The Long Arm of Charitable Solicitation Law

Forty-one U.S. states as well as the District of Columbia and many local jurisdictions require some type of registration for charities trying to solicit funds. These laws create a patchwork of largely inconsistent laws that nonprofits must contend with. To add to the confusion, the jurisdictions that require registration have different definitions and standards regarding who must register, which documents are required, whether nonprofits must renew their registrations, and which government agencies process the registrations.

Collaboration Case Study – Acquisition Converted to Management Agreement

Often, in an effort to save money, clients come to their attorneys with a plan and simply ask them to “draft X.” Frequently, X isn’t the most appropriate solution. This case was one of those. The deal started out as an acquisition with the lawyer (me!) being kept at arm’s length when in fact more involvment early on would have quickly identified that this program was not a candidate for an acquisition, but rather a simple management arrangement.

Nonprofit Law Jargon Buster – 501(c)(3) Organizations and the Commerciality Doctrine

The well-meaning have been advising exempt organizations to “operate like a business” for years. If the organization is a Section 501(c)(3) organization, operating too much like a business can cost it its tax-exempt status due to the “Commerciality Doctrine.” Practically, the issue of commerciality usually arises when a tax-exempt organization engages in any endeavor for which a clear for-profit counterpart exists in the marketplace. Typical examples include publishing, consulting and sales of arts and crafts. Today, the Commerciality Doctrine is a threat to the increasingly popular movement toward social enterprises. Those that choose to organize as Section 501(c)(3) organizations should only do so after a thorough review of the Commerciality Doctrine.

Ripples from the Zambezi – Economic Development from the Bottom Up

In Ripples from Zambezi, the author, Ernesto Sirolli, turns the top down model of grand economic development on its head. Instead, his focus is on nurturing the passion and creativity of individuals.

The title comes from Sirolli’s early experiments in economic development in rural Africa, where he worked as a foreign aid worker for the Italian government. The beginning of the book details his experiences in Africa and the ideas that those failed experiments planted in his mind.

From that experience, he learned firsthand the damage traditional top down development models could do and made it his life’s work to find a better way to build local economies. He later discovered that the ideas that germinated in Africa applied to Western economies, too.
Sirolli’s approach builds on the theories of E.F. Schumacher, A.H. Maslow, Carl Rogers and others. The fundamental concepts underpinning Sirolli’s work include:

– A belief in the intrinsic goodness of human nature.

– If people don’t ask for help, leave them alone.

– There is no good or bad technology to carry out a task – only an appropriate or inappropriate one. Something big, modern, and expensive is not necessarily best; it all depends on the circumstances.

Top 10 Smart Moves Great Nonprofit CEOs Make

Asks Forgiveness, Not Permission. I receive calls from nonprofit CEOs who are struggling with their boards. I am also asked by boards to intervene when there is a an issue with the CEO. What I have learned is that great CEOs do not overly confer with the Board. Instead, great CEOs understand that it is their job to implement the Board’s strategy within the scope of the strategy, policies, and budget the Board has set. Too much “checking-in” can have the unintended consequence of inviting the board to micro-manage. Conversely, scribbling too far outside the lines of the board approved strategy, policies, and budget can get a CEO fired.

Charity Raffles – Tread Carefully

As the recession deepens, we get more and more creative ideas from people wanting to conduct complex raffles. In Arizona, the most popular questions this year involve raffles of real estate. While raffles can be great revenue generators for charitable organizations, many charities do not realize that in most states, including Arizona, raffles are illegal gambling. Cautionary tales abound. Most states have specific exceptions for charitable raffles but require the charity and the raffle to meet specific criteria to qualify.

Top 15 Non-profit Board Governance Mistakes

Boards are entitled to delegate tasks to committees, officers, staff, or in certain cases, professionals, but only if they perform sufficient oversight. Oversight is commonly exercised through policies and procedures so long as the board ensures that the policies and procedures are actually followed. Common oversight mechanisms include review of financial statements and the annual Form 990 as well as the implementation of various governance policies.

Starting a Nonprofit in Arizona – Applying for Tax-Exempt Status

Forming a nonprofit corporation is not the same as being tax-exempt. To obtain 501(c)(3) status, newly formed entities must apply to the IRS for a formal determination of exemption. Entities seeking 501(c)(3) status apply by filing Form 1023. (Entities seeking exemption under other sections of 501(c) file Form 1024.)

Newly formed organizations applying for exemption face a chicken and egg dilemma. Form 1023 requests considerable detail regarding the charity’s planned programs and activities. The attitude of the IRS is that requiring applicants to articulate detailed plans is a small price to pay for the significant tax benefits associated with 501(c)(3) status.

Starting a Nonprofit in Arizona – Forming the Entity

Once a non-profit founder has surveyed the non-profit landscape and found a legitimate need, recruited an initial board, created business and fundraising plans, and scraped together some start-up funding, he or she is ready to proceed. In Arizona, it usually makes the most sense to form the entity as an Arizona non-profit corporation. The steps required to form a nonprofit in Arizona are covered.

Starting a Nonprofit in Arizona – Laying the Groundwork

I receive several calls a week from people who want to start a new non-profit. Looking back on my legal career, I realize that many of the tax-exempt organizations I helped to create early on never got off the ground. Today, I consider it part of my responsibility to the potential new client and to the sector to educate would be founders on the realities of the marketplace. What follows is a walk through the typical discussion that I have with potential founders.

Permanent Endowment = Infinity and Beyond

Most non-profits understand that if a fund is a permanent endowment, the principal must be preserved in perpetuity. Still, in my practice I am often surprised by how little some fundraising professionals understand about the mechanics of gift restrictions – particularly the implications of permanent restrictions and legal meaning of the term “endowment.”

Proposal to Abolish the Rebuttable Presumption

The Chronicle of Philanthropy reports that Sen. Grassley is once again attempting to change the rules that impact how certain exempt organizations set executive compensation. This time, Sen. Grassley wants to do away with the “rebuttable presumption process” that exempt entities have been relying on to provide some measure of assurance that their compensation decisions will not trigger intermediate sanctions.