Blog - Page 42 of 48 - Charity Lawyer Blog

Corporate Sponsorship or Taxable Advertising?

Generally, exempt organizations are taxed on income from any unrelated trade or business activities regularly carried on by the organization, less any permitted deductions. Promotion of private companies is generally considered advertising – an unrelated business activity. If the recognition given to corporate sponsors is deemed to be advertising, then the sponsorship payment may be taxed as unrelated business income and will not be counted as public support for purposes of qualifying as a public charity.

May 20, 2011 No Comments

Grantmaking and Gift Planning

Protection of Charitable Assets Act

Proponents of the Act argue that registration of charities is important for several reasons. The first of which is that a list of registered charities can serve as a resource for the Attorney General and the public. Additionally, a potential donor will be able to consult the list to ensure that a charity is current in its filings which will help in making an informed decision about contributing. Lastly, the registration requirement serves to remind anyone who operates or plans to operate a charity of the seriousness of the fiduciary duty one undertakes as a director or trustee of a charity.

Detractors of the Act can point to numerous cases of overreaching by State Attorneys General over the years as well as existing multistate registration burdens on charities that fundraise in multiple jurisdictions.

May 3, 2011 No Comments

Nonprofit Law Jargon Buster – Voting Members vs. Self-Perpetuating Boards

When considering whether to include voting members in a nonprofit corporation, it is important to understand that voting members of a nonprofit corporation are generally analogous to shareholders of a business corporation. Voting members have statutory rights under state law; therefore, it is important to clarify the right of members to avoid inadvertently creating a voting membership class and vesting ultimate control in the members when that is not your intention. Once a membership has been established, it may be difficult to eliminate, and it may be impossible without the consent of the members.

April 26, 2011 No Comments

Lessons to be Learned From the Arizona Fiesta Bowl

Could one man really do that much damage to an Arizona institution as high profile and important as the Fiesta Bowl? More likely, the nonprofit scandal of the year was a group effort fueled by a dysfunctional board. The Fiesta Bowl board bears all the hallmarks of a board more interested in administering than governing the organization. Still, there are lessons to be learned from the Fiesta Bowl’s governance and oversight failures.

April 8, 2011 No Comments

Memorializing Nonprofit Board and Committee Meetings

Because minutes hold such legal importance, it is necessary to make certain that every organization has a policy of recording minutes in such a way that ensures that the minutes accurately reflect the wishes and actions of the board of directors; however, all language which might be used to the company’s disadvantage in the future should be eliminated. Minutes should be worded in a way that is clear and concise and accurately conveys the meaning of the action taken.

March 28, 2011 No Comments

Is it Time to Form a For-profit Subsidiary?

Tax-exempt Organizations engaging in social enterprise or other active business pursuits often worry that a growing stream of unrelated business income could threaten their tax-exempt status. This concern is related to the prohibition against tax-exempt organizations engaging in more than an insubstantial amount of activity unrelated to their tax-exempt purpose. Unfortunately the term insubstantial is undefined. Based on court cases, it appears that gross unrelated business income receipts of 5 percent or less is always safe while over 20% is probably too much.

When unrelated business endeavors take off, the success of the business can threaten a 501(c)(3) organization’s tax-exempt status. To protect their tax-exempt status, many tax-exempt organizations with successful unrelated business ventures move their unrelated business activities into a taxable for-profit subsidiary.

March 15, 2011 No Comments

Setting Nonprofit Executive Compensation

In light of the heightened interest of the I.R.S., Congress, state regulators, and the media in executive compensation, as well as heightened penalties, exempt organizations should strongly consider increasing the amount of time and attention they devote to investigating, deliberating, documenting, and reporting executive compensation. To facilitate the careful review that is demanded, tax-exempt organizations that employ an executive staff should consider implementing the following practices and procedures:

March 8, 2011 No Comments

Nonprofit Law Jargon Buster: What is Proxy Voting?

Proxy voting is legal mechanism for a member of a voting body to delegate his or her voting right to another member of the voting body. In the context of nonprofit corporations, voting bodies include the board of directors as well as voting members. Some nonprofit corporations rely on proxy voting because it allows directors or members who have confidence in the judgment of other directors or members to vote for them and allows the voting body to convene a quorum of votes when it is difficult for all members of the voting body to attend. In proxy speak, the individual delegating his or her voting authority is referred to as the principal and the individual exercising the delegated voting authority is referred to as the proxy for the principal.

February 28, 2011 No Comments

Governance

Nonprofit Directors and Trustees – Should Board Service Pay?

Trustee compensation is a sensitive topic in the philanthropic world. Many people believe that board members should serve out of a sense of giving back to their community. However, the philanthropic world is diverse and there are many positions that require extraordinary talent and an extraordinary time commitment to lead them. Nonprofit organizations are also increasingly complex and subject to complex rules and that make significant demands on that talent. Increasingly, board members face the potential for liability if they fail to fully adhere to these complex and fast changing rules.

February 18, 2011 No Comments

Charitable Solicitation Laws – Commercial Co-Venture

Generally, a commercial co-venturer is a person regularly and primarily engaged in commerce (other than in connection with raising funds for charities) who conducts a “charitable sales promotion.” Co-venturers are typically for-profit companies who engage in charitable sales promotions. Approximately twenty-one jurisdictions regulate commercial co venturerers.

February 9, 2011 No Comments