TWEETS OF THE WEEK

Nonprofit Tweets of the Week – 2/27/15

Red carpet at night with flashlights

Last Sunday, the Oscars telecast featured several films and acceptance speeches that focused on themes of social justice and social good. Have a listen to Bob Marley‘s Get Up, Stand Up while perusing our curated nonprofit tweets of the week:

  • Atlantic: What the FCC’s historic net neutrality ruling means in plain English http://theatln.tc/1DvznGh
  • Independent Sector: The 2015 Principles for Good Governance and Ethical Practice, our answer to a new world of opportunity for nonprofits http://ow.ly/IDIGK
  • CompassPoint: Real world insights show a better path to successful #nonprofit #boards: http://ow.ly/JADmx From @HaasJrFund
  • Nonprofit Quarterly: 10 signs your nonprofit is on a destructive path to its demise http://hubs.ly/y0s9760 #10WaystoKill
  • Olive Grove: Why is “generative thinking” so important for #KickAssGovernance? Find out in this @PwC_LLP article: http://ow.ly/JnTTo
  • Jan Masaoka: Forms 990 and IRS passwords hacked; allows access to restricted data like Schedule B donor lists @UrbanInstitute The Hill
  • Lucy Bernholz: Strategy and collaboration in #philanthropy – working at cross purposes? PND Blog  … @fdncenter
  • CA Attorney General: AG Kamala Harris Announces Legislation to Improve Transparency & Accountability for Commercial Charitable Fundraisers
  • ScaleChange: The Top Nonprofit Crowdfunding Risks
  • Insider Higher Education: .@AlliantU becomes a benefit corporation, blurring the line between for-profit and nonprofit: http://bit.ly/1BemMtn
IRS & FEDERAL TAX ISSUES

Expedited Determination Process for 501(c)(4) Organizations

The Internal Revenue Service recently released a memorandum modifying and clarifying procedures for Section 501(c)(4) applicants seeking exemption after December 23, 2014, which may potentially be engaged in political campaign intervention or providing private benefit to a political party, but that otherwise do not present any issues regarding their exempt status.

The memo directs the Exempt Organizations Determinations Unit (EOD) of the IRS to offer, by letter, an optional expedited process to such pending applicants. The process permits these organizations to make representations under penalties of perjury regarding their past, current, and anticipated future political campaign intervention and social welfare activity. More specifically, an organization must attest that it has spent and anticipates that it will spend:

  • 60% or more of both its total expenditures and its total time (measured by employee and volunteer hours) on activities that promote social welfare; and
  • 40% or less of both its total expenditures and total time (measured by employee and volunteer hours) on direct or indirect participation or intervention in any political campaign on behalf of (or in opposition to) any candidate for public office.

Once these representations are made, the organization receives a favorable determination letter without further review, within one month.

If the organization does not opt in to the faster review process within 45 days of the date of the letter, the EOD will review all of the facts and circumstances in the pending application to determine if the organization is operated primarily for social welfare purposes, including by evaluating possible political issues. This may involve multiple IRS reviewers and requests to the organization for additional information.

To summarize, this expedited procedure is available when an organization:

  1. Applies for recognition of exemption under Section 501(c)(4) and presents no other issues with regard to exempt status;
  2. Receives Letter 5228 from the IRS offering the optional expedited process; and
  3. Makes the representations required for eligibility included in Letter 5228 within 45 days of the date of the letter.

The memo also directs the IRS to promptly review any pending applications that were submitted prior December 23, 2014 and outlines the steps for doing so, including documenting such review and recommendations.

For further information, see Memorandum for Exempt Organizations Determinations Unit and Exempt Organizations Technical Unit Employees.

BOARDS / GOVERNANCE   CALIFORNIA LAW   CURRENT AFFAIRS & OPINION   IRS & FEDERAL TAX ISSUES

CEB: Nonprofit Law: Hot Topics – Livecast on Thu, 2/26, at noon

Hot Topics Letterpress

Erin and I will be presenting a program on Nonprofit Law: Hot Topics for Continuing Education of the Bar (CEB) – State Bar of California livecast on Thursday, February 26 from noon to 1 p.m. The following description of our program is on the CEB website.

Providing counsel to nonprofits requires knowledge and understanding of corporate and tax laws that are often not intuitive or easy to research, and that often differ from the laws applicable to for-profits. In this program, we’ll explore considerations in the nonprofit formation process, potential alternatives to formation of a new nonprofit entity, the legal implications of nonprofits engaging in commercial activities and for-profit social enterprises pursuing charitable goals, common governance mistakes, and recent changes in the laws impacting nonprofits. We will use relevant examples to illustrate how these concepts might apply to your clients.

Program Highlights:

  • New Form 1023-EZ, the short-form federal exemption application
  • Fiscal sponsorship, an often appropriate alternative to a startup
  • Recent changes to the Nonprofit Corporations Law affecting governance and bylaws
  • Earned revenues and application of the unrelated business income tax
  • Prohibited private benefits and application to nonprofits affiliated with businesses
  • Introduction to alternative entities, including the benefit corporation and social purpose corporation
TWEETS OF THE WEEK

Nonprofit Tweets of the Week – 02/20/15

Bacteria seen under a scanning microscope

Notable news from the past week: Superbug, the White House Countering Violent Extremism Summit, Oscar predictions, and the Lunar New Year. Have a listen to Glen Campbell‘s heartbreaking, Oscar-nominated I’m Not Gonna Miss You while perusing our curated nonprofit tweets of the week:

  • Bridgespan Group: Making the Right Hire: Assessing a Candidate’s Fit with Your Organization http://bit.ly/1ySJQX5 #BridgespanClassic
  • Gene: Nonprofit collaborations – what does that mean? http://linkd.in/1DqxmMM #MOU #partnership #jointventure #merger
  • La Piana Consulting: Common-Sense Tips for Good Collaboration http://ow.ly/JkUp7 #nonprofits
  • La Piana Consulting: Dozens of insights on nonprofit collaboration, how to make it work http://ow.ly/JdbVy (subscribe to receive alerts re: new posts)
  • National Council of Nonprofits: The best blog post all year (so far!) about restricted funding http://buff.ly/1Dltmyo
  • For Purpose Law: Will Your Nonprofit Go the Distance? 4 Key Indicators of Longevity and Success http://bit.ly/YbZSBk
  • Harvard Business Review: It’s time to rethink corporate governance as we know it: http://s.hbr.org/171yrxO
  • Eugene Fram: Nonprofit Boardroom Elephants and the ‘Nice Guy’ Syndrome: A Complex Problem http://wp.me/pz57p-Wi
  • CalNonprofits: Bringing in the New: 2015 Labor Laws explained by CalNonprofits Insurance Services http://bit.ly/1FtX7Oe
  • Nonprofit Quarterly: What does the Koch brothers’ #donor confidentiality case mean for other #nonprofits? http://hubs.ly/y0xyz00
  • Rebecca Hamburg Cappy: New draft ballot measure committee manual from @CA_FPPC. Comment period open. http://fppc.ca.gov/index.php?id=450
  • Council on Foundations: “What impact investors can learn from microfinance” http://ow.ly/JkFFP #impinv #philanthropy
BOARDS / GOVERNANCE

Nonprofit Radio: Board Calendars

Businessman Notepad Our Time Concept

I’ll be on Nonprofit Radio speaking with host Tony Martignetti this Friday at 10:30 am PT / 1:30 pm ET discussing agenda items nonprofit boards should get on the board calendar at the start of the year. You can tune in to the live feed on Talking Alternative or catch up later on iTunes.

We’ll be talking about:

  • What belongs on your board’s calendar and agendas?
  • What should your board discuss?
  • Which actions should your board take?

Take a look at our article Nonprofit Board Calendar: Schedule of Key Agenda Items on LinkedIn. And let us know if you have any questions or areas you’d like to cover.

CURRENT AFFAIRS & OPINION   FINANCIAL MANAGEMENT

Important OMB Guidance on Reimbursement of Indirect Costs

 

Investment

In 2013, the White House Office of Management and Budget (OMB) issued historic guidance regarding the policies and procedures of federal grants. Applicable to all new written agreements (contracts and grants) signed after December 26, 2014, government agencies and departments that hire a nonprofit using federal funds must reimburse the organization for its reasonable indirect costs, also referred to as overhead or administrative costs. The Interim Final Rule, updating the regulations of all federal departments and agencies required to follow the OMB Uniform Guidance, closed for public comment on February 17, 2015.

Nonprofits can seek reimbursement of their indirect costs by electing to use their already federally approved indirect cost rate (if one exists), negotiating a new rate, or utilizing the default minimum rate of 10% of the modified total direct costs. The Guidance applies not only to federal government agencies, but also pass-through entities such as those state and local governments that carry out part of a federal program.  This is a significant change, as many pass-through entities previously did not pay indirect costs, even if the nonprofit had a negotiated indirect cost rate established.

While the Guidance does not require a government agency to use the new overhead reimbursement standards for existing contracts or a basic renewal of an existing contract, any substantial changes made to the contract could require that the higher overhead rules apply. For nonprofits that already receive or plan to receive federal funding, it is important to understand the new guidelines and accurately identify and track overhead costs in order to benefit from these changes. It may be necessary to contact the government or pass-through entity associated with the contract in order to elect or negotiate an indirect cost rate and reimbursement. Furthermore, nonprofits should be prepared in the case that those state or local agencies that issues their award are not up to speed about the new requirements. The National Council of Nonprofits advises:

In connection with government grants and contracts, the [OMB] Uniform Guidance provides only the promise of improved treatment; it is incumbent upon each organization to (1) take action to own its own costs, (2) learn its responsibilities and rights under the new rules, and (3) protect those rights through advocacy, both on its own behalf with each grant and contract, as well as by engaging in efforts with the broader nonprofit community.

Lastly, nonprofits should take note that while the guidance requires these agencies to pay for indirect costs, it does not provide additional funding to do so.

Additional Tips from CalNonprofit’s Webinar, “What Nonprofits Need to Know About the New OMB Guidelines:”

Further Reading:

National Council of Nonprofits: New OMB Guidance on Indirect Costs: What It Does and Why It Matters; Know Your Rights … and How to Protect Them

Nonprofit Quarterly: The Word for Today is “Overhead”: OMB Uniform Guidance Takes Effect

TWEETS OF THE WEEK

Nonprofit Tweets of the Week – 2/13/15

Hockey_Mask_Jason

Friday the 13th. My long-term friend (since nursery school) and highly respected entertainment attorney Larry Zerner played Shelly, owner of the hockey mask Jason Voorhees stole in Friday the 13th Part III. With a nod to Sunday’s Grammy Awards, have a listen to Album of the Year winner Beck‘s Heart is a Drum while perusing our list of nonprofit tweets of the week:

CALIFORNIA LAW

Emergency Powers for California Nonprofit Corporations

Emergency pointer icon on white backgroundUnder California law, specifically after the approval of Assembly Bill 491 in 2013, corporations including nonprofit public benefit, mutual benefit, and religious corporations are permitted to conduct certain corporate activities during an emergency. Types of emergencies include a natural catastrophe, an enemy attack, an act of terrorism, or a state of emergency declared by the Governor. Previously, a nonprofit board might be unable to act, or might risk a challenge if it took action during an emergency without the approval of the minimum number of required directors.

Corporations may now conduct ordinary business operations and affairs in anticipation of or during an emergency, and may even adopt bylaws to manage and conduct such affairs, only effective in such an emergency. Furthermore, any action taken in good faith by a corporate director, officer, employee, or agent during that time may not be used to impose liability on that individual or the board.

The law also permits the directors to:

  • Relax notice requirements for directors to “any practicable manner under the circumstances”;
  • Modify lines of succession to accommodate the incapacity of any director, officer, employee, or agent resulting from the emergency;
  • Relocate the principal office, designate alternative principal offices or regional offices, or authorize the officers to do so; and
  • Deem that one or more officers of the corporation present at a board meeting is a director, in order of rank and within the same rank in order of seniority, as necessary to achieve a quorum for that meeting.

Note, though, that the board may not take any action that requires the vote of members or is not in the corporation’s ordinary course of business, unless the required vote of the members was obtained before the emergency.

CALIFORNIA LAW

Simplified California Exemption Process for Non-Charitable Nonprofits

Simplicity concept.

Effective January 1, 2014, Assembly Bill 1173 simplified the process for applying for California tax exemption by certain organizations that have a federal exemption determination letter. Non-charitable nonprofits, specifically those recognized by the IRS as exempt under Internal Revenue Code (IRC) Section 501(c)(4), (5), (6), and (7), are now permitted to file the short Form 3500A, previously used only by 501(c)(3) organizations. Form 3500A is an abbreviated two-pages, in comparison to the rather lengthy Form 3500 previously required.

Note that while it’s possible for 501(c)(4), (5), (6), or (7) organizations – social welfare organizations, labor organizations, business leagues (including trade and professional associations), and social clubs – to self-declare themselves as tax-exempt for federal income tax purposes without filing an application with the IRS, such organizations will remain taxable for California income/franchise tax purposes unless they obtain recognition of exemption from the Franchise Tax Board.

Read more about the Form 3500A here, and on the Franchise Tax Board website, here.

TWEETS OF THE WEEK

Nonprofit Tweets of the Week – 2/6/15

paparazzi

I’m asked by various publications to provide background on general nonprofit legal issues – sometimes on stories involving celebrities, who may unfairly get top billing when they are only tangentially related to a charity in question. Have a listen to Lady Gaga‘s Paparazzi while perusing our curated nonprofit tweets of the week:

  • Hollywood Reporter: Eva Longoria, Two “Philanthropreneurs” and the Dangers of Hollywood Charity: THR Investigates http://thr.cm/BSwVXS
  • Santa Barbara News: Cynder Sinclair: New Laws for Nonprofits in 2015 You Should Know About http://dlvr.it/824jbK
  • Rick Cohen: President Obama’s Proposed 2016 Federal Budget: What Nonprofits Should Know – @COF_ @IndSector @NatlCouncilNPs NPQ
  • CalNonprofits: Tell the IRS how it can improve Form 990-take this survey & make a difference for our sector! http://svy.mk/18Lmy05
  • Independent Sector: MUST READ: New Blog frm IS Board Chair & President Emeritus of @YMCA, Neil Nicoll. “A Time For Renewal” http://ow.ly/IuxGc [Ed. I’m honored to be a new member of the IS Public Policy Committee and looking forward to being part of the renewal.]
  • Gene: Make sure your nonprofit board accomplishes all of its tasks – sample board calendar here http://linkd.in/1LETre7
  • Jeff Clarke: Fewer emerging philanthropists creating big foundations, is it the end of an era? biz model #innovation #lean is in – Inside Philanthropy
  • Jane Wales: Committed to making #philanthropy a leader in info sharing @FordFoundation expands @creativecommons licensing policy http://ow.ly/Iz27X
  • C. Garber-Siegrist: IRS Publishes New Revenue Procedures Addressing Applications For Tax-Exempt Status http://ow.ly/IjmI7 @Mondaq @VenableLLP [Ed. PLR user fee now $28,300!]
  • Nayantara Mehta: Nice work by UC Hastings law students: Translating San Francisco’s Lobbying Rules Into Plain English
  • Rockefeller Foundation: Trending this Week: 7 Things We’ve Learned About Impact Investing in 7 Years http://ow.ly/I9aKx #ImpInv