The “Tax Cuts and Jobs Act” ultimately passed by Republicans in Congress and signed by President Trump is not good for most nonprofit organizations, but is not as bad as it might have been. 

It eliminates tax incentives for charitable contributions for all but about 5% of U.S. taxpayers who will continue to itemize deductions, a number significantly less than the 30% of taxpayers who itemize currently.  The National Council of Nonprofits has argued that this provision will reduce charitable contributions by about $13 billion a year.  

Volunteers for charities and other nonprofit entities have an additional line of defense against the threat of personal liability now that Congress has finally passed a federal Volunteer Protection Act. Acting in the euphoria for citizen service following the Presidents’ Volunteer Summit in Philadelphia in April 1997, Congress passed with fanfare a bill that had been languishing in both House and Senate, in various forms, for a decade. 

The law (42 USCA Sec. 14501 et seq.) generally provides that volunteers will not be personally liable for their acts or omissions if they are acting within the scope of their responsibility for the organization and the harm is “not caused by willful or criminal misconduct, gross negligence, reckless misconduct, or a conscious, flagrant indifference to the rights or safety of the individual harmed.” 

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President Donald J. Trump has promised to “destroy” the so-called “Johnson Amendment” that prohibits 501(c)(3) charities from participating in election campaigns.  Several Republicans in Congress have introduced bills to do just that.

And yet, the National Council of Nonprofits, the Independent Sector, the Council on Foundations and many operating charities have taken strong positions against a change.  Is this an issue that makes much of a difference?  Is it really something to get worked up about?

We think it is.  It would undermine the trust in the charitable sector and make them less effective in pursuing their missions.  But equally important, it would put more unaccountable “dark money” into our political system —and make it tax-deductible!

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Whether due to the size constraints, budget concerns, or the desire to reach new individuals, many nonprofit organizations turn to unpaid interns to perform some of their services.  Some of these interns may even fill in gaps where nonprofits wish they could hire full-time personnel.  But under the United States Department of Labor’s (“DOL”) 2010 Fact Sheet spelling out a six-factor test, which was written for for-profit organizations but is applicable to nonprofits as well, some nonprofits may be running afoul of the Fair Labor Standards Act (“FLSA”) by failing to compensate their interns.

For membership organizations trying to figure out how best to support their members, choosing between seeking 501(c)(3) charity status and 501(c)(6) trade association status will usually involve weighing the benefits and disadvantages of the two different tax-exemptions.  

Not all membership organizations will be in a position to make the choice. The primary purpose of a 501(c)(3) charity must be charitable and educational, providing significant benefits to the general public. The primary purpose of a 501(c)(6) trade association is to improve a line of business activity of the members. 

The Internal Revenue Service has issued new procedures on how 501(c)(4) social welfare groups must comply with the recently enacted requirement to notify the IRS of their existence.  (Rev. Proc. 2016-41)   The requirement was included in the 2015 tax act (See Nonprofit Issues®, January, 2016) in the aftermath of the IRS “scandal” delaying recognition of potentially political 501(c)(4) organizations.  Because (c)(4) social welfare organizations, unlike 501(c)(3) charities, are not required to obtain a determination of exemption, many have failed to notify the IRS of their existence and have operated largely under the radar and unknown to the IRS.  The 2015 law added a new section 506 to the Tax Code that does not require (c)(4) organizations to obtain official recognition of their status, but requires them to tell the IRS that they exist. 

It isn’t easy to run a successful charitable fundraising event.  There is a lot of planning required, a lot of details to worry about, and a lot of people to coordinate.  And, if you ask – and sometimes even if you don’t – there are the lawyers.

A fundraising event presents a wide range of nonprofit legal issues.  What follows is a checklist of some of them.

This Ready Reference Page covers; preparing for the event, soliciting for the event, running the event and after the event.

Threats of high litigation verdicts and a crisis in obtaining insurance caused many charities to restructure their organizations to create separate “foundations” to protect their reserve assets a couple of decades ago.  Prior to that, many hospitals had created foundations in order to maximize their reimbursements for medical services.  Both the wave of huge adverse verdicts and the difficulty in obtaining insurance have waned over the years.  Hospital reimbursement has changed so foundations no longer increase hospital income.  But many charities are continuing to restructure today, both to protect their assets and to provide greater flexibility in the programs they undertake.

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Hardly a day goes by without numerous newspaper articles and other media stories about real or perceived abuses in the nonprofit sector. 

What’s especially tragic about the vast majority of this negative media and Congressional scrutiny is that much of it could have been avoided had the organizations’ boards, officers, employees, and/or volunteers simply fulfilled their fiduciary responsibilities.  In fact, virtually every case prosecuted by state and federal regulators can ultimately be traced back to the organization’s board, officers, employees, and/or volunteers failing to fulfill their basic fiduciary responsibilities.  Had the individuals in question been more vigilant, the wrongdoing could have been detected, addressed, and, in most instances, the subsequent negative media and governmental scrutiny avoided, or at least minimized.