Independent Sector Threads: Oakland Style


Independent Sector and its regional convening partners held critical community conversations called “Threads” about the key trends, obstacles, and opportunities that will affect every organization and individual working toward the common good over the next 20 years. I had the privilege of attending the conversation in Oakland and summarizing it in 90 seconds for the Opening Plenary of the 2015 Independent Sector Annual Conference. In light of Oakland culture, I decided to deliver the summary as a rap:

In the style of California Love – (Oakland-based) 2Pac feat. Dr. Dre

In the citaaay, the city of Oakland
We kept it rockin!

Now let me talk to everybody ‘bout the Oakland meet
Diverse perspectives with a touch-of-heat
Talkin’ leadership, culture and financial health
Governance, operations, not enough shared wealth

We in that sunshine state with great diversity
The town where ya find Steph Curry keep droppin’ three
Big on tech, and sustainability
Gentrification, inequality

We all in a game where concerns are just short-term
Each impact needs a metric to confirm
Funders pressurin’ for early innovation
But can’t show failure in the nonprofit nation

We think young, in the cities by the Bay
Your project is the bomb if your project makin’ pay
Throw up a finger if ya feel the same way
We’re damn short-sighted in Californ-I-a

In the style of Nuthin’ But a G Thang – Dr. Dre feat. Snoop Doggy Dog

One, two, three and to the fo’
Demographic changes are banging down the do’
Ready to make an entrance, so sit on up
(Cause you know we ‘bout to rip it up)
Board leadership first, so we can pop it like a bubble
The diversity’s pathetic, now we know we in trouble
It’s more than a gender thang, baby!
Gen’rations think we each crazy!
Minor’ties asking can you see me!
Inclusion demands voice and authority

But, uh, now the next topic at hand
Tech’s no panacea, I’mma let you understand
From an old G’s perspective
Before it’s a solution you gotta prove that it’s effective

We never think we could be wors’ning the gap,
Creating more crap, and taking rurals off of the map

Now you know, independence we must preserve
No subcontract should stifle our voice and duty to observe
And I.S. that’s what we expect of you
Courageous positions on each issue
‘cause when the problems are so big and getting biblical
We can’t just say that we ain’t political

It’s like this and like that and like this and uh


Women Leaders Still Make Less Than Their Male Counterparts…Even in the Nonprofit Sector

Caucasian middle-aged businessman and Filipino businesswoman holding different sized piggybanks.


GuideStar recently released its 2015 Nonprofit Compensation Report, an annual report compiled using data reported by exempt organizations to the IRS for 2013.  Unfortunately, the Report’s findings regarding women leaders in the sector are not at all encouraging.  According to a list compiled by the author of the Report, the Report resulted in the following Key Findings, among others:

  • The percentage of female chief executive officers at nonprofits overall has decreased over the last decade. Although the percentage of female CEOs at larger nonprofits with annual budgets over $10 million increased slightly, the percentage of female CEOs at nonprofits with annual budgets under $5 million actually decreased.
  • Of the nonprofits with annual budgets over $50 million, a mere 18 percent of them had a female CEO. The percentage of women CEOs in nonprofits in this size category has only increased 4 percent in the last ten years.
  • For nonprofits that do have female CEOs, their male counterparts at other organizations earned between 6 and 23 percent more than they did in 2013. This is an improvement from the 21 to 47 percent discrepancy, depending on organization size, that GuideStar found when it first began reporting on the gender pay gap in nonprofits in 2001, but it still far from parity.

The Chronicle of Philanthropy reported that the compensation gap was most dramatic for women CEOs at nonprofits with annual budgets ranging from $2.5 million to $5 million, whose male counterparts earned a shocking 23 percent more than them.  Even at small nonprofits with annual budgets of less than $250,000, male CEOs still out-earned female CEOs by 6 percent, the lowest discrepancy found in any of the categories of budget size.  Over the last decade, the gender pay gap has slightly narrowed for organizations with budgets of $1 million or less or $50 million or more, but has actually widened for organizations with budgets between $1 million and $50 million.

