Nonprofit Tweets of the Week – 6/24/16

United Kingdom and European union flags combined for the 2016 referendum - crowd of people walking on Millenium Bridge and St Paul's Cathedral in the bckground

The past week was marked by yesterday’s Brexit (the UK’s vote to leave the European Union) and the sit-in by House Democrats protesting the House’s failure to pass legislation addressing gun violence. Have a listen to House Democrats singing We Shall Overcome while perusing our curated nonprofit tweets of the week:

  • CalNonprofits: Historic UK “Brexit” Vote Raises Countless Issues for Nonprofits, Civil Society NPQ … via @JamesMSchaffer
  • Bob Ottenhoff: Orlando says $7M collected after nightclub shooting to be given to family members & survivors instead of nonprofits NY Times [Ed. Lucy Bernholz also noted the trend: “Donors chipping away at NPOs from top (Chan Zuckerberg) + bottom $7m Donations Go Directly to Orlando Kin”.]
  • Gene: State Attorneys General Urge Caution When Donating in Response to Orlando Massacre with UPDATE #crowdfunding
  • Phlantopic: Millennials & the Presidential Election Cycle: Does Cause Engagement Change in an Election Year?  @derrickfeldmann
  • NPR: Doctors Without Borders Rejects EU Funds Over Migrant Policies
  • Gene: Listening to @EugeneSteuerle re: charitable deduction floor & deduction for non-itemizers – see Urban Institute
  • Gene: Listening to Roger Colinvaux re: critical need for uniform disclosure rules for all tax categories – campaign giving Tax Policy Center
  • Nonprofit Quarterly: #IRS’s ACT has released its 2016 report, and the news is not good for either #nonprofits or the IRS itself. NPQ
  • Nonprofit Law News: IRS Issues Regulations Affecting Compensation Arrangements at Tax-Exempt… | by @McDermottLaw #nonprofit #law
  • Theresa Fay-Bustillos: New article–growth of donor advised funds by financial firms while donations are down could be linked. #nonprofit



Nonprofit Radio: New Overtime Rules


I’ll be on Nonprofit Radio this Friday at 10:30 am PT / 1:30 pm ET discussing the new overtime rules and their impact on nonprofits with host Tony Martignetti. Catch us live on Talking Alternative or a few days later on iTunes.

The Department of Labor’s final overtime rule updates the salary level required for the executive, administrative, and professional (“white collar”) exemption to ensure that the Fair Labor Standards Act’s (FLSA) intended overtime protections are fully implemented, and it provides greater clarity for white collar workers and their employers, including non-profit organizations. The final rule will also lead to better work-life balance for many workers, and it can benefit employers by increasing productivity and reducing turnover. – U.S. Department of Labor


The FLSA requires that most employees in the United States be paid at least the federal minimum wage (currently, $7.25) for all hours worked and overtime pay at time and one-half the regular rate of pay for all hours worked over 40 hours in a workweek.

A common set of exemptions from the overtime rule, referred to as the white-collar exemptions, applies to employees employed as executive, administrative, or professional (EAP) employees*, generally only if (1) they are paid on a salary, not hourly, basis (the salary basis test); (2) their duties primarily involve executive, administrative, or professional duties as defined by the Labor Department regulations (the duties test); and (3) their salary meets the minimum threshold (salary level test). Note, however, that the minimum salary threshold does not apply to teachers, lawyers, or doctors.

There is another exemption from the minimum wage and overtime rules for highly compensated employees* if their total annual compensation meets or exceeds the minimum threshold.

* As of the posting date, these links do not have updated thresholds resulting from the new rules described below.

New Overtime Rules

Updated Thresholds:

Most employees earning a salary of less than $47,476 per year ($913 per week) will be entitled to overtime compensation. This approximately doubles the previous threshold of $23,660 (unchanged since 2004), effectively requiring employers to pay overtime for most salaried employees receiving between $23,660 and $47,476 per year, which they were previously not required to do under the FLSA. Further, the threshold will be automatically be updated every three years, starting on January 1, 2020. Note that the salary level does not include payments for medical, disability, or life insurance, or contributions to retirement plans or other fringe benefits. Nondiscretionary bonuses and incentive payments (including commissions) may be used to satisfy up to 10 percent of the standard salary test requirement so long as such payments are paid on a quarterly or more frequent basis.

