 |
Nonprofit News You Can Use | |
| Issue 2 (12/04) |
The Newsletter of the Law Firm for Non-Profits, P.C. |
|
|
|
Nonprofit News You Can Use | |
| Issue 2 (12/04) |
The Newsletter of the Law Firm for Non-Profits, P.C. |
|
After
an absence of much too long, "Nonprofit News You Can Use" is back. In the last few months we have added two legal staff (for a total of 3) and are committed to making this a valuable tool to our clients and other subscribers.We promise to keep it short, timely and focused exclusively (well, almost) on legal matters of interest to nonprofits and in particular our clients. Links are provided for more detail on any item covered
.The Law Firm for Non-Profits, P.C. has prepared this newsletter to enable you to learn more about our firm and the services it provides. The information it contains does not, and is not intended to, constitute legal advice. This information does not create an attorney-client relationship, nor does it substitute for obtaining legal advice.
1. The Nonprofit Integrity Act:
Sweeping New Rules for Nonprofits Operating in California
Newly enacted legislation imposing a
number of new requirements on charitable organizations holding assets in, based
in, or otherwise active in California. The Act imposes new rules in the areas of
(1) Accounting Standards, (2) Financial Audit Requirements, (3) Compensation of
Top Executives or Staff and (4) Fundraising. It also requires registration with
the Attorney General's Registry of Charitable Trusts within 30 days of receipt
of first assets. The old rule was six months.
Click to read
a more detailed survey of the Act.
2.
Internet Board Meetings and Electronic
Communications
Another new law affecting all
California nonprofit corporations expands and clarifies how corporations may use
faxes, email, electronic message boards and other electronic means to engage in
official communications (e.g., notices of meetings, etc.) with directors and
members. In addition, the new act permits board meetings to be held over the
Internet if each director can concurrently communicate with all other
participating members and (2) each director is provided a means of participating
in all matters before the board including the capacity to propose and object to
board actions.
The actual rules are fairly detailed. We review the basics here. A copy of the entire bill can be downloaded. Key provisions of the new law provide that members of the board of a California nonprofit corporation may participate in a board or committee meeting through use of electronic video screen or other electronic transmission in addition to conference telephones. Use of video screens and conference calls are valid so long as all members participating in the meeting can hear one another.
A meeting may be held by other electronic means (e.g., various Internet-based conference services) if the following two conditions are met:
The new law also clarifies that a writing now includes faxes, telegrams and other electronic communication (e.g., e-mail and postings to electronic message board or networks that the corporation has designated for such purposes). Transmission by the corporation of an electronic communication to a board member is valid if it is sent to a recipient "who has provided an unrevoked consent to the use of those means of" communication and if the corporation creates a record that is both capable of retention, retrieval and review, and which may be rendered into a "clearly legible tangible form."
While the new law makes it easier to send notices and hold meetings electronically, nonprofit corporations will be required to obtain board members' consent (preferably in writing) before using such electronic communications. Boards may want to amend their bylaws to permit these new means of communication. To the extent their current bylaws conflict with the new law, boards must still follow the law. (I.e., those bylaw provisions are probably invalid.)
3. Donation
Acknowledgement Thresholds Upped
As you may know, 501(c)(3) organizations are required to provide donation
substantiations when donors receive something of value (e.g., a premium) in
exchange for their donation. There is an exception to the requirement when the
item has "insubstantial value." The IRS indexes the values for inflation. The
limits for 2005 are as follows:
4.
"Automatic" Excess Benefit Transactions
Spurred on by well-documented abuses and Congressional pressure, the IRS has
begun a crackdown against so-called Excess Benefit Transactions by 501(c)(3) and
501(c)(4) organizations. Click to
read our article on the topic.
These new efforts have already begun. For example:
By way of an example, consider an executive who is given use of a company car. IRS rules require that personal use of the car be considered compensation to the E.D. If the value of the personal use is not reported on the year-end Form W2 or a Form 1099, that private use of the car may be considered an "automatic" excess benefit transaction. If audited, penalties may be assessed against the E.D. as well as all directors that voted for, abstained or otherwise took part in the decision that let the E.D. use the car for personal use. At the extreme, the nonprofit could even lose its exemption.
Board members can protect themselves (they are subject to personal liability for penalties assessed if they approved excess benefits) and their organizations by following relatively straightforward "safe harbor" guidelines provided by the IRS. (These are detailed in our article.) California corporations have nearly identical rules they must follow with regard to payments to corporate insiders. Note that these rules apply to any transaction between the nonprofit and a covered insider. Organizations large and small - including some very large ones you may know well - are currently being investigated by the IRS. Read and heed the rules and you can be fairly well assured that, if your organization is audited, it will pass scrutiny.
5.
How to Conduct Trademark Searches for Free
The name by which a nonprofit
does business is often one of the most valuable pieces of "property" it has.
Too few nonprofits (and other businesses) fail to take adequate measures to
protect their business names from infringement. They may also have selected names that
infringe on the rights of others. These rights fall under the law of trademarks.
A critical first step to adopting and using a business name is to conduct a trademark search. This can be expensive, particularly for nonprofits. Our friend and colleague, Larry Zerner, is an intellectual property attorney whose website has many useful links on trademarks, copyright, entertainment law, publishing, etc. His recent newsletter, The ZernerLaw Report includes an article of particular interest to cash-strapped nonprofits titled "How to Conduct Trademark Searches for Free." Click here to view it.
6. Easy to Set-Up
E-Philanthropy Websites
We're always on the look out for resources to help nonprofits. This issue we
highlight www.CharityFinders.com.
CharityFinders lets you create a highly functional, secure "e-philanthropy"
website. Their website construction wizard guides you though building the site,
which you then control. CharityFinders has generously offered to provide a
special discounts to clients of the firm. Send an e-mail to Allan Pressel at
Allan@CharityFinders.com or call 877-456-3210.
7. HR California -
Resources for California Employers
The focus in this newsletter is heavily on California law. It will not always be
so, but here's another reference specifically for California nonprofits (and
businesses). The California Chamber of Commerce covering just about everything
you might want to know about employment law. We would be happy either to answer any specific questions
you may have or refer you on to very capable employment lawyers if that would be
advisable.
The contents of this newsletter may constitute advertising.