The disparate treatment of female nonprofit CEOs with respect to compensation was further on display at the recent testimony of Cecile Richards, President of Planned Parenthood, before the House government oversight committee.  In his opening statement, committee Chairman Jason Chaffetz stated that Planned Parenthood wasn’t in need of federal subsidies, as evidenced by Richards’s compensation.  During questioning, he later continued to press her on the specific amounts of her compensation in various years in a condescending and derogatory manner.  Representative Carolyn Maloney responded to his questioning by commenting “In my entire time I’ve been in Congress, I’ve never seen a witness beaten up and questioned about their salary” and accused Mr. Chaffetz of “beating up on a woman, our witness, for making a good salary.”  As Nonprofit Quarterly pointed out, Richards’s compensation is actually low compared to the average CEO compensation for organizations with annual budgets of more than $50 million as reported by the GuideStar Report.

Although organizations recognized as exempt under Section 501(c)(3) must ensure that compensation they pay to executives is fair, reasonable, and not excessive, I think that the dismaying results of the Report raise some questions that all nonprofit Boards of Directors should be asking themselves.  Is their CEO’s compensation in fact fair and reasonable in light of the services the organization is receiving in return?  How does that compensation compare to that paid by similarly sized and similarly situated organizations?  Has the organization offered compensation that will enable it to attract the level of talent that it desires and needs?  Within the boundaries applicable to 501(c)(3) organizations with respect to compensation, does the organization’s compensation generally reflect the values that the nonprofit strives to stand for?  Has the organization inadvertently allowed any form of bias (by a Director, major donor, or other stakeholder) to influence its decisions regarding compensation?

While nonprofit Directors must be cognizant of the federal and, in some cases, state regulations regarding nonprofit compensation, asking these questions, and considering how the answers may reflect on the organization, may also very well be a part of carrying out a Director’s fiduciary duties owed to the nonprofit on whose Board she sits.  I hope that the results of future nonprofit sector compensation reports will tell a very different story!


Why Are Charities Tax-Exempt?


Charitable organizations are eligible to be tax-exempt under section 501(c)(3) of the Internal Revenue Code. This is based on a common belief that giving to charities is good for society. However, with ever increasing reports of corruption and fraud, very large amounts of monies tied up in endowment funds of universities and foundations, and cries of unfair competition by taxable for-profits, some people are questioning whether or not all charitable organizations should be tax-exempt?

With over 1.1 million tax-exempt charitable organizations, the first question is whether the requirements for being a 501(c)(3) organization are appropriate and sufficient for tax-exemption and for being a recipient of tax-deductible contributions*. The next question is whether governmental authorities are appropriately enforcing those requirements.

* Ed. Eligibility for receiving deductible charitable contributions is described under Section 170 of the Internal Revenue Code but generally covers the vast majority of domestic 501(c)(3) organizations.

501(c)(3) organizations:

  • must be organized exclusively and operated primarily for a 501(c)(3) exempt purpose – religious, charitable, scientific, testing for public safety, literary, or educational purposes, or to foster national or international amateur sports competition (but only if no part of its activities involve the provision of athletic facilities or equipment), or for the prevention of cruelty to children or animals;
  • must not allow net earnings to inure to the benefit of any private shareholder or individual (including any director);
  • must not engage in substantial lobbying (though a relatively generous amount of lobbying is permissible to most public charities, particularly those making the 501(h) election;
  • must not engage in electioneering.

What does it mean to be charitable?

Treasury Regulations describe “charitable” to include but not be limited to:

  • relief of the poor and distressed or of the underprivileged
  • advancement of religion, education, or science
  • defense of human and civil rights secured by law
  • action to combat community deterioration and juvenile delinquency

See our previous post – Starting a Nonprofit: What is “Charitable” under 501(c)(3)?

What does it mean to be educational?

Treasury Regulations describe “educational” as relating to:

  • the instruction or training of the individual for the purpose of improving or developing his capabilities; or
  • the instruction of the public on subjects useful to the individual and beneficial to the community.

See our previous post – Starting a Nonprofit: What is “Educational” under 501(c)(3)?


Some critics assert that it’s too easy to pass the requirements for furthering a “charitable” or “educational” purpose. See Anything Goes: Approval of Nonprofit Status by the IRS (Stanford University Center on Philanthropy and Civil Society). This has only been made worse by the new Form 1023-EZ made available last year by the Internal Revenue Service for use by applicants for 501(c)(3) status.


With unclear guidance about what it means to be operating for “charitable” and/or “educational” purposes, there are likely thousands of charitable organizations that are operating with purposes that many critics believe are not worthy of tax-exemption. But are we okay with lawmakers determining that a symphony deserves to be tax-exempt but a small animal rescue group does not or vice versa? Or that educating students on the sciences is an exempt activity but educating them on starting a business is not?