The highly compensated employee minimum compensation threshold is now $134,004 (previously, $100,000).

Effective Date:

December 1, 2016

What Employees (and Nonprofits) are Covered by the New Rule:

The overtime rules generally apply to employees covered by the FLSA. These include:

  • Employees of organizations considered a “covered enterprise” – generally organizations that engage in ordinary commercial activities that result in sales made or business done that of at least $500,000. Most charitable nonprofits that do not engage in ordinary commercial activities will not be subject to the new overtime rules except employees of the following named enterprises: hospitals; institutions primarily engaged in the care of older adults and people with disabilities who reside on the premises; schools for children who are mentally or physically disabled or gifted; federal, state, and local governments; and preschools, elementary and secondary schools, and institutions of higher education. Note that the term ordinary commercial activities is similar to, but not synonymous with, the term unrelated business activities (as such term is used for purposes of determining unrelated business income tax liability).
  • Employees who engage in interstate commerce (including through the phone or the internet) or in the production of goods for interstate commerce and employees whose work involves or relates to the movement of persons or things (including donated items) across state lines.
  • Employees who are covered by operation of specific state laws. According to the National Council of Nonprofits: “In at least 11 states [or jurisdictions], the changes to the federal rules will automatically apply to virtually all employees and employers.”

See the excellent flowchart on National Council of Nonprofits site: Is Our Nonprofit Organization Covered by the FLSA?

What Nonprofit Employers Can Do:

According to the Department of Labor:

Non-profit organizations may ensure compliance for those employees affected by the Final Rule in a number of ways, including providing pay raises that increase workers’ salaries to the new threshold, spreading employment by reducing or eliminating work hours of individual employees working over 40 hours per week for which no overtime is being paid, or paying overtime.


In 2014, President Obama directed the Department of Labor to update its regulations regarding minimum wage and overtime standards to ensure “workers are paid a fair day’s pay for a hard day’s work.” The new $47,476 threshold represents the 40th percentile of earnings of full-time salaried workers in the lowest-wage Census Region (the South). According to the Department of Labor Q&A site:

The Department has concluded that the standard salary level of $455 weekly ($23,660 annually for a full-year employee) set in 2004 was too low to adequately account for the elimination of the former “long” duties test that ensured that employers could not avoid paying overtime by assigning lower-paid employees a minimal amount of exempt work. Furthermore, the real value of the salary level has fallen significantly since it was set 12 years ago. Today, the annualized equivalent of the standard salary level is below the 2015 poverty threshold for a family of four, making it inconsistent with Congress’ intent to exempt only “bona fide” EAP workers, who typically earn salaries well above those of workers they supervise and presumably enjoy other privileges of employment such as above average fringe benefits, greater job security, and better opportunities for advancement.


The Department considered several alternatives for setting the standard salary level to determine which method would work most effectively with the current duties test to effectively distinguish between overtime-eligible white collar employees and those who are bona fide EAP employees. Because the Department decided not to revise the current standard duties test, it set a salary threshold at a level reflective of employees who historically have received overtime protections from those who have not. Specifically, because the current standard duties test is substantially similar to the former “short” duties test, which before 2004 had been associated with a higher salary threshold, the Department looked at the historical ratios between the short and long test salary levels in order to assure that we restored the historical relationship between having a less rigorous duties test and an appropriately high salary threshold. The Department set the standard salary level at the 40th percentile of weekly earnings of full-time salaried workers in the lowest wage Census Region (currently the South), because it was at the low end of the historical range of short test salary ratios and would be appropriate across all areas and industries. The new salary amount will be $913 per week (which is $47,476 annually for a full-year worker) when this Final Rule takes effect on December 1, 2016.

Reaction from the Nonprofit Community

According to The Nonprofit Quarterly:

Among the more than 270,000 comments the DOL received to the proposed rule were many voices speaking for the nonprofit community, and they seemed to see only the negative impact on their operations; mission seemed to take a backseat to the difficulty of meeting a higher standard. Rick Cohen’s “brief review of one third of the posted comments found there was not one positive comment from a nonprofit.” The comments he saw predicted dire outcomes, staff reductions, service cuts, and even agency closings. No one seemed to see the increased pay for those earning low salaries as an important benefit to be supported. – Nonprofit Reactions to New Overtime Rules Run the Gamut

Independent Sector commented:

While IS believes that employees should be paid a living wage and similarly supports an increase in the salary threshold for eligibility to receive overtime compensation, there are many concerns that IS and others in the nonprofit sector have regarding this rule. As expressed in the submitted comments, IS is troubled by the agency’s lack of engagement with nonprofit organizations in developing its proposed new overtime rule, and urged four specific revisions to the plan before it is implemented: moving to a phased-in implementation; revising the terms of federal grants and contracts with nonprofit organizations; allowing for regional market differences to the proposed salary threshold; and implementing an open process for any changes to the duties tests.


Overtime Regulations and the Impact on Nonprofits (National Council of Nonprofits)

Breaking down your nonprofit’s obligation to pay overtime under the new federal rules (National Council of Nonprofits)

Overtime Final Rule and the Non-Profit Sector (Department of Labor)

Guidance for Non-Profit Organizations on Paying Overtime under the Fair Labor Standards Act (Department of Labor)

Overtime Rules for Nonprofits – videos (Independent Sector)

New overtime rules for nonprofits: what’s different about California? (CalNonprofits)

What’s different in California: Although the federal threshold for exempt status has been $23,660, in California the threshold for exempt status is set as twice minimum wage. So with the current minimum wage of $10/hour, the minimum for exempt status is $41,600/year, and as of January 1, 2017 when the minimum wage goes up to $10.50/hour, the minimum salary for exempt employees will be $43,680/year. So the gap between the old and new thresholds is narrower in California.


Nonprofit Tweets of the Week – 6/17/16

Natural Dramatic Clouds area Background

This week was marked by the tragedy in Orlando, an act of terror and an act of hate. Have a listen to Broadway Carpool Karaoke (fun but with some poignant lyrics from Rent and Les Miserables) while perusing our curated nonprofit tweets of the week:

  • CEP: On the blog, CEP’s @kmbolduc reflects on Orlando and what philanthropy is for.
  • Money: Read this expert’s advice before you donate to the Orlando nightclub shooting GoFundMe campaign Time
  • Sunlight Foundation: IRS opens up Form 990 data, ushering nonprofit sector into the age of transparency:  #ire16
  • Everyday Sexism: Obama: “we need to tell our children the right stories because the stories we tell matter” #StateofWomen
  • Nonprofit Quarterly: TRENDING: House Hearings on New Overtime Rule Reveal Nonprofit Pay Attitudes
  • National Council of Nonprofits: All things #overtime straight from the DOL
  • Associations Now: Report: IRS Nonprofit Office Needs Improvement #assnchat
  • Gene: Advisory Committee on Tax Exempt & Government Entities 2016 Report of Recommendations IRS (p. 89)
  • Mother Jones: From Thiel to Trump, the rise of the mega-rich brings a new peril for watchdog journalism
  • San Francisco Foundation: Announcing our new strategy for #BayArea Hear more from our CEO, Fred Blackwell #BayAreaBold [Ed. TSFF “committing its activities and its grantmaking to take on the issues of racial and economic equity ….”]

Featured Small Firm: San Francisco Daily Journal


NEO Law Group was profiled in the San Francisco Daily Journal on Friday, June 10, 2016.

The attorneys at NEO Law Group preach impact over profit maximization – and they walk the walk.

I’ve been incredibly fortunate in working with some of the best people you could ever know. You can find short bios of our team here. And we extend our thanks to our clients and colleagues who generously agreed to be interviewed by the Daily Journal: Scott Curran (founder of Beyond Advisers and former General Counsel of the Clinton Foundation), Jan Masaoka (CEO, CalNonprofits), Peggy Saika (former CEO, Asian Americans/Pacific Islanders in Philanthropy), David Sohn (employment and litigation attorney), and Kyle Westaway (social enterprise attorney, consultant, lecturer, author).

“Lawyers in general can get excited about being complex just for the sake of feeling smart or doing something novel … He’s just about trying to understand what the most practical and highest quality approach for the client is going to be.”

Below are lists of our recent published works and speaking engagements. We are committed to continuing to produce valuable information for nonprofit leaders so they can advance their missions and benefit us all.

Recent published works:

Program-Related Investments: Will New Regulations Result in Greater and Better Use? The Nonprofit Quarterly (2016)

The Ongoing Overhead Myth and the Dangers of Overly Zealous State Legislators, The Nonprofit Quarterly (2016)

The Deposed “King” of Queens Library: The Legacy of Bad Nonprofit Leadership, The Nonprofit Quarterly (2016)

Fiscal Sponsorship: A Balanced Overview, The Nonprofit Quarterly (2016)

New California Regulation Poses Threat to Nonprofits Not Properly Registered, The Nonprofit Quarterly (2015)

Fiscal Sponsorship: What You Should Know and Why You Should Know It, ABA Business Law Today (2015)

Basic Legal Considerations Before Launching a Planned-Giving Program, The Chronicle of Philanthropy (2015)

Recent speaking engagements:


Lobbying, Advocacy & Political Activities of Exempt Organizations, CalCPA NPO Cmt – SF (6/21)

Legal and Ethical Crowdfunding for Non-profits: Opportunities, Pitfalls, and Best Practices, ABA Center for Professional Development (6/28)

Legal Careers Outside the Box, Continuing Education of the Bar – California

Ask a Nonprofit Lawyer: Governance & Bylaws, Yale Alumni Nonprofit Alliance

Nonprofit Law Primer for Emerging Leaders, NEO Law Group

Duties and Responsibilities of Serving on a Nonprofit Board, Bar Association of San Francisco

What You Need to Know about Social Media and Nonprofits, Clear Law Institute


Current Developments – The Bakers’ Dozen, Western Conference on Tax-Exempt Organizations (Los Angeles)

Nonprofit Board Scandals and the Lessons Learned, BoardSource Leadership Forum (New Orleans)

Legal Session, National Network of Fiscal Sponsors Annual Gathering (New York City)

10 Rules Your Nonprofit Needs to Know for 2016, Annual Policy Convention, CalNonprofits

Learn How to Form a Nonprofit, Yale Alumni Nonprofit Alliance

Opening Plenary – Threads, Independent Sector National Conference (Miami)

Top Five Hot Legal Topics for 501(c)(3) Organizations (webinar), American Law Institute

Nonprofit Legal Structures and Compliance Issues, CalCPA Nonprofit Interest Group, South Bay

Nonprofit Law, MyLawCLE (Miami)

Social Media for Nonprofits (webinar), American Law Institute

Building Movements and Advocacy, 501(c)onference, Center for Nonprofit Management (Los Angeles)

Diverse Views on Social Impact Financing, National Summit on Quality in Home Visiting Programs, The Pew Charitable Trusts, Every Child Succeeds (Washington DC)

How to Start a California Nonprofit Webinar, California Family Resource Association

Hot Topic Call: Risk Assessment for Model A Fiscal Sponsors, National Network of Fiscal Sponsors

Nonprofit Law: Hot Topics, Continuing Education of the Bar, State Bar of California

Nonprofit Law Basics, Community Leaders Summit, Parents Club on Board,


Nonprofit Tweets of the Week – 6/10/16


The past week was marked by World Oceans Day, outrage over the sentencing of the Stanford rapist, and the loss of another icon, Muhammad Ali. Have a listen to R. Kelly’s The World’s Greatest while perusing our curated nonprofit tweets of the week:

  • National Council of Nonprofits: ACT report “reduction in EO staff has created critical gaps” Urges IRS to be more responsive to taxpayor inquiries
  • Gene: Lobbyists Leave Capitol Hill for the States  … h/t Tim Delaney @NatlCouncilNPs (“policy action is at the state level”)
  • For Purpose Law: Nonprofits Stop Bad Regulations
  • Gene: Arts Projects: Charitable or Not? | Sen Fin Cmt Chair’s review into 501c3 private museums
  • Nonprofit Quarterly: Clara Miller‘s piece is a must-read for those serious about philanthropic impact: NPQ
  • Foundation Center – SF: #Transparency is no longer optional for foundations. Open 990s are coming—is your #foundation ready?
  • Guidestar: Is the IRS Form 1023-EZ TOO easy? @chazemclean weighs in: @IRSnews
  • Jean Case: Confronting the 4 Myths of Impact Investing Medium
  • Steve Case: The 15 most important slides in Mary Meeker’s Internet trends report @kpcb
  • Jatrice M Gaiter: 70% of wealthy Americans trust private sector over nonprofits on social issues

Legal and Ethical Crowdfunding for Non-profits: An ABA Webinar

Crowdfunding Law

I’ll be on a panel presenting a webinar for the American Bar Association titled Legal and Ethical Crowdfunding for Non-profits: Opportunities, Pitfalls, and Best Practices. Date: June 28, 2016. Time: 10:00 – 11:30 am PT / 1:00 – 2:30 pm ET. 1.50 Ethics/Professionalism CLE Credit Hours.


Michael E Adler, moderator
Katherine Emily Redman
Gene Takagi
Hash Zahed

Program Description:

This program is intended for lawyers who work in or represent non-profits and are interested in (or provide legal counsel on) crowdfunding for an organization or charitable cause, including for litigation funding. Crowdfunding – raising money to support an undertaking or cause by reaching out to large (often unknown) numbers of people as donors through in-person events or social media – has become increasingly common. Websites including CauseVox, KickStarter, GoFundMe, and others are growing more popular, and LinkedIn offers hundreds of listings somehow related to crowdsourcing. All in all, an array of legal and ethical issues can trip up any individual or organization testing this financing approach. Lawyers need to be positioned to counsel clients effectively on the parameters, ethical considerations, and legal conditions surrounding crowdfunding. Our speakers will provide examples and guidance to put you on the right path.

Supplemental Resources:

Crowdfunding for Nonprofits (Michigan Community Resources Crowdfunding Legal Team)

Crowdfunding for Nonprofits (National Council of Nonprofits)

Risks and Rewards of Crowdfunding for Nonprofits (Foundation Center)

Nonprofit Radio: Crowdfunding

Nonprofit Crowdfunding Risks

Crowdfunding Platforms & Commercial Fundraisers

The Global Crowdfunding Industry Raised $34.4 Billion In 2015, And Could Surpass VC In 2016 (DazeInfo)

Crowdfunding and Nonprofits (California Attorney General)



Nonprofit Tweets of the Week – 6/3/16

Stop gun violence

Yesterday was National Gun Violence Awareness Day (as a UCLA alum, it had particular importance after this week’s tragic shooting). Have a listen to Nicki Minaj‘s Favorite while perusing our curated nonprofit tweets of the week:

  • White House: More than 30,000 Americans die from guns every year. Here’s what we’re doing to #StopGunViolence. #WearOrange


  • Nonprofit Quarterly: TRENDING: Nonprofit Reactions to New Overtime Rules Run the Gamut NPQ
  • Independent Sector: Parts 1 & 2 on nonprofit overtime rules are available online now! Access the recordings: here #FLSA
  • National Council of Nonprofits: What are the risks of underfunding nonprofit infrastructure? Weak policy capacity via @npquarterly
  • Lucy Bernholz: The Real Reason Big Pharma Wants to Help Pay for Your Prescription – Bloomberg
  • National Council of Nonprofits: IRS Form 1023[-EZ] filing fee reduced as of 7/1/16 from $400 to $275 per Rev Proc 2016-32 – how much easier will IRS make creating a #nonprofit?
  • Bridgespan Group: Becoming a more #diverse #nonprofit means making your values tangible
  • Rob Reich: 62% of family foundation board members say involving relatives as important as having impact. Chronicle of Philanthropy
  • Nonprofit Orgs: 28 Must-Read Fundraising and Social Media Reports for Nonprofits:
  • Fast Co. Exist: Demanding that nonprofits not pay for overhead is preventing them from doing good
  • Fast Co. Exist: Millennials are reshaping the world of social impact

California’s Dangerous Nonprofit Warning Label Bill – AB 2855 – Will Not Advance

Jubilant people

5/28/16 Update: Costly bill that would have required charities in California to post a “warning label” on their websites and fundraising documents was held in committee and will not advance.

AB 2855 was a dangerous bill that threatened nonprofits raising funds in California and reflected the lack of understanding of its author/sponsor, California Assemblymember Jim Frazier (D –Oakley), of the nonprofit sector’s work, influence, and scope. Had this bill passed, it would have ranked among the worst laws in the country in its characterization and treatment of nonprofits. The bill was considered by the Assembly’s Appropriations Committee on May 11. Thanks to the strong advocacy efforts of over 700 nonprofits led by CalNonprofits and to members of the Appropriations Committee and its Chair Lorena Gonzalez (D-San Diego), AB 2855 was held in committee on May 27 and will not advance.

For more information about the dangers of bills like AB 2855, read our Senior Counsel Erin Bradrick‘s article The Ongoing Overhead Myth and the Dangers of Overly Zealous State Legislators in The Nonprofit Quarterly (4/14/16).

Our original analysis of AB 2855 (before it was shelved)

Background of the Bill – Mandated Overhead Disclosures

AB 2855 originally was drafted to require charities operating or engaging in charitable solicitations in California to post their administrative overhead expenses or a link to such information on each and every one of their web pages and on the first page of each and every fundraising document.

Requirements of the ‘Warning Label’ Bill

Likely because of Constitutional issues related to compelling such speech, AB 2855 was amended to delete the overhead disclosure requirement and replace it with a requirement for charities to include what CalNonprofits terms a warning label, more specifically:

  1. a required prominent link on charities’ websites to “the Attorney General’s Internet Web site which contains information about consumer rights and protections and charity research resources”; and
  2. the Web site address of such Attorney General’s Internet Web site on all charities’ fundraising documents (including old ones) used to solicit in California.

AB 2855 would require hundreds of thousands of charities operating or engaging in charitable solicitations in California (regardless of what state in which they are based) to put a link to a California Attorney General website with unknown content that would also be freely available to the public without such link. And it would require those charities to put the Attorney General website address on tens of millions of fundraising documents that are distributed within California.

First Amendment Issues

A general principle of the First Amendment requires a court to review any government regulation of the content of a person’s or organization’s speech with strict scrutiny. Generally, this involves asking two questions:

  1. Does the regulation further a compelling governmental interest?
  2. Are the means used narrowly tailored to accomplish that governmental interest?

The government’s interest, according to the Legislative Analysis, is “to give consumers more information about how to research a charity before making a gift ….” The additional substantive information would be required of, and provided by, the Office of the Attorney General. Such information would be accessible to the general public without requiring charities to add any information to their communications. But advocates of the bill appear to be making an argument that giving consumers an easier time to find such information on a government web address is the compelling government interest requiring the consumer protection ‘warning label’ on what would amount to tens of millions of documents.

Requiring hundreds of thousands of charities fundraising in California to include such website addresses and links on all of their websites and fundraising documents will require much work. It’s difficult to see how proponents of the bill will claim that the bill is narrowly tailored particularly in relation to the rather narrow goal of making information on the Attorney General’s website easier for the general public to find. It would be the first law of such nature governing charities in the country and a strong signal of the state government’s distrust of the charitable sector based on a minuscule fraction of charities involved in scandals picked up by the media. It essentially would put charities in the same category as tobacco companies that are required to put a warning label on their products. And it would undermine the incredibly valuable work of the charitable sector, the sector most trusted by the public.

The U.S. Supreme Court dealt with content-based regulation of speech in a charitable solicitation context in Riley v. National Federation of the Blind, 487 U.S. 781 (1988). In Riley, the Court held that the North Carolina Charitable Solicitations Act was unconstitutional content-based regulation of speech. Members of the Assembly Committee should be fully aware of this case and how the Supreme Court protects free speech before voting on compelling the speech of nonprofits in the manner described by AB 2855.

Imagine if all states had the same requirements. Every charity raising funds in all states would have 50 links to include on their website and on all of their national fundraising documents.


See CalNonprofits letter to Assemblymember Lorena Gonzalez, Chair, Appropriations Committee:

The impact of AB 2855 – and thus any effort to ensure compliance with its requirements – would be far-reaching. AB 2855 would require every charity to include what feels to nonprofits like a “warning label” on their website in a “prominent” location and also requires nearly every document they produce to direct donors and others to the state’s top law enforcement’s website. Mandating content in the ways proposed by AB 2855 would be expensive and burdensome, and would detrimentally interfere with nonprofits’ ability to communicate with their constituents and the public. AB 2855 arguably compels speech in an unconstitutional manner by dictating specific content to be included on nonprofit websites and documents and seems ripe for challenge on this basis.

See CalNonprofits revised letter to the Honorable Ed Chau, Chair, Assembly Privacy and Consumer Protection Committee:

The AG’s office is already communicating this information to the public – their web site is the first listing in a Google search for “California charities.” Burdening nonprofits in and beyond California with required speech on “any document” which seeks donor support to simply advertise what the public can easily find is unnecessarily punitive without serving any compelling public interest. Imagine all the “documents” that non-profit organizations create to solicit funds to support their mission-based work: signs on coin collection jars, private letters to individual donors, billboards and other large-scale outdoor advertisements, flyers posted in laundromats, neighborhood association newsletters, to name just a few. And AB 2855’s provisions would apply to any charity – regardless of where they are based – that solicits donations from Californians. So, every inbound piece of mail from any charity in the world would have to include this unnecessary disclosure. The additional cost of including this provision on “any document” would be extraordinary.

Also see the Opinion piece by Tim Delaney, chief executive of the National Council of Nonprofits, in The Chronicle of Philanthropy:

The bill, as amended late last week, would force every nonprofit in the country that seeks funds in California to put a link on its home page – plus a disclosure on all other solicitation materials directing potential supporters to  the California Attorney General’s Office.  That office is instructed to provide “information about charities, informational materials containing consumer rights and protections and charity research resources to allow donors to become informed about a charity before making a decision to give.” Such legislative  language puts nonprofits at the mercy of an elected partisan’s changing views on what’s “appropriate” on such things as overhead, compensation, and advocacy – as well as which charitable causes are worthy. It probably will prompt copycat legislation in other states, transforming nonprofit website homepages into huge advertisements for the offices of state charity regulators, rather than the mission of the actual nonprofit.

Burdens and Costs to the State Government

AB 2855 will create substantial burdens for the State’s Office of the Attorney General in developing a website with appropriate information on how to research a charity (a very complex matter approached in myriad ways by grantmakers), developing regulations related to the law (including determining the minimum contacts required to fall within AB 2855 – e.g., a “donate” button on a passive website clicked by 5 California residents?), educating the public about the law and its associated regulations, re-designing registration and registration renewal forms, enforcing the law in audits, defending litigation on the constitutionality of the law (which would be expected in light of the almost universal opposition by the nonprofit sector).

You can access the May 11, 2016 Bill Analysis for the Appropriations Committee (which includes the comment “unduly onerous”) here.


Nonprofit Tweets of the Week – 5/27/16

Election 2016

The past week was marked by lots of election-related news. Have a listen to Electoral College – Schoolhouse Rock while perusing our curated nonprofit tweets of the week:

  • Nonprofit Quarterly: In the future the #IRS will be collecting far less information on donors than it currently does: State Regulators and Watchdogs Object to Changes in Donor Disclosure by Nonprofits 
  • CalNonprofits: Nonprofits don’t deserve to have a warning label ,,, A persuasive argument against AB 2855 in today’s SacBee Op-ed
  • Nonprofit Quarterly: How did the Oscar winning Spotlight expose still result in the loss of $52 million in charitable funds? NPQ
  • Bridgespan Group: When a founder moves on: how to deal w/the wrenching transition of a #nonprofit #CEO
  • Philantopic: Peter Thiel Calls It “#Philanthropy”: Going After Someone You Don’t Like Isn’t a Public Service   @Salon
  • Foundation Center – SF: Read the stats. Corporations really do benefit from giving! @VALEODelivers
  • Houston Arts Alliance: Currently reading (via @FracturedAtlas): So you want to become a 501(c)(3): @GTak Interview
  • Gene: 10 Tips and Considerations for Launching a Crowdfunding Campaign – DWT
  • Kevin Doyle Jones: good piece on new crowdfunding law @jennykassan
  • Innov8: “There’s a new crowdfunding exemption in California that could be a game changer… — Medium” #socent #socinn

501(c)(3) Electioneering Rules: Voter Guides & Candidate Questionnaires


Closeup of businessman making decision whether to accept or deny a suggestion or employee.


In this next post in our series on election-related activities and 501(c)(3) organizations, we are taking a closer look at nonpartisan voter guides and candidate questionnaires.  Despite the fact that such guides and questionnaires are election-related, 501(c)(3) organizations can prepare and distribute them without fear of jeopardizing their exempt status (if done properly!).

A voter guide or candidate questionnaire is typically a printed guide comparing the positions of candidates for a particular office.  The information used to compile a voter guide is often gathered from questionnaires sent to the candidates soliciting their responses and from public sources, such as campaign materials and incumbent legislative records.  While other types of entities may be able to prepare voter guides that instruct the recipient who to vote for, 501(c)(3) organizations may not prepare such guides for the purpose of influencing the outcome of an election or benefitting a particular candidate or political party.  Rather, it would be appropriate for a 501(c)(3) organization to distribute a voter guide merely for impartial educational purposes.

The IRS has indicated that, in determining whether the preparation and distribution of a voter guide constitutes impermissible campaign intervention, the following factors are key considerations:

  • “Whether the questions and any other description of the issues are clear and unbiased in both their structure and content.”
  • “Whether the questions posed provided to the candidates are identical to those included in the voter guide.”
  • “Whether the candidates are given a reasonable amount of time to respond to the questions.  If the candidate is given limited choices for an answer to a question (e.g. yes/no, support/oppose), whether the candidate is also given a reasonable opportunity to explain his position in his own words and that explanation is included in the voter guide.”
  • “Whether the answers in the voter guide are those provided by the candidates in response to the questions, including whether the candidate’s answers are unedited, and whether they appear in close proximity to the question to which they respond.”
  • “Whether all candidates for a particular office are covered.”
  • “Whether the number of questions, and the subjects covered, are sufficient to encompass most major issues of interest to the entire electorate.”

As with other election-related activities, the IRS will look at all of the facts and circumstances in reviewing a voter guide prepared by a 501(c)(3) organization.  This includes the guide’s format, its content, and the method of distribution used.  In designing a questionnaire to send to candidates, 501(c)(3) organizations must be careful to draft neutral questions—ones that do not hint at the “correct” answer or indicate the organization’s position on the issue being discussed.  They should also avoid separately stating the organization’s position on any of the issues covered in the guide, which would likely be viewed by the IRS as an invitation for recipients to compare the views of candidates to those of the organization.

Also, as with other election-related activities (and activities in general), a 501(c)(3) organization is not able to do indirectly what it would be prohibited from doing directly.  Accordingly, the distribution by a 501(c)(3) organization of a voter guide prepared by a third party that it could not have prepared itself will likely constitute impermissible political campaign intervention.