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Organizational Issues
• Corporate Documents• Articles of Incorporation• Bylaws• Minutes
• Application for Tax-Exempt Status (Form 1023)
- Make Sure Determination Letter is Current
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Information Found in Corporate Documents
• Name of Corporation• Corporate Purposes• Board Number and Selection Process
• Self-Perpetuating• Member Selected• Term Limits
• Resident Agent and Address• Committee Structure• Officers• Indemnification Procedure• Public Charity Status (IRS Determination Letter)
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Board Meetings
• Quorum• Approve Minutes• Committee Reports• Accurate Minutes
• Record Dissents (By Name or Number)• Record Votes• No unnecessary or irrelevant information
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Rights and Responsibilities of Board Members
• Two Duties• Duty of Care• Duty of Loyalty
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Duty of Care
• Informed, good faith decisions • Regular attendance at board and committee
meetings• Can rely on reports and consultants, if reliable• Delegation is permissible• Monitor investments
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Duty of Loyalty
• Undivided allegiance• Disclosure of
conflicts/Conflict of Interest Policy
• Intermediate Sanctions
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The 17 Questions
• What are the stated purposes of the organization?• Does the transaction advance the stated
purposes?• Does the transaction benefit a private individual?• Were any promises made when the funds were
raised?• Were any conditions placed on the donated
funds?
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17 Questions (cont.)
• Does the director attend the meetings?• Are meetings held regularly?• Does the director have all the relevant facts?• Is there any reason not to trust the information
being furnished?• Are taxes being paid?• Is there a conflict of interest or self-dealing?
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More Questions
• Is the transaction fair to the organization?• How would an ordinarily reasonable and prudent person
decide the matter?• Are there other laws that affect the particular situation?• How accurate are the records?• Is the director acting honestly, in good faith and with total
integrity?• Is this transaction in the best interests of the organization?
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Operational Issues
• Conflicts of Interest• Private Inurement• Private Benefit• Intermediate Sanctions
– Applies to Excess Benefit Transactions(including compensation arrangements)
– 25% Tax on the Self-Dealer (200% if not corrected)– 10% Tax on the Board (up to $10,000)
• Conflict of Interest Policy• Sarbanes-Oxley• Best Practices
– New York Situation
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Lobbying
• Two Types of Lobbying:• Direct Lobbying• Grassroots Lobbying
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Direct Lobbying
• Communication with a legislator, legislative staff, or other government official (state, federal or local)
• Refers to specific legislation or legislative proposal• Takes a position
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Grassroots Lobbying
• Communication with the general public• Refers to and takes a position on specific
legislation• Includes a “call to action”
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Exceptions to Lobbying
• Nonpartisan Analysis and Research• Self Defense• Technical Assistance in Response to a Written
Request• Discussion of Broad Social Issues
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Impermissible Lobbying
• Two tests• Insubstantial Part• 501(h) election
– Expenditure Test (20%)• 501(c)(4) Alternative
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Political Activity
• Cannot participate or intervene in any political campaign on behalf of any candidate for public office
• Watch out for “indirect” campaign activity (biased voter guides, issue advocacy tied to a candidate, etc.)
• Voter education and candidate forums may be ok.
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Unrelated Business Income Tax (“UBIT”)
• Three elements• Trade or Business• Regularly Carried On• Unrelated to Exempt
Purposes
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Exceptions to UBIT
• Passive Income (Rents, Royalties, Interest, Capital Gain)
• Services provided by Volunteers• Most fundraisers• Bingo
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Special UBIT Conerns
• Corporate Sponsorships (Acknowledgement vs. Advertising)
• Debt Financed Property• Mailing Lists• Royalties vs. Compensation• Affinity Credit Cards
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Other Hot Legal Areas
• Contracts (Employment Contracts)• Environmental• Intellectual Property
• Trademarks• Patents• Copyrights
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Liability Protection
• Insurance (D&O, property, E&O)• Corporate Protection• Volunteer Protection Acts (State and Federal)• Indemnification
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Fundraising Issues
• Registration Requirements• Raffles and Auctions• Planned Giving Tools
• Sample Will Language• Naming Opportunities• Donor Advised Funds• Charitable Gift Annuities• Charitable Remainder Trusts• Pooled Income Funds
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Structure Issues
• Use of Subsidiaries (for profit and nonprofit)• LLC’s• Title Holding Companies• Supporting Organizations• Joint Ventures
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Filing and Disclosure Issues
• Form 990• Personal Property Tax Returns• Charitable Solicitation• Make available 990’s, 1023• Charitable Substantiation Rules (Receipts)
• What Portion is Deductible