What is clear is that the charitable sector provides valuable services to communities and great value to society. Better guidance on what types of organizations qualify and do not qualify as exempt may be helpful, but lawmakers must be careful in making decisions that in the broader scheme harm the general good only to prevent a very small percentage of organizations from operating in a manner that may not have obvious public benefit or that many may believe are undeserving of exemption. What is important is for the IRS and state agencies to consistently and fairly enforce laws to help prevent organizations from operating inconsistent with 501(c)(3).

Ed. This post was written by a new contributor 15-year old Hana Takagi together with her uncle Gene.


Proposed Regulations Threaten California Nonprofits – Comments due July 13


Your Comment Counts words on a red suggestion box to illustrate the value and importance of feedback, opinions, suggestions and brainstorming ideas


In a previous post, we warned our readers about the initial draft of these proposed regulations from the Office of the Attorney General of the State of California:

The proposed regulations, if adopted, will mean such charities will need to suspend activities and fundraising if they are delinquent in their registration, and if suspended or revoked, their board members will be subject to personal liability and their assets subject to forced divestiture.

A revised version of the proposed regulations dated June 25, 2015 failed to adequately address the three provision we believe threaten California’s nonprofit sector and all individuals served by California nonprofits. You have until 5 p.m. on Monday, July 13, to send your comments to Joseph N. Zimring, Deputy Attorney General at

According to this article by Jeffrey Davine of Mitchell Silberberg & Knupp LLP:

The California Department of Justice, however, estimates that there are 52,000 charities within California that have not complied with these requirements. Moreover, it is estimated that there are at least 130,000 additional non-California charities operating in the State that have not complied with these requirements.

Assuming such statistics are accurate, if the proposed regulations are promulgated, over 180,000 charities in California will be required to stop operation until they have fixed their registration issues (which may take several months). 180,000! What would be the impact on the people relying on the services those charities are providing? What is the likelihood that this rule will most impact those most in need, particularly in rural and poor areas? And what message is the Attorney General sending by stating that if those 180,000 charities don’t stop operating, the Attorney General can hold the board members personally liable and take away all of the charity’s assets?

§ 999.9.3. Disclosure and Restrictions on Use of Charitable Assets After Suspension or Revocation of Registration.

(b) A registrant that has been suspended or revoked may not distribute or expend any charitable assets or assets subject to a charitable trust without the written approval of the Attorney General. Members of the board of directors or any person directly involved in distributing or expending charitable assets may be held personally liable in a civil action brought by the Attorney General for any charitable assets or assets subject to a charitable trust that are distributed or expended in violation of this regulation.

Why It’s a Problem:  A charitable nonprofit that is late filing a single form with a California agency may be suspended. If a nonprofit is suspended (whether it is aware of the suspension or not) but still operates (which generally means it’s expending charitable assets), the Attorney General has the power to sue the board members. This is the true even if the nonprofit is expending funds to pay its employees, live up to its contractual operations, or deliver urgent services to its beneficiaries. This will have a chilling effect on board recruitment and on the desire for nonprofits to operate in California.

(c) The Attorney General may direct a registrant whose registration has been suspended or revoked to distribute some or all of its charitable assets or assets subject to a charitable trust to another charitable organization or into a blocked bank account.

Why It’s a Problem:  If a charitable nonprofit has been suspended (e.g., for one late filing), that fact alone gives the Attorney General power to force the nonprofit to give all of its assets to another nonprofit.

§ 999.9.1. Automatic Suspension.

(d) A registration that has been continuously suspended for one year pursuant to this regulation shall be automatically revoked.

Why It’s a Problem:  A charitable nonprofit that is unaware of its suspended status (possible due to a change in mailing address, a common scenario for all-volunteer organizations) may have its registration revoked. While the revised version of the proposed regulations included a 30-day notice period to allow a noncompliant charity to cure the violation causing an automatic suspension, this notice will not be helpful if the organization’s leaders do not receive it.

Why the AG Wants These Regulations

I get why the Attorney General wants to propose regulations with teeth that forces the tens of thousands of noncompliant charities operating in California to comply with the registration requirements. I agree this is a major problem that needs to be addressed. But the draft regulations provide an inelegant solution, leaving it up to the Office of the Attorney General to pick and choose which charities and board members will be the examples facing the stiff consequences with little guidance. Why not limit the draconian consequences to more specific situations and eliminate the possibility of imposing such consequences upon an organization that missed a single filing resulting in suspension.

You can read more about the proposed regulations on the Wexler Law Group post, Second Bite at the Apple. We encourage you to also check out his very detailed comments.

Endorse Our Letter of Concerns

Please consider adding your endorsements to the Letter to Attorney General detailing our concerns with the proposed regulations. Joining us as signatories to the letter are  Barbara Rosen of Evans Rosen LLP; the California Association of Nonprofits; the National Council of Nonprofits, the Nonprofits Insurance Alliance of California (NIAC) and NIAC’s Founder/President/CEO Pamela E. Davis, and Independent Sector. The letter has also been endorsed by the United Ways of California; the Alliance for Justice; and Anne Wallestad, President & CEO, BoardSource. Even thought the comment period has passed, your endorsements will add weight to our efforts to protect charities operating in California and the millions of people they serve. Please contact us or leave your endorsement in the comments section below. Thank you for your advocacy!



Independent Sector: Threads


Independent Sector and its convening partners are holding critical community conversations (“Threads”) about the key trends, obstacles, and opportunities that will affect every organization and individual working toward the common good over the next 20 years. A Threads conversation was held in Silicon Valley on Monday and another will be held in Oakland (where I’ll be among the attendees) on Wednesday. I’ll be back in Washington DC on Friday for an Independent Sector Public Policy Committee meeting where I look forward to learning more about the common and distinct threads among the various regions.

Background Resource – Basis for Discussions:

Earlier this year, Independent Sector published Nine Key Trends Shaping the Future of the Charitable Sector. These trends are divided as follows:

Three Assumptions About National and Global-Level Forces
1. Disruption from inequality and environmental degradation
2. Greater ethnic diversity and new generations of leadership
3. Technology transforming learning, gathering, and associations
Three Assumptions About the Context for Pursuing Social Impact
4. Swarms of individuals connecting with institutions
5. Business becoming increasingly engaged in social and environmental issues
6. New models for social welfare and social change
Three Critical Uncertainties About Government
7, Will there be a resurgence of the public’s voice in policymaking?
8. Will the primary focus for policy development be at the local or national level?
9. How will government balance competing priorities and revenue pressures?

Favorite Tweets from Oakland:

  • One reason the #nonprofit sector is not solving big problems: we’re not keeping pace with the changing world. – Diana Aviv
  • Are we in the #nonprofit sector prepared and positioned to succeed in a world that is changing at such a fast pace? – Aviv
  • “We are the crazy ones” says Aviv “who think we can change the world.” Actually we aren’t crazy enough. – Jan Masaoka
  • “Running a nonprofit is like driving across the country and buying gas one gallon at a time.”
  • Another trend: Increasing demand for proof of impact & the challenge it poses to major social changes that take time.
  • Societal challenges: short-term thinking, income inequality, changing forms of communication, power inequality.
  • Why is ok to bemoan income inequality but not call out corporate control of public policy (such as taxes) as the reason? – Masaoka
  • James Head (East Bay Community Foundation) calling on the nonprofit sector to hold philanthropy more accountable and responsive.

Favorite Tweets from Silicon Valley:

  • Lucy Bernholz received applause questioning the premise that technology democratizes power rather than concentrating it.
  • Why do foundations always tell us we need to respond to demographic changes but won’t fund communities of color?
  • Nonprofits need a voice at policy table and be recognized as the service providers on the ground. More nonprofit vets in office!

Favorite Tweets from Earlier Threads:

  • Societal issue challenges: no confidence in institutions, widening inequality, political gridlock, focus on results not change…
  • NP sector in “defensive crouch”, needs to stand up and advocate for what we know works on the front lines.
  • Experience may be the enemy of our sector. We need to be adaptable to keep up.
  • Sector-wide ego holds us back from systems changes. It’s hard to accept solutions may come from outside the room.
  • Sea of information is overwhelming, therefore people are moving into self-imposed like minded clusters – a new form of tribalism
  • Ppl limit info they receive from opp viewpoints, this disconnects us. Fdns exacerbate this w/specialized funding
  • 43% of new workers are people of color. 80% of nonprofit workers are white. That’s a problem.
  • Right on – hiring and affording the best talent, esp in light of student debt is a major issue for nonprofits
  • “Young people don’t have a good on ramp into #nonprofit sector. Not enough training or PD to keep them.” Yes!! @ynpnla agrees
  • “Trust, turf, cash and credit” are noted challenges holding back collaboration in the nonprofit sector
  • Shift to “new power” – open, participatory, engagement – seems dominant theme so far #threadsla #nonprofit
  • Challenging us to move beyond “bold critiques and safe solutions.”

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

Important OMB Guidance on Reimbursement of Indirect Costs



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


A Prediction for the Nonprofit Sector in 2015


2015 what lies ahead

Predictions for the new year – love ’em or hate ’em – they’re difficult to do well. Good prognosticators have to go beyond stating obvious trends but without being careless. I’ve tried this once before (see 2008: Policy & Random Predictions by Gene Takagi, Esq.), and it’s instructive to look back. So, for 2015, I’ll note just one obvious, but often dismissed, trend and leave the more sophisticated predictions to others.

Nonprofits will increasingly recognize the importance of recognizing, understanding, and responding to the for-profit social enterprise movement.

While there has been a rise of for-profit businesses legitimately pursuing social goals, it’s still difficult for the public to determine which are the true do-gooders and which are the posers. Yet, they are intriguing and inordinately attractive. Are dollars and resources that otherwise would have gone to charity going to these efforts? Of course!

The New York Times certainly recognizes the issue. The newspaper invited experts to discuss the following issue in it its Room for Debate section on December 30, 2014: Is it better to invest money in a socially responsible business or give to a charitable group?

Nonprofits should recognize that many billions of dollars are involved. Corporations will highlight their social programs but those programs will increasingly be funding their own or other for-profit social good efforts instead of charities (e.g., Foundations will increasingly make use of program-related investments (PRIs), opting for this still little-used vehicle in lieu of making grants. As for individuals, here are some thoughts I offered at last year’s Independent Sector Public Policy Institute:

Impact and how you evidence impact. That’s what donors and funders want to see. And more and more, individuals (particularly those of younger generations) are becoming sector agnostic. They don’t care if they are supporting nonprofits or for-profits doing good. Making a loan through Kiva (which is not a gift to a charity) or supporting a crowdfunding project (which often is not to a charity) are attractive options. Charities have to recognize this new form of competition, and not only for funds, but also for talent.

Does it matter whether funds and assets designated for social good are given to a nonprofit or for-profit?

Absolutely! 501(c)(3) nonprofit organizations are best situated and structured to advance most charitable efforts. They must be organized exclusively for charitable purposes. They must be operated primarily for charitable purposes. They are subject to restrictions against private inurement, private benefit, excess benefit transactions, self-dealing, and violations of charitable trust laws. And they are required to publicly disclose their annual filings with the IRS. But there are other important factors to consider. For example, it’s even more important to determine which specific organizations (whether nonprofit or for-profit) receive those funds and assets. Some organizations just do a better job at advancing their social missions than others. And some for-profits do a better job than many nonprofits.

How should nonprofits respond to the for-profit social enterprise movement?

Nonprofits need to recognize, more than ever, they are operating in a broadened competitive environment for funds and supporters. And they’ll need to determine how best to compete in light of the changing environment. As noted above, evidencing and framing positive impact should be a priority. But the provision of immediate goods or services, in and of itself, should not be underappreciated. Not every program needs to show a long-term impact on achieving a broader social goal. A bandage has a purpose too.

For some nonprofits, collaborations with for-profits will be a key to staying relevant and creating greater impact. There’s nothing new about looking to for-profits for funding, sponsorship, or opportunities for cause-related marketing. And we’ll continue to see growth in such areas. But we’ll also see new forms of collaboration, some of which will work well and others not so much.

Social impact bonds will continue to be experimented with and evolve. Nonprofits will increasingly use for-profit subsidiaries to operate unrelated businesses. We’ll see more joint ventures between nonprofits and for-profits, including outside of the health care and low-income housing areas. And we’ll see more formal cooperative arrangements to increase service delivery to otherwise neglected markets.

These are exciting times full of challenges and opportunities that should not be trivialized as short-term hype. It’s not just technology that’s changing the world. There’s much more going on.


Top 10 Events in 2014

Top 10

2014 was another year full of events affecting the nonprofit sector in the United States.  Nonprofits were at the forefront of movements issuing demands for reform and played a critical role in achieving successes in areas such as marriage equality and immigration.  They also helped to increase awareness of inequalities and injustices that still exist and to highlight areas in which significant progress still needs to be made, including domestic violence, civil rights, and global wealth disparities.  Nonprofit workers showed, and continue to show, tremendous courage and leadership in fighting the tragic Ebola outbreak and in providing assistance to those affected by it.  On the administrative and legislative front, the IRS eased the process of obtaining tax-exemption for many small nonprofits through the introduction of the Form 1023-EZ and the nonprofit landscape was potentially subject to significant changes due to tax reform and the midterm elections—with the full impact of each of these changes on the nonprofit sector remaining to be seen.   Here’s our list of the top ten events that had the largest impact and a sampling of a few links discussing each:

1.  The shooting of Michael Brown, the following protests, and Black Lives Matter

2.  The Ebola outbreak

3.  Ray Rice and increased attention to intimate violence in the NFL

4.  Immigration reform

5.  Midterm elections

6.  IRS released new, streamlined Form 1023-EZ

7.  The Tax Reform Act of 2014

8.  Developments in same-sex marriage laws

9.  The advance of Islamic State in Iraq and Syria (ISIS) and the CIA Torture Report

10. Thomas Piketty’s Capital in the Twenty-First Century and increased attention to global wealth inequality


Final Treasury Regulations for Charitable Hospitals Released

city hospital building with reflection

The U.S. Treasury released final regulations on December 29, 2014 that provide guidance regarding the requirements for charitable hospital organizations added by the Patient Protection and Affordable Care Act of 2010.

Background (from the regulations):

Section 501(r) was added to the Code by the Patient Protection and Affordable Care Act, Public Law 111-148 (124 Stat. 119 (2010)) (the Affordable Care Act), enacted March 23, 2010, and imposes additional requirements on charitable hospital organizations. Section 501(r)(1) provides that a hospital organization described in section 501(r)(2) will not be treated as a tax-exempt organization described in section 501(c)(3) unless the organization meets the requirements of sections 501(r)(3) through 501(r)(6). Section 501(r)(3) requires a hospital organization to conduct a community health needs assessment (CHNA) at least once every three years and to adopt an implementation strategy to meet the community health needs identified through the CHNA. Section 501(r)(4) requires a hospital organization to establish a written financial assistance policy (FAP) and a written policy relating to emergency medical care. Section 501(r)(5) requires a hospital organization to not use gross charges and to limit amounts charged for emergency or other medically necessary care provided to individuals eligible for assistance under the organization’s FAP (FAP-eligible individuals) to not more than the amounts generally billed to individuals who have insurance covering such care (AGB). Section 501(r)(6) requires a hospital organization to make reasonable efforts to determine whether an individual is FAP-eligible before engaging in extraordinary collection actions. Section 501(r)(2)(B) requires a hospital organization to meet each of these requirements separately with respect to each hospital facility it operates.

According to a post written by Emily Morris on the Treasury’s site, Treasury Finalizes Patient Protection Regulations for Tax-Exempt Hospitals, the final regulations provide guidance on the statutory requirements that charitable hospitals:

  • Limit charges.  Hospitals may not charge individuals eligible for financial assistance more for emergency or other medically necessary care than the amounts generally billed to patients with insurance (including Medicare, Medicaid, or private commercial insurance).

  • Establish and disclose financial assistance policies.  Each hospital must establish and widely publicize a financial assistance policy that clearly describes to patients the eligibility criteria for obtaining financial assistance and the method for applying for financial assistance.

  • Abide by reasonable billing and collection requirements.  Charitable hospitals are prohibited from engaging in certain collection methods (for example, reporting a debt to a credit agency or garnishing wages) until they make reasonable efforts to determine whether an individual is eligible for assistance under the hospital’s financial assistance policy.

  • Perform a community health needs assessment.  Each charitable hospital must conduct and publish a community health needs assessment at least once every three years – and disclose on the tax form it files annually the steps it is taking to address the health needs identified in the assessment.

Here are some other articles and resources regarding the new regulations:

The federal government is cracking down on nonprofit hospitals under ObamaCare in an attempt to prevent harsh collection practices and steep charges for the uninsured. – The Hill

The Internal Revenue Service has released new regulations for charitable hospitals to stop harsh collection practices and make financial assistance policies more transparent to patients. – Becker’s Hospital Review

New Requirements for 501(c)(3) Hospitals Under the Affordable Care Act (IRS)