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Blogs |
Here LawForChange™ hosts blogs and commentary by lawyers and other thought leaders on legal topics, current developments in laws and regulations and other issues affecting social sector organizations. Nothing posted here is intended to constitute specific legal advice and the statements and opinions set forth here are those of the authors and not those of LawForChange™.
Posted: 02/22/2012
Submitted by: Jeffrey S. Tenenbaum, David R. Warner, Kristine A. Sova, and Nicholas M. Reiter Venable LLP
As technology for the home office improves, more nonprofits and employees are taking advantage of the benefits of telecommuting. Of course, federal and state labor laws still apply to the telecommuting employee. Whether a nonprofit should, or in some cases must, permit telecommuting depends upon an analysis of the unique issues that telecommuting raises under federal and state law.
Posted: 02/20/2012
Submitted by: Ellis Carter, CharityLawyer
As a new charitable project that is just starting out, the process of obtaining funding and applying for tax-exempt status may seem daunting, even prohibitive. A great option for these small organizations is to work with a fiscal sponsor. Typically, the fiscal sponsor is legally responsible for the use of the donated funds which are restricted for the sponsored project's charitable purposes.
Posted: 02/17/2012
Submitted by: Steven R. Chiodini, Nonprofit Law Matters
Model C fiscal sponsorships, where a public charity enters into a pre-approved grant relationship with an unrelated individual or organization, may be less common than Model A direct-program sponsorships, but they do offer some advantages, including the possibility of limiting a sponsor's liability for project activities. Unfortunately, they also pose a number of traps for the unwary, and a recent private letter ruling by the IRS provides a cautionary example.
Posted: 02/15/2012
Submitted by: Jeffrey S. Tenenbaum and Dismas Locaria, VenableLLP
Allegations of voter registration fraud and other questionable behavior by employees of ACORN surfaced following the release of several undercover videos. The alleged conduct of ACORN employees gained national attention, led to federal legislation prohibiting the distribution of federal funds to the Organization, and ultimately led to bankruptcy and dissolution in 2010. The downfall of ACORN serves as an important lesson to all nonprofit organizations.
Posted: 02/13/2012
Submitted by: Ellis Carter, CharityLawyer
More and more nonprofits are considering merging or consolidating as a strategy to survive or even grow as government and private sources of funding shrink. Merger proposals are being prompted by reduction of funding sources, the tight economy, the need for succession planning and a desire to consolidate expenses and increase capacity.
Posted: 02/10/2012
Submitted by: Steven R. Chiodini, Nonprofit Law Matters
Charities have many legal issues on their radars, but franchise law typically isn't one of them. Consequently, a Wisconsin case applying franchise law to a nonprofit surprised many in the sector. Even though your charity network may not look much like Dunkin' Donuts, it may still be wise to consider precautions to avoid franchise hang-ups.
Posted: 02/08/2012
Submitted by: Jeffrey S. Tenenbaum, George E. Constantine, Audra J. Heagney, Lisa M. Hix, Brock R. Landry, Kristalyn J. Loson, and Janice M. Ryan, Venable LLP
On January 1st, a new D.C. Nonprofit Code went into effect which will have a significant impact on the way nonprofits operate. The act introduced new registered agents rules, new requirements for board committee membership, and new conflict of interest provisions. Other changes include expanded indemnification requirements, duty to inform that requires "reporting up" of wrongdoing, and the abolishment of "Old Act" nonprofits.
Posted: 02/06/2012
Submitted by: Ellis Carter, CharityLawyer
Section 501(c)(3) of the Internal Revenue Code allows for tax exemption for organizations organized and operated to foster national or international amateur sports competition so long as no part of the net earnings inure to the benefit of any private shareholder or individual. In cases of athletic or other types of parent-run and organized booster clubs, it is the last part of this provision that can prove problematic.
Posted: 02/01/2012
On January 21, 2012, the Internal Revenue Service (IRS) released a revised version of Form 990 and accompanying instructions and schedules for tax year 2011. Notable changes to Form 990 and its associated schedules relate to joint ventures, investment partnerships, compensation disclosure, and hospitals. In addition, the instructions to the revised form include many clarifications that were lacking in previous guidance.
Posted: 01/31/2012
Submitted by: Emily Chan, Nonprofit Law Blog
Youths represent a growing volunteer population for nonprofits and for some, a potential pool of nonprofit board members. Some groups have taken note of this increasingly service-oriented age group and focused discussions about integrating younger individuals into nonprofit boards beyond young professionals and even young adults to youths (i.e., persons under the legal age of adulthood).
Posted: 01/30/2012
Submitted by: Ingrid Mittermaier, Nonprofit Law Matters
For several months now, the new IRS Form 8940 has been available for use by Section 501(c)(3) charities (and nonexempt charitable trusts) in filing a variety of requests with the IRS. Attorney Ingrid Mittermaier of Adler & Colvin details a range of request types for which Form 8940 can be used.
Posted: 01/27/2012
Submitted by: Ellis Carter, CharityLawyer
Charities should be aware that it is now illegal to receive compensation for preparing a return for another party if you have not obtained a PTIN from the IRS first; in fact, a paid preparer who is not registered with the IRS is perpetrating fraud. A charity that chooses to work with an unregistered paid preparer opens itself up to IRS scrutiny and, possibly, denial of tax exemption plus additional attorneys' fees to resolve any issues. Attorney Ellis Carter explains.
Posted: 01/25/2012
Submitted by: Ellie Winninghoff, DoGoodCapitalist.com
Corporate giants American Electric Power, United Technology Corporation, Southwest Airlines, and Pepsi are among the growing number of companies that have merged their separate financial and sustainability reports into a single "integrated report." This article, the third in a three-part series on accounting for sustainability, examines the early stages of a global effort to create integrated reports and establish them as a standard.
Posted: 01/23/2012
Submitted by: Ellis Carter, Charity Lawyer Blog
For whatever reason, be it a communication error, a time management issue, or just the thought that there are more important tasks to complete, many nonprofits forget or fail to timely file their Form 990 tax return. This may seem like a simple mistake that can easily be remedied, but that's not always the case.
Posted: 01/20/2012
Submitted by: Carmen Nobel, HBS Working Knowledge
Research in progress by Harvard Business School's Julie Battilana and Matthew Lee reveals that a large number of social entrepreneurs are focused on local rather than global change, and on sustainable funding. While existing qualitative studies tend to focus on heroic, successful entrepreneurs, early research results suggest that many social entrepreneurs are not focused on changing the world, but on effecting change in their own backyards.
Posted: 01/18/2012
Submitted by: Ellie Winninghoff, DoGoodCapitalist.com
What's the difference between financial materiality and sustainability materiality? This question is at the heart of "assuring" (verifying) a company's sustainability report. While financial materiality is about how quantitatively significant something is, sustainability materiality also entails determining what data are meaningful to a company's stakeholders. This article discusses some of the tricky issues involved in the assurance of information in corporate sustainability reports.
Posted: 01/16/2012
Submitted by: Ellis Carter, Charity Lawyer Blog
A much anticipated report to Congress from the Department of the Treasury was released in December. The 109-page document details the findings of the Treasury regarding a Pension Protection Act-mandated study on the organization and operation of supporting organizations (SOs) and donor-advised funds (DAFs).
Posted: 01/13/2012
Submitted by: Ellie Winninghoff, DoGoodCapitalist.com
Welcome to the fast-changing world of sustainability reporting — one that could culminate in nothing less than the total transformation of how companies report performance in the 21st century. This article, part one of a three-part series, will trace the trajectory of the GRI, a multi-stakeholder-based, consensus-seeking global institution that has developed and continues to refine frameworks and guidelines for ESG reporting.
Posted: 01/10/2012
Submitted by: Kenneth E. Liu, Gammon & Grange, P.C.
Online social media can be powerful tools for social change, and nonprofits large and small increasingly use such tools to advance their causes. But social media also pose risks if not used properly. As your organization grows its social media presence, it's important to avoid legal traps in the online world. Here are some tips and pointers on avoiding legal troubles in using social media.
Posted: 01/09/2012
Submitted by: Gregory L. Colvin, OurFuture.org / Adler & Colvin
Congressman Ted Deutch has offered the strongest constitutional amendment introduced in either chamber of Congress so far to rectify the imbalance of power between the corporations and the people in our democracy.
Posted: 01/06/2012
Submitted by: Gregory L. Colvin, OurFuture.org / Adler & Colvin
We've seen the signs and heard the chants: "Abolish Corporate Personhood!"
I'm very sympathetic to the cause of reducing the power of big business corporations to control our government, our economy, our consumer culture, our society, and our lives. But there are two problems with a constitutional amendment that abolishes corporate personhood. One, it does too much; and two, it does too little.
Posted: 01/05/2012
Submitted by: Gregory L. Colvin, OurFuture.org / Adler & Colvin
Among those who feel that the only way to overcome the Citizens United decision, which opened the door to unlimited corporate spending on elections, is to amend the U.S. Constitution, the question on everyone's mind is: "So what's the language?" I offered a version, but I also feel obliged to compare several alternative versions that have been offered. Here are the five options I've looked at in addition to my own draft amendment.
Posted: 01/04/2012
Submitted by: Jason (Frugal Dad)
This infographic discusses some of the facts behind the patent industry and how it's changed as software, technology, and the Internet have developed at an incredible pace. I find the information says a lot about the state of development and innovation; both how important it can be to everyday life, and the problems it can face on a larger scale.
Posted: 01/03/2012
Submitted by: Gregory L. Colvin, OurFuture.org / Adler & Colvin
Since the U.S. Supreme Court ruled that the Constitution gives corporations the freedom to spend without limit to influence American elections, people have asked, "How can we amend the Constitution to put this right?" What follows is a draft of a Twenty-Eighth Amendment to the U.S. Constitution that would enable a thorough, citizen-based reform of our campaign finance laws, showing how we could prevent corporate and personal wealth from dominating elections in our free republic.
Posted: 01/02/2012
Submitted by: Gregory L. Colvin, OurFuture.org / Adler & Colvin
On December 8, Senator Bernie Sanders of Vermont, joined by Senator Mark Begich of Alaska, introduced a constitutional amendment to drive big money out of politics for good. The language of the amendment, entitled "Saving American Democracy," is identical to the "OCCUPIED" amendment offered in the House by Rep. Ted Deutch of Florida. In the time since the Deutch amendment was announced, several important issues have emerged. This post aims to address them.
Posted: 12/26/2011
Submitted by: Emily Chan, Nonprofit Law Blog
Emily Chan recently discussed the political campaign activity prohibition on public charities with Tony Martignetti on Nonprofit Radio. Here are some of the highlights from the show along with additional follow-up, including discussion of the IRC prohibition on electioneering by 501(c)(3) organizations, permissible election-related activity under the IRC, the role of the First Amendment, and how the electioneering prohibition applies to web sites and social media.
Posted: 12/21/2011
Submitted by: Gene Takagi, Nonprofit Law Blog
Martin Lipton's post "The Spotlight on Boards," published in The Harvard Law School Forum on Corporate Governance and Financial Regulation blog, lists 15 expectations of corporate boards and five requirements for meeting them. While the post focused on major public companies, much of the information on best practices is equally applicable to nonprofits and well worth a read. Here are some of those expectations, with appropriate tweaks for charitable nonprofits.
Posted: 12/19/2011
Submitted by: Gregory L. Colvin, OurFuture.org / Adler & Colvin
There is a growing movement of people fed up with corporations-as-persons, money-as-speech, elections-for-sale in America. They are ready to amend the U.S. Constitution as the only sure way to reverse the Supreme Court's decisions in Citizens United v. Federal Election Commission and Buckley v. Valeo. But what's the best amendment? Here are twelve questions to put the choice of language in an analytical framework. Every drafter should be able to answer them.
Posted: 12/14/2011
Submitted by: Ellis Carter, Charity Lawyer Blog
A Pennsylvania Appellate Court has allowed creditors to sue directors and officers of a nonprofit nursing home for breach of fiduciary duty and deepening insolvency before bankruptcy. The debtor, Lemington Home for the Aged, is a nonprofit, tax-exempt nursing home. In determining that the Home's directors could be held personally liable, the Court relied on the fairly egregious facts and circumstances leading up to the filing of the bankruptcy petition.
Posted: 12/12/2011
Submitted by: Marc J. Lane
Many mission-driven organizations, both nonprofits and for-profits, are becoming "social enterprises" that embrace market-based strategies in the pursuit of their social purposes. New business models and even entity forms are emerging to help the social entrepreneur drive positive social change. Lawyers have new opportunities to aid their clients in advancing these new business forms.
Posted: 12/07/2011
Submitted by: Ellis Carter, CharityLawyer
Prospective clients often ask whether we know of any dormant nonprofits that are going out of business that they could take over. The idea is that taking over an existing entity avoids the hassle and expense of incorporation, creating a governance structure and obtaining tax-exempt status for a brand new entity. But what at first blush sounds like a brilliant maneuver to avoid the effort, cost and delay of creating a new nonprofit is, in reality, almost never a good idea.
Posted: 12/05/2011
Submitted by: Chris Hurtado and Bruce Campbell, Campbell Law Group
In general, private offerings to accredited investors are exempt from registration requirements under U.S. securities laws. To take advantage of this exemption, however, the issuer must not engage in a "general solicitation." The ban on general solicitation is construed broadly, and in certain instances, even bare "tombstone" ads can result in violations. This article examines this general rule and certain exceptions to it.
Posted: 11/30/2011
Submitted by: Ingrid Mittermaier and Joey Neugart, Adler & Colvin
Can a charitable nonprofit successfully operate in tandem with a for-profit? Yes, but it requires scrupulous attention to Code requirements.
Posted: 11/29/2011
Submitted by: Jim Fruchterman, Beneblog
Benetech is a leading nonprofit organization based in Silicon Valley. We write software for people with disabilities as well as human rights and environmental groups. We're against piracy, and have made commitments to authors and publishers to encourage compliance with copyright law. So we shouldn't have anything to fear from a bill entitled "Stop Online Piracy Act," right? Wrong.
Posted: 11/28/2011
Submitted by: Ellie Winninghoff, The Do-Good Capitalist
Cutting-edge, low-profit socal enterprises may be too innovative to fit into the boxes that define nonprofit status, while risk-averse corporate directors may not have the power to favor environmental or social factors over profit. Two new corporate forms in California — one designed to unleash capital for impact investing, the other creating greater accountability for CSR — seek to address these issues by broadening the fiduciary duties of directors.
Posted: 11/18/2011
Submitted by: Ellis Carter, CharityLawyer
Most charitable organizations are not accustomed to complying with campaign finance laws. Supporting or opposing candidates is prohibited for 501(c)(3) organizations. However, charitable organizations are permitted to weigh in on initiatives and propositions to an insubstantial degree; still, initiatives and propositions can create a trap for the unwary charitable organization.
Posted: 11/16/2011
Submitted by: Rolfe Larson, npEnterprise Forum
One sign that the social enterprise field is maturing is the emergence of guides and directories. And one sign that the field still has a way to go is a lack of consistency in how social enterprise is defined (if it's defined at all) or what information is presented about each listing. But now there are enough directories in circulation to create, well, a directory of directories, all in one place. This is that place.
Posted: 11/14/2011
Submitted by: Ellie Winninghoff, The Do-Good Capitalist
Imagine investing in — not donating to — nonprofits that make small business loans in Appalachia, develop affordable housing in New Orleans, or extend credit to micro-entrepreneurs. Or perhaps you prefer a for-profit loan fund that supports organic farms, a private equity fund that preserves ranchland, or a venture capital fund focused on climate change solutions. Welcome to the world of "impact investing."
Posted: 11/11/2011
Submitted by: Gregory L. Colvin, Nonprofit Law Matters / Adler & Colvin
Last week, I received a call from a reporter at The Chronicle of Philanthropy asking whether it was true that people could donate in support of Occupy Wall Street and receive a charitable tax deduction. Next, I was asked about other cities where there may not be a proper fiscal sponsorship in place. Here's how I answered.
Posted: 11/09/2011
Submitted by: Bruce Campbell, Campbell Law Group
The Small Business Jobs Act of 2010 provided a 100% exclusion from federal tax (and for purposes of the alternative minimum tax) for any capital gains realized from certain investments in "qualified small business stock" made between September 27 and December 31, 2010. Just before 2010 ended, Congress extended this tax break one more year with the 2010 Tax Relief Act. Now, once again, the closing of a particularly tax-advantaged window to make investments looms near.
Posted: 11/07/2011
Submitted by: Thomas J. Tierney and Richard Steele, The Bridgespan Group
In an age of increasingly scarce resources, nonprofit leaders, their board members, and their donors must find ways to collaborate more effectively. This paper, based on Give Smart: Philanthropy That Gets Results, outlines three imperatives of effective collaboration and shows how better execution can increase impact.
Posted: 11/04/2011
Submitted by: Rolfe Larson, npEnterprise Forum
Steve Jobs once said: "I am as proud of what we don't do as I am of what we do." So also it should be for the social enterprise sector. There are plenty of great things that are not SEs. To gain credibility and traction in the marketplace, the SE field cannot be all things to all people. That's the path to becoming nothing at all.
Posted: 11/02/2011
Submitted by: Kelly Campbell and Matthew Forti, The Bridgespan Group
As government budget cuts and the bad economy intensify competition for money, it is increasingly important that nonprofits demonstrate results to the donors they hope will support them. But how a nonprofit ought to respond to the increasing emphasis on results should be a function of where it stands in terms of measuring its performance. Such measurements should evolve with the size and scale of a nonprofit program.
Posted: 10/31/2011
Submitted by: Allen Bromberger, Perlman & Perlman
On October 17, the California legislature and the Governor enacted a law authorizing benefit corporations in the state. The social enterprise world cheered, and press releases flew like confetti. Virtually every reporter referred to the new corporate form as a "B" corporation. But they made a mistake: a benefit corporation is not a B corporation. So what's the story?
Posted: 10/28/2011
Submitted by: Jeffrey S. Tenenbaum, Lisa M. Hix, and Matthew T. Journy, Venable LLP
A tax-exempt organization is generally exempt from federal corporate income tax on income derived from activities that are substantially related to the organization's tax-exempt purposes. However, a tax-exempt organization may be subject to a federal corporate income tax on income derived from unrelated trade or business activities. This is known as the Unrelated Business Income Tax ("UBIT").
Posted: 10/26/2011
Submitted by: Rosetta Thurman
What kinds of nonprofit leaders do we need now in order to effect social change? According to Kevin Kelly's landmark essay (and contrary to conventional nonprofit wisdom), you don't need the whole world to be a part of your cause. You just need 1,000 True Fans.
Posted: 10/24/2011
Submitted by: Bruce Campbell, Campbell Law Group
Entrepreneurs now have not one, but three different corporate forms allowing for alternative governance structures. it's important, nevertheless, to think critically about the options, and to understand that the best choice for a particular social business may be none of the new forms. The details matter, and it doesn't help anyone if a structure reflects the values of a business, but impedes its ability to execute on critical components of its financial plan.
Posted: 10/21/2011
Submitted by: Ellis Carter, CharityLawyer
Tax-exempt organizations (other than private foundations) have the ability to influence legislation either as an insubstantial part of their activities or by making the 501(h) election and measuring their lobbying expenditures. However, state and federal laws often require principals and their lobbyists to register prior to engaging in lobbying and to file expenditure reports.
Posted: 10/19/2011
Submitted by: Emily Chan, Nonprofit Law Blog
In California, in order to qualify for State property tax exemption, a nonprofit's property must be irrevocably dedicated to religious, hospital, scientific, or charitable purposes; and "the charitable [and/or other exempt] activities must be found to primarily benefit persons within the geographical boundaries of the State of California." Here's an overview of the issues involved.
Posted: 10/17/2011
Submitted by: Gene Takagi and Emily Chan, Nonprofit Law Blog
Recently on Tony Martignetti Nonprofit Radio, Emily and I discussed with Tony the topics of earned income and the unrelated business income tax. To provide a more easily understandable overview, we answered these questions in general terms without addressing many of the exceptions, modifications, and nuances involved in this tricky area of the law.
Posted: 10/14/2011
Submitted by: Anne E. Andrews, Esq., The Sector Agnostic
When corruption and bribery are the rule rather than the exception, how can a social entrepreneur comply with the FCPA?
Posted: 10/12/2011
Submitted by: Ellis Carter, CharityLawyer
Some businesses want to be able to help their employees in times of need. When properly structured, such assistance can qualify as a tax-free gift to the employee. The structure for employee assistance funds hinges on several factors, including the type of assistance employers intend to provide. This article describes the most popular vehicles for employer-sponsored employee assistance funds and how they can and cannot be used.
Posted: 10/10/2011
Submitted by: Chris Hurtado and Bruce Campbell, Campbell Law Group
Crowdfunding has obvious appeal in this era of social media and expanding Internet penetration. For companies seeking to raise investment dollars, however, crowdfunding is largely unavailable as a tool to attract U.S. investors due to SEC registration requirements, and the future of crowdfunding remains uncertain. Here are three key risks that threaten the potential of crowdfunding to become a significant source of startup capital in the near future.
Posted: 10/07/2011
Submitted by: Ellis Carter, CharityLawyer
The IRS has announced a new voluntary relief program for employers that permits them to reclassify their workers and avoid being audited on payroll taxes related to misclassified workers for prior years. The program is known as the Voluntary Classification Settlement Program ("Settlement Program"). Any employer — including a tax-exempt employer — may participate in the Settlement Program so long as it meets the specified criteria.
Posted: 10/05/2011
Submitted by: Emily Chan, Nonprofit Law Blog
Setting up and operating a successful nonprofit is challenging but possible in the right circumstances. This article highlights key steps and issues to consider prior to formation to decide whether a new nonprofit is the best vehicle for achieving your charitable objectives, and key steps and issues to consider during the formation process and in the early stages of the nonprofit's lifecycle to increase the chances of creating a healthy and vibrant nonprofit organization.
Posted: 10/03/2011
Submitted by: Bruce Campbell, Campbell Law Group
Many entrepreneurs in the social sector are surprised to learn that the IRS taxes "sweat equity." The IRS taxes income, and its definition of income includes both cash and non-cash compensation for services. But when is sweat equity deemed to be non-cash compensation that is subject to income and payroll taxes? When does this issue arise? And what's the best way to approach it? Bruce Campbell describes the essentials.
Posted: 09/30/2011
Submitted by: Carrie Garber Siegrist, LawForChange
Busboys and Poets is a community gathering place and resource for artists, activists, writers, thinkers, and dreamers in Washington, D.C. Its four locations are home to restaurants, bookstores, and gathering spaces. Owner Anas "Andy" Shallal, an Iraqi-American artist, activist, and restaurateur, sat down with LawForChange to discuss the process of opening Busboys and Poets in 2005, his decision to apply for certified B corporation status in 2008, and the application process.
Posted: 09/28/2011
Submitted by: Rolfe Larson, npEnterprise Forum
In August 2010, ShoreBank, the nation's first, largest, and leading community bank, was shut down by regulators. It was probably the largest and most disruptive social enterprise failure ever in the U.S. — a major blow to the social enterprise sector. There are things to learn from every failure, says Rolfe Larson. What can be learned from this one?
Posted: 09/26/2011
Submitted by: Jochem Tans, Campbell Law Group
Many organizations are making their commitment to charitable causes and donations a core aspect of their business and their marketing appeal. The bottom line, however, is that "cause marketers" are operating in state-regulated terrain. Nearly every state has its own laws to deal with the solicitation of funds for charitable causes. Jochem Tans offers insights intended to help you understand and comply with them.
Posted: 09/23/2011
Submitted by: Bruce Campbell, Campbell Law Group
In "traditional" venture capital, success is measured financially, and comes in two forms: sale or IPO within 5 to 7 years. In the impact world, we purport to measure success differently; we're not satisfied with financial return without positive social and/or environmental benefit. Is it reasonable to think the "exit" scenarios may also be different? Bruce Campbell says yes.
Posted: 09/21/2011
Submitted by: Kyle Westaway, Socentlaw
B Lab has announced the launch of GIIRS Ratings and Analytics and the commitment of 15 GIIRS Pioneer Investors, who declare as part of their impact investing strategy an investment preference for GIIRS-rated funds and companies. GIIRS Impact Ratings provide investors for the first time with a comprehensive, comparable, and third-party verified assessment of companies' and funds' social and environmental impact.
Posted: 09/20/2011
Submitted by: Ellis Carter, CharityLawyer
When forming a new nonprofit corporation, one important consideration for incorporators is whether or not term limits should be imposed on board members. Additionally, incorporators need to consider whether or not terms should be successive or staggered. There are many pros and cons for both sides of these arguments. This post by Ellis Carter considers some of the key factors in making a strategically apt decision.
Posted: 09/16/2011
Submitted by: Ellis Carter, CharityLawyer
In most jurisdictions, endowment funds are regulated by the state's version of the Uniform Prudent Management of Institutional Funds Act. The Act serves as a set of default rules that govern an endowment gift when the donor does not communicate the terms of the gift to the organization. Many nonprofits are surprised to learn that unless the donor specifies a shorter term, the default rules of the Act require endowment funds to be maintained in perpetuity.
Posted: 09/16/2011
Submitted by: Ellis Carter, CharityLawyer
The IRS has created a safe-harbor to help tax-exempt organizations distinguish between taxable advertising and mere acknowledgement of sponsors. The IRS exempts payments that fit within the safe harbor, known as "qualified sponsorship payments," from unrelated business income tax ("UBIT"). To ensure this favorable tax treatment, it is important that the sponsorship be structured so that it is a qualified sponsorship payment rather than taxable advertising.
Posted: 09/16/2011
Submitted by: Ellis Carter, CharityLawyer
When forming a nonprofit corporation, it is important to decide whether the corporation will be board driven or member driven. If the corporation is board driven, there are typically no members or the members have very limited rights. If the organization is member driven, the members are typically voting members who have the power to elect and remove members of the board of directors.
Posted: 09/16/2011
Submitted by: Ellis Carter, CharityLawyer
When a nonprofit hires an artist to create a sculpture, who owns the copyright? This is an equally important question for nonprofits and for-profits, but nonprofits are particularly prone to failing to secure their ownership over copyrights in commissioned works.
Posted: 09/14/2011
Submitted by: Ellis Carter, CharityLawyer
Today, the IRS issued long awaited guidance clarifying the tax treatment of employer-provided cell phones. The guidance relates to a provision in the Small Business Jobs Act of 2010 (the "Act"), enacted last fall, that removed cell phones from the definition of listed property, a category under tax law that normally requires additional recordkeeping by taxpayers.
Posted: 09/14/2011
Submitted by: Marc J. Lane
The Low-profit Limited Liability Company, or "L3C," is a new, for-profit business form available to social entrepreneurs who seek the legal and tax flexibility of a traditional LLC, the social benefits of a non-profit organization, and the branding and market positioning advantages of a social enterprise. Moreover, the L3C presents a unique opportunity to attract private capital to ventures with modest financial prospects, but the possibility of significant social impact.
Posted: 09/08/2011
Submitted by: Ellis Carter, CharityLawyer
When most people think of a nonprofit merger, they think of a strong organization taking over a failing organization. However, mergers are not always born out of dysfunction. The best mergers consist of two strong organizations motivated by shared opportunity.
Posted: 09/08/2011
Submitted by: Ellis Carter, CharityLawyer
The IRS has released Form 8940, Request for Miscellaneous Determination, for tax-exempt organizations to use when they request determinations (other than initial exemption applications) about their tax-exempt status. This post details the types of requests for which Form 8940 may be used.
Posted: 09/06/2011
Submitted by: Ellis Carter, CharityLawyer
The recent victory of Jan Van Dusen in U.S. Tax Court was more than just a personal victory for Ms. Van Dusen over the IRS. It was a victory for all volunteer pet foster parents in that it allows the deduction of out-of-pocket expenses that can be demonstrably linked to volunteer work for 501(c)(3) organizations.
Posted: 09/01/2011
Submitted by: Mandy Taft-Pearman and Alan Tuck
Nonprofit networks go by many names and are defined in a number of different ways, but the key differences among them are the degree of central control, variations in the types of activities of affiliates, and degrees of standardization in affiliate work.
Posted: 08/29/2011
Submitted by: Ellis Carter, CharityLawyer
In Girl Scouts of Manitou Council, Inc. v. Girl Scouts of the United States, Inc., the 7th Circuit Court of Appeals held that state fair dealership laws are applicable in the case of the Girl Scouts of the United States' dealings with its chapters. While this was a relatively narrow ruling, the standards set could have wider implications for nonprofits that have chapters and affiliates.
Posted: 08/23/2011
Submitted by: Elizabeth Han, Orrick, Herrington & Sutcliffe LLP
On July 7, 2011, the GAO published an important report addressing the major person-to-person (P2P) lending platforms and the potential regulatory challenges the platforms could face as the industry continues to grow. The GAO report discusses the advantages and disadvantages of two proposed regulatory approaches in providing more efficient, effective industry oversight: the current "bifurcated" SEC-centric approach and a "consolidated" CFPB-centric approach.
Posted: 08/08/2011
Submitted by: Ellis Carter, Charity Lawyer
Although nonprofits generally lack shares that can be owned and transferred, there are many ways to ensure a level of control or influence over a nonprofit entity. To avoid problems, those seeking to control a nonprofit or balance governance rights among different stakeholders need to understand the available options.
Posted: 08/05/2011
Submitted by: Kyle Westaway, Socentlaw
Though many sections of the American Bar Association are in favor of L3C legislation, the Nonprofit Organizations Committee and the Limited Liability Companies, Partnerships and Unincorporated Entities Committee of the Business Law Section of the American Bar Association are planning to oppose the L3C legislation based on three primary objections. Here are those objections, along with responses by a group of leading nonprofit attorneys as excerpted from a July 13 letter.
Posted: 08/05/2011
Submitted by: razesquire
Nonprofits can make money, but there are limits: First, the business must be related to the nonprofit's mission; second, the profits generated must be used in furtherance of that mission. Here are some of the specifics as seen by the IRS.
Posted: 08/03/2011
Submitted by: Ellis Carter, Charity Lawyer
A tax-exempt organization must ensure that its unrelated business income (UBI) — that is, business activity unrelated to the organization's exempt purposes — is maintained within a relatively "safe" range of its overall exempt activity. Here are some key considerations, as explained by Ellis Carter of the Charity Lawyer blog.
Posted: 08/03/2011
Submitted by: Anne Andrews, The Sector Agnostic
As the experts weigh in on whether News Corp. is liable under the U.S. Foreign Corrupt Practices Act (FCPA), those in the social sector should take note: plenty of social enterprises are also subject to the FCPA. Here's what you need to know.
Posted: 07/12/2011
Submitted by: Jon Widrick, Esq. and Amy Kincaid
This advisory refers to the state Benefit Corporation law, which authorizes corporations to elect to be benefit corporations and is codified in the Code of Virginia Title 31.1-782 et seq. (herein referred to as "the Statute"), to address two questions:
- What are the key provisions of Virginia's Benefit Corporation law?
- How does a business become a Benefit Corporation in Virginia?
Posted: 07/06/2011
Submitted by: Kyle Westaway, Socentlaw
On June 16 and 17, the New York Senate and Assembly unanimously (62-0 in the Senate and 139-0 in the Assembly) passed a bill that, when signed by Governor Cuomo, will make New York the fifth state to allow businesses to organize as a Benefit Corporation.
Posted: 06/30/2011
Submitted by: Emily Chan, Nonprofit Law Blog
This year's Craigslist Foundation Boot Camp included an informative session on "Governing Boards: From Good to Great," providing useful tips on a common and difficult issue for many nonprofits: how to create and maintain a strong board of directors.
Posted: 06/30/2011
Submitted by: Emily Chan, Nonprofit Law Blog
The IRS has identified 275,000 nonprofits that had their federal tax-exempt status revoked as a result of failing to satisfy their filing requirement for three consecutive years. Here's why — and, if you're one of those organizations, a few things you need to know.
Posted: 06/20/2011
Submitted by: Ron Robins, Alrroya.com
For most companies, that which drives up their stock values is what ultimately matters — and adopting sustainability practices can do precisely that. Investing for the Soul founder and analyst Ron Robins looks at actions taken by some key companies to promote sustainability.
Posted: 06/16/2011
SRI funds based in the U.S. and operating globally are subject to a hodgepodge of laws and regulations that are meant to be applied generically to all businesses. Often these laws and regulations are a poor fit when applied to mission-driven, triple-bottom-line SRIs; at the same time, they impose substantial penalties for non-compliance. It is therefore essential for international SRIs to establish comprehensive global compliance programs that address these issues.
Posted: 05/15/2011
Submitted by: Emily Chan, Nonprofit Law Blog
In 2008, nearly 70% of the $1.4 trillion generated by nonprofits came from the sale of goods and services — a.k.a. earned income. Emily Chan of the Nonprofit Law Blog looks at two key issues public charities and other nonprofits face when considering or conducting earned income activities: whether that income is taxable, and whether it jeopardizes the organization's tax-exempt status. (05/15/2011)
Posted: 05/15/2011
Submitted by: Emily Chan, Nonprofit Law Blog
What started as a trickle of cash is now a serious revenue stream. What new form should your organization take? In Part II of a series, Emily Chan of Nonprofit Law Blog looks at affiliating a social enterprise with an existing nonprofit, and whether to keep revenue-generating activities within the nonprofit, move them into a nonprofit or for-profit subsidiary, or consider some form of hybrid entity. (05/15/2011)
Posted: 04/22/2011
Overlooked and often underestimated, the cost of legal fees for aspiring social entrepreneurs and nonprofit leaders can be the difference between taking the next step and going home. Now there's a new tool to help combat the cost of lawyers while providing much needed legal assistance: LawForChange.
Posted: 04/18/2011
Submitted by: Foley Hoag LLP
The Massachusetts Attorney General issued a report outlining two steps the AG will take to limit – but not explicitly ban – independent director compensation at public charities.
Posted: 03/07/2011
Submitted by: R. Todd Johnson, Business For Good
These questions and answers provide insight into the purposes, rationale, and intentions behind the Working Group's proposed changes; background on why the Working Group pursued this proposed statutory framework; a summary of comments received by the Working Group during its work; and a summary of the reasons for its choices. Part 1 of 2.
Posted: 03/07/2011
Submitted by: R. Todd Johnson, Business For Good
These questions and answers provide insight into the purposes, rationale, and intentions behind the Working Group's proposed changes; background on why the Working Group pursued this proposed statutory framework; a summary of comments received by the Working Group during its work; and a summary of the reasons for its choices. Part 2 of 2.
Posted: 03/03/2011
Submitted by: R. Todd Johnson, Business For Good
California's AB 361 may become the vehicle for a Golden State version of the Benefit Corporation — which means California could be the first state to offer social entrepreneurs not one, but two forms for creating a business focused on the flourishing of people, planet and profit.
Posted: 03/01/2011
Submitted by: Jim Fruchterman, Stanford Social Innovation Review
A veteran social entrepreneur provides a guide to those who are thinking through the thorny question of whether to create a nonprofit, a for-profit, or something in between.
Posted: 02/18/2011
Submitted by: Kyle Westaway
Kyle Westaway, legal expert on social enterprise and Managing Partner at Westaway Law, explores what makes California's newly introduced "flexible corporation" unique
Posted: 01/28/2011
Submitted by: Robert A. Wexler
"How can I explain the laws that affect social enterprises to social entrepreneurs and other non-lawyers without driving them or myself crazy?"
Posted: 11/23/2010
Submitted by: Elizabeth Carrott Minnigh, Esq., Buchanan Ingersoll & Rooney PC*
As I have traveled around the country speaking on the L3C, it has become clear that even for folks very familiar with the program related investments (PRIs), there are still a lot of questions on how and when to utilize an L3C. So what do you need to know to add the L3C to your bag of tricks?
Posted: 11/11/2010
Submitted by: Maryland State Senator Jamie Raskin
Posted: 10/25/2010
Submitted by: Courtney Ivins, Lex Mundi Pro Bono Foundation*
In commemorating National Pro Bono Week (October 24-30, 2010), we open this forum to discuss the following question: Can and should pro bono law be encouraged to meet the growing legal needs of social entrepreneurs?
Posted: 09/16/2010
Submitted by: Robert Wexler, Adler & Colvin
In his famous poem, The Road Not Taken, Robert Frost, laments, “two roads diverged in a yellow wood, and sorry I could not travel both …” But really, I ask, in today’s high paced, high-tech world, why the heck not? Why when investing in a for-profit social enterprise does a private foundation have to make a distinct choice, at least from a legal and reporting standpoint, between investing to make money or investing to further a charitable activity?
Posted: 07/26/2010
Submitted by: R. Todd Johnson
After his seventh trip to Ethiopia, R. Todd Johnson reflects on how well-intentioned philanthropy produces long-term, unintended negative consequences, how the “NGO economy” is “killing” entrepreneurship, and how business can assist in the elimination of extreme poverty.
Posted: 07/11/2010
Submitted by: Tom Triplett
More and more nonprofits are looking to earned income as a way to generate new revenue. But moving to social enterprise as a revenue source can cause problems with other funding sources and the activities they support. So what to do when these situations threaten to undermine your nonprofit? Here are some alternatives to consider.
Posted: 06/29/2010
Submitted by: R. Todd Johnson
Until recently, available corporate forms left entrepreneurs with a simple “either – or” equation. You either adopt a corporate form that maximizes the possibility of doing well, or adopt a corporate form that maximizes doing good. This has been the great legacy of our public policy decisions.
Posted: 06/14/2010
Submitted by: Allen Bromberger, Perlman + Perlman
In a word, yes. On April 13, 2010 , the Governor of Maryland signed a law creating a new legal form called a “Benefit” corporation. A few weeks later, Vermont followed suit and passed a similar law. Essentially a business corporation, fully taxed and operated for the benefit of its shareholders, the benefit corporation law also allows the founders to embed a social or public purpose into the corporate charter.
Posted: 06/07/2010
Submitted by: Jessica Prue
For generations, farmers did not know who purchased their coffee, how it tasted, or if they would sell to the same buyer again. Sustainable Harvest is changing this cycle with the “Relationship Coffee” trade model. Relationship Coffee operates with complete transparency and brings coffee farmers, importers, and roasters together on a level playing field.
Posted: 06/01/2010
Submitted by: Robert Wexler, Adler & Colvin
Leaders of social enterprises, whether existing or to be formed, often express a profound interest in forming a new “hybrid” entity, ostensibly to solve one of the fundamental problems facing social enterprises today – the ability to build a social enterprise with a combination of grants, donations, and private equity. But really, what is a “hybrid”?
Posted: 05/24/2010
Submitted by: R. Todd Johnson, Jones Day
As is often the case, my education in “for-benefit” businesses started on a college campus. And like so many education stories, it started with a group of young and passionate individuals, just crazy enough to give up on all the conventional ideas of success in pursuit of a new ideal.
Posted: 05/18/2010
Submitted by: David Roll
Is proliferation of legal sites for social entrepreneurs a good thing? And how do you select a pro-bono lawyer? As an antitrust lawyer, David has been trained to believe that competition is good, that it maximizes the allocation of resources and enhances efficiency. But is this happening in the pro bono legal space?
Posted: 05/11/2010
Submitted by: Jessica Prue
The New York Times recently published an article critical of organizations that use unpaid internships to take advantage of college students and recent graduates. In light of this publicity, how can your social sector organization ensure that you offer meaningful experiences this summer and, more importantly, host unpaid interns legally?
Posted: 05/06/2010
Submitted by: Ken Weigel, Alston & Bird LLP
Today’s transportation and communication systems have made international activities easier and more prevalent than ever. Even when one is aware that a transaction is international, it is easy to forget that import and export requirements exist. However, forgetting import and export requirements can result in delays, seizures, and monetary penalties, even for innocent and unknowing mistakes.
Posted: 04/30/2010
Submitted by: Anke Wessels, Center for Transformative Action
There are over 1.5 million nonprofit organizations in the United States, each spending valuable time and resources on operations that are not directly related to their mission. Is there a way for new entities to get the benefits of nonprofit status while avoiding filing for nonprofit status and becoming burdened with the details of financial and organizational management? Fiscal sponsorship may be a viable solution for many new social sector projects.
Posted: 04/23/2010
Submitted by: Joy Anderson and Elizabeth McCance, Social Edge
Today I’d like to introduce a different slant on the question of what legal structures best foster social ventures. Specifically, when launching a new venture, what is the best way to protect the mission?
Posted: 04/11/2010
Submitted by: David Roll
I recently attended a panel hosted by the Hudson Institute to discuss the implications of Citizens United on nonprofits and democracy. I was struck by the fact that whether the panelists supported or opposed Citizens United, they were not much interested in discussing whether money in politics—the constant need to raise campaign funds-- was corrupting the democratic process and drowning out the voice of the American people.
Posted: 04/01/2010
Submitted by: Lindsay Clinton, Social Edge
The desire to combine social and commercial in the pursuit of an outcome has led to creative ways to structure an enterprise—often known as a hybrid model or dual structure, because it combines a nonprofit arm with a for-profit arm. The for-profit allows an enterprise to facilitate investment, while the nonprofit can facilitate grant capital and provide non profit-making services to a community.
Posted: 03/20/2010
Submitted by: Milton Cerny, McGuireWoods LLP
On Jan. 21, 2010, the U.S. Supreme Court issued a landmark decision in Citizens United v. Federal Election Commission that may have a dramatic impact on spending for political activities by business corporations and nonprofit 501(c)(4) social welfare organizations, 501(c)(5) labor organizations, and 501(c)(6) trade associations.