Two Lawline CLE Programs for Attorneys Helping California Nonprofits

We are presenting two Continuing Legal Education (CLE) programs for Lawline on Friday, January 13, 2016 that we hope California attorneys will find helpful in their representation of nonprofits:

 Forming a California Nonprofit (Erin)

This program will discuss the process of forming a California nonprofit entity, going through the legal considerations involved in each step in detail. We will start with a discussion of some of the appropriate things to consider before beginning the formation process and then turn to the mechanics of formation, including drafting Articles of Incorporation, Bylaws, and a Conflict of Interest Policy. We will also cover other legal considerations that apply to California nonprofits, including registration requirements at the state level.

Most nonprofits are required to separately seek recognition of tax-exemption at the state and federal levels, so we will take a close look at the requirements for exemption and the application process, focusing primarily on 501(c)(3) organizations. Finally, we’ll briefly touch on some alternatives to forming a California nonprofit that may be attractive in certain circumstances.

Throughout the session, Erin Bradrick, Senior Counsel at NEO Law Group, will illustrate concepts through examples and will provide information on how to access additional resources.

Earned Income Issues and Guidance for California Nonprofits (Gene)

Many people are surprised to learn that over 70% of the revenues from reporting public charities comes from the sale of goods and services. And charities are increasingly engaging in earned income (and social enterprise) ventures as they face the simultaneous challenges of uncertainty in public fundraising and the tax benefits associated with charitable giving, undependable philanthropic funding, and increased competition for limited resources. But earned income is an area wrought with misconceptions and misunderstandings.

The rules governing unrelated business taxable income (UBTI) are complex. As a result, many non-profits simply fail to properly report and pay taxes on their UBTI or preclude themselves from starting an earned income venture. As the differences in the activities of non-profit and for-profit organizations continue to blur with the increasing commercialization of charities and the growth of socially-purposed taxable entities (like the benefit corporation), the associated tax issues will only get more complicated. Subsidiaries, joint ventures, and commercial co-ventures may be useful options for some non-profits if entered into with sufficient knowledge and consideration.

This audio-only course, taught by Gene Takagi, the managing attorney of NEO Law Group, a firm specializing in non-profit law, reviews the legal issues that should be considered when reviewing a non-profit’s earned income venture and offers practical guidance on best practices for both in-house and outside counsel.

How to Be a Good Ally: A Strategic (Civil Rights) Engagement Conference

On January 6, 2016, I joined over 1,000 lawyers and legal professionals attending the How to Be a Good Ally conference in San Francisco. While work called me away in the mid-afternoon, I left tremendously impressed and inspired by those who organized the conference in reaction to the election results, by those who spoke to us, and by our local legal community. And I continued to follow the conference on Twitter.

Join 1,000+ lawyers and legal professionals for this cutting edge conference addressing urgent matters of importance, including rising hate crimes and anti-Semitism; governmental targeting of the Muslim community; deportations and dreamers; the targeting of transgender people and religious exemptions to LGBT civil rights protections; reproductive freedom and saving Roe v. Wade; changes to the Affordable Care Act and health access and impacts on people with disabilities and at-risk populations; criminalization of communities of color; combatting domestic and sexual violence; environmental protections under siege; voting rights and access; economic justice and workers’ rights; and challenges to civil liberties and the civil justice system.

You can follow the Storify here. Also check out the materials provided on Lieff Cabraser’s site relevant to each of the panels described below.

Highlighted Tweets & Resources

(from SFBayAllies, ADL San Francisco, Equal Rights Advocates, Equal Justice Society, Sara Zimmeran, Sally Xiyi Chen, Legal Aid at Work, Alison Elgart, Jeremy Chan, Bryan Parker)

Panel 1: Hate Crimes, Anti-Semitism and Rise of the White Nationalist Right

  • #HateGroups are emboldened when they feel they have allies in positions of power in gov’t. -@orensegal
  • Great takeaway from our first panel: protecting one group against hate crimes, is protecting all of us.
  • Action point: encourage advocates, allies & social media platforms to prevent #onlinehate and encourage positivity & truth
  • 501(c)(3) nonprofits can speak out if elected officials are advocating hate messages or violating civil rights
  • Reason for optimism: nonprofits are setting aside differences to collaborate on bigger civil rights issues
  • Recommendations of the ADL Task Force on the Online Harassment of Journalists

Panel 2: Government Targeting of Muslim Community

  • The Trump Memos: The ACLU’s Constitutional Analysis of the Public Statements and Policy Proposals of Donald Trump
  • Little outcry to Muslim registration program after 9/11-we must do better this time. Naheed Qureshi, @MuslimAdvocates

Panel 3: Immigrant Rights, Deportations and Dreamers

Panel 4: LGBTQ Equality Backlash

Panel 5: Protecting People with Disabilities and Medically at Risk

Panel 6: Justice Under Attack

  • Donald Trump and the Overinflated Presidency (WSJ)
  • Amicus: Corruption in the White House (Slate)
  • @Dahlialithwick We need to do better job of helping ppl undstnd what’s @stake; other side convincd ppl to vote against self-interest
  • Have to work across narrow interests (environment, LGBT, etc.); change will come from ground-up – decentralized @Dahlialithwick
  • “In order to change the rules, you need movement building.” – @rashadrobinson
  • @Dahlialithwick Nobody wants to talk about private prisons or gerrymandering but we have to get there
  •  @Dahlialithwick we must get beyond booze, Netflix & sleep. Tweeting & FB alone is not enough
  • Public failure to demand substance from media and government – @CharlesMBlow
  • Media was complicit in (digital) act of war – @CharlesMBlow
  • Optimist Prime: When cable news said, “he may not be good for the country, but he is good for our bottom line” = giant red flag. Unforgivable.

Panel 7: Criminalization of Communities of Color

Panel 8: Reproductive Rights and Saving Roe v. Wade

Panel 9: Combatting Domestic and Sexual Violence

  • @realDonaldTrump a disaster for violence against women. Must shift culture, esp in low wage industries+colleges.
  • ABA Section of Civil Rights and Social Justice Resource List from Campus Sexual Assault: A Civil Rights Perspective
  • Comments by PEOTUS and Sessions threaten to normalize gender-based violence. We must stand united to combat sexual violence

Panel 10: Protecting Workers

  • Chris Ho outlines how crucial protecting workers’ rights is now, esp. for undocumented workers, approx 10% of CA workforce
  • Language Discrimination (Legal Aid at Work)

Panel 11: Saving the Planet

Panel 12: Securing Voting Rights

Panel 13: Lift America to be America Again – A Call to Action (keynote by Rev. William Barber II)

  • If you ever want to see what white privilege is, we have just seen it in this election.
  • Trump mixes race and othering with economic fears, and points their fears towards women, POC, immigrants
  • We need mvmt lawyers, we need social engineers.  Everything you went to law school for is on the line RIGHT NOW.

Nonprofit Radio: 2017 Legal Tips

Erin will be on Nonprofit Radio this Friday at 10 am PT / 1 pm ET discussing 2017 Legal Tips with host Tony Martignetti. Catch them live on Talking Alternative or a few days later on iTunes.

The New Year means a close look in the corners. We’ve got the legal issues you need to fine tune.

Related Resources

10 Legal Tips in 30 Minutes to Get 2017 Ready 

The Blueprint Forecast for Philanthropy and the Social Economy 2017

10 New Year’s Resolutions for Your Board

5 New Year’s Resolutions for Nonprofits

10 Significant News Events of 2016

2016 has featured a number of major events that have affected, and will continue to affect, the nonprofit sector. Some might describe 2016 as a difficult year, featuring a long, turbulent election in the United States and unexpected results that have left many groups, including nonprofits themselves and the communities they serve, anxious and uncertain about their futures. Nonprofits such as the ACLU, the Sierra Club, Planned Parenthood, among others, saw record surges in donations following the election. On a judicial front, an empty seat on the Supreme Court resulted in the Court unable to decide on critical and controversial issues like immigration, and even though the Court upheld an affirmative action program at the University of Texas, the future of affirmative action and other major policy issues will likely depend on the next Supreme Court appointment. Abroad, Britons voted to leave the European Union, triggering financial and political uncertainty there as well. Here is a list of our 10 significant news events of 2016 affecting the nonprofit sector in the United States and a few links regarding each:

  1. The Election and President-Elect Donald Trump

    The 2016 Elections – Impact on the Work of Charitable Nonprofits [National Council of Nonprofits]
    Both Clinton and Trump Would Reduce Tax Incentives for Charitable Giving [Tax Policy Center]

    Trump’s White House Victory Could Spell Money Woes for Charities [Chronicle of Philanthropy]

    Nonprofits See Unprecedented Support Following Trump’s Win [Chronicle of Philanthropy]

  2. Brexit

    Historic UK “Brexit” Vote Raises Countless Issues for Nonprofits, Civil Society [Nonprofit Quarterly]

    What Lessons Does “Brexit” Hold for Social Innovators Worldwide? [Stanford Social Innovation Review]

  3. Dakota Access Pipeline

    Dakota Pipeline Update: When Resistance Is a Matter of Protection [Nonprofit Quarterly]

    American Indians Shouldn’t Get Shortchanged by Philanthropy [Chronicle of Philanthropy]

  4. Merrick Garland’s Nomination and the Empty Supreme Court Seat

    Obama nominates Merrick Garland to Supreme Court [CNN]

    The Supreme Court Needs a Ninth Justice Immediately [The Washington Post]

  5. Zika Epidemic

    Zika Spread Prompts Reexamination of Public Policy Re: Women’s Health in South America [Nonprofit Quarterly]

    Zika Is No Longer a Global Emergency, W.H.O. Says [New York Times]

  6. Black Lives Matter

    Black Lives Matter & the Road Ahead [Nonprofit Quarterly]

    How Philanthropy Can Show That Black Lives Matter [Chronicle of Philanthropy]

  7. Paris Global Climate Agreement

    Landmark Paris Climate Pact to Take Effect in 30 Days [Climate Central]

    100s of Businesses and Governments: Trump Should Uphold Climate Agreement [Nonprofit Quarterly]

  8. North Carolina “Bathroom Bill”

    DOJ and North Carolina File Lawsuits over NC’s Controversial LGBT Law [Nonprofit Quarterly]

    North Carolina Lawmakers Leave ‘Bathroom Bill’ in Place [The Washington Post]

  9. US Supreme Court Upholds Affirmative Action Program

    Supreme Court Upholds Affirmative Action Program at University of Texas [New York Times]

    Impact of Supreme Court’s affirmative action ruling could reach K-12, higher ed [PBS]

  10. Continued Conflict in Syria

    Starving in Place: Humanitarian Aid Still Blocked in Syria while Ceasefire Shaky [Nonprofit Quarterly]

    7 Experts To Read On The Desperate Health Crisis In Syria [Huffington Post]

    After Aleppo, what happens to Syria’s besieged towns? [Al Jazeera]


Editor’s Honorable Mentions:

Biggest Change to Nonprofit Financial Reporting in 20 Years Has Arrived [BDO Nonprofit Standard]

“The Financial Accounting Standards Board (FASB) has just released the Accounting Standards Update (ASU), Not-for-Profit Entities (Topic 958) – Presentation of Financial Statements of Not-for-Profit Entities, which you can find here. If you’ve been following our blog, you’ll know this marks the biggest change to nonprofit financial reporting in more than two decades.”

The Foreign NGO Law [ChinaSource]

“On January 1, 2017, China’s new Foreign NGO Management Law will go into effect, changing the landscape for foreign individuals and organizations working in China.”

Wharton Social Impact Conference – SF 2016

Company improve its social impact (work on influence marketing).

The 2016 Wharton Social Impact Conference in San Francisco took place on December 13, and I had the pleasure of catching a couple of the sessions during the day.

Funding Models for Maximizing Impact

Moderator Dr. Amara Enyia noted the Rockefeller Foundation’s identification of a $2.5 trillion annual funding gap to achieve the Sustainable Development Goals (SDGs) in developing countries and framed the discussion by asking how we should access private funds to fill this gap.

The Omidyar Network (ON) is a pioneer in using different legal structures to maintain flexibility in addressing social goals and having an opportunity to scale solutions. Chief of Staff Elaine Chou described ON’s use of various forms of capital along the financial-social return continuum to achieve its goals and pointed to a recent article published in the Stanford Social Innovation Review – Across the Returns Continuum – that further describes ON’s views.

In this article, we present a framework for investing across the returns continuum—a continuum that extends from fully commercial investments at one end to philanthropic grants at the other. This framework reflects our belief that there is a broad range of viable investment profiles, some of which involve a trade-off between social return and financial impact, and many of which do not.

Chan Zuckerberg Initiative (CZI) Chief of Staff Caitlyn Fox also pointed to the desire for CZI to maintain flexibility in its investments and why that led to the choice of operating as a for-profit LLC as opposed to a nonprofit private foundation. But she noted the public perception/criticism tradeoff that came with such decision. CZI’s three main focuses are education, basic science research (including for the cure of diseases), and policy (including criminal justice reform and immigration reform).

This led to further discussion of ON’s and CZI’s public policy activities, which were not limited in the way they would otherwise have been had they adopted a private foundation form. However, Ben Mangan of Center for Social Sector Leadership remarked that philanthropy (private foundations), while restricted from lobbying and political campaign intervention, could do much to support public policy initiatives, identifying the Ford Foundation as a good example. Mangan also noted that the choice of the LLC form by “philanthropists” was not a rejection of traditional philanthropy but an appropriate addition. Michael MacHarg of Mercy Corps concurred, noting that we shouldn’t vilify or pigeon-hole certain legal forms and use the appropriate forms or tools as would be most effective and efficient in carrying out the blended purpose of the venture.

Enyla raised the issue of privatization of public goods, how that might go awry, and how that would impact public-private partnerships. Mangan responded by raising the problem of greenwashing and claiming the halo of being a social venture or social enterprise – terms that are not legally or consistently defined. Public agencies choosing for-profit partners that publicly touted social goals (for marketing and political purposes) but truly only had financial goals remain a problem.

Enyla asked how funding models for impact would evolve over the next ten years. MacHarg emphasized the need for more experimentation and the support of early stage enterprises, no matter what the form. He also called out for more current expenditures and less emphasis on creating endowments. Chou returned to the idea of accepting the spectrum of actors across the returns continuum.

The panel discussed getting and using data from multiple stakeholders, including intended beneficiaries, to inform their organizations’ funding decisions and activities. This prompted a question about investing in very early-stage ventures that have no impact data to show. The panel responded by referring to traditional investment criteria, including review of the management team, as well as the venture’s theory of change and how its hypotheses could be tested. Fox also mentioned CZI looked at segments where more risk capital might be needed (e.g., funding younger scientists).

Finally, the panel discussed the need for patient capital for social innovations that might take decades. Enyla noted how policy makers were typically driven by the need to show short-term results and how that stifled the ability to pursue important project.

Impact Investing

Jon Jones of GSVlabs moderated this session exploring where we are with impact investing. Kathleen Berroth of Omidyar Network defined impact investing broadly, citing the Across the Returns Continuum article mentioned above.

The impact investing field, in our view, must move beyond the unproductive debate over trade-offs [between financial return and social impact] and instead focus on a more relevant question: Under what conditions should an investor accept a risk-adjusted below-market return in exchange for an opportunity to achieve social impact?

Victoria Fram of VilCap Investments, LLC (Village Capital’s affiliated for-profit investment fund) discussed her firm’s criteria on impact investments, all in for-profit enterprises (40% of the founders are women, 20% are people of color). Village Capital finds, trains, and invests in entrepreneurs solving real-world problems, and builds communities around entrepreneurs and their ventures to improve opportunities for growth and success.

Nelson Gonzalez of Declara is working on U.S. expansion of leAD the sports accelerator fund of the Adidas founding family. He discussed the spectrum between the “earnest” impact investors (with sincere and primary social impact goals) to the sophