Bureau’s website. Religious organizations are not required to register or to submit an annual filing.
Annual Meetings
New York State requires that an NPO hold a membership meeting at least once each year. NPC-L 603(b). The membership meeting generally includes voting of directors or officers, discussion of the Board’s annual activities and financial reports, and ratification of certain actions, such as changes in the Bylaws.
Although the NPO does not require an annual meeting of directors, it is likely that the NPO’s Bylaws mandate an annual Board meeting. Discussions include long-term strategy for the NPO, goals on how to effectuate the NPO’s charitable purposes, financial and tax considerations, and building a team of advisors and support for the Board.
Annual Compliance Makes NPO Management Easier in the Long Run
Taking small steps each year to maintain compliance with the tax and governance laws applicable to your NPO has a big impact for the success of the organization. Regular communication with your Board, members and advisors ensures that the NPO is proactively managing its activities to avoid potential troubles.
If you have questions about ongoing governance or tax compliance, please contact us to discuss how we can assist your organization.
Advocacy and Lobbying by Non-Profits
Non-profits often wonder if they can carry out lobbying as part of their charitable activities without jeopardizing their charitable status. Various factors must first be carefully considered. These may include identifying the type of activity to be carried out, the tax classification of the non-profit organization and the proportion of time devoted to lobbying.
Activity Type: Advocacy, Lobbying or Political Activity
The IRS considers advocacy, lobbying and political activity to be separate activities. The specific type of activity must be identified in order to determine the extent to which it can be carried out by the organization without jeopardizing its tax-exempt status.
Advocacy is generally defined as an activity that seeks to influence social change in furtherance of the organization’s corporate purposes. An example is advocacy for environmental causes, gender and racial equality, or get-out-the vote drives to assist and encourage registration.
Lobbying is an extension of advocacy activity. Where advocacy strives to educate and influence the minds of the general public, lobbying activity is directed at influencing policy and legislative changes in furtherance of the social interest. An example is supporting legislation or working with lobbyists to advance new and modified laws and policies that would support the organization’s social goals.
Political activity specifically encourages voters to support or oppose a particular candidate for office.
It is important to identify and distinguish the activities because the organization’s tax classification will determine how, and to what extent, it can carry out advocacy, lobbying or political activity.
Tax Classification
Non-profit organizations are either charitable or non-charitable. Organizations such as public charities (which receive at least 1/3 of their contributions from the general public) or private foundations (which often receive a small number of generous donations) are considered charitable non-profits.
Most other non-profits are non-charitable – the most popular of which are social welfare/civic organizations (501(c)(4)) and membership organizations (501(c)(6)).
Time Devoted to Advocacy or Lobbying
Advocacy. There is generally no limit to the amount of advocacy that an organization may carry out. However, it is important to note that advocacy activity is not considered to be a charitable in nature. Accordingly, it cannot be the primary purpose of a public charity, such as a 501(c)(3).
Social welfare organizations which have exemption under 501(c)(4) may engage in unlimited advocacy. The IRS accepts that advocacy may be the primary purpose of a social welfare organization.
Legislative activity. Public charities (501(c)(3)) may engage in very limited lobbying, so long as an insubstantial amount of their funds are being used for lobbying purposes. There is no calculation or figure to define an “insubstantial” amount. If a public charity anticipates or chooses to engage in lobbying activity, it may request that the IRS review its anticipated lobbying activities under Section 501(h) to abide by the IRS’s formula which dictates the amount of lobbying authorized without jeopardizing a charity’s status.
Social welfare organizations (501(c)(4)) are allowed to engage in unlimited legislative activities if it is in furtherance of its corporate purposes.
Political activity. Public charities are prohibited from engaging in political activity. Social welfare organizations (501(c)(4)) are authorized to engage in political activity, provided it is not the organization’s primary purpose or primary activity.
Considerations
A non-profit organization that intends to carry out lobbying, advocacy or political activities must closely review their activities to ensure that they do not jeopardize the charitable status with the IRS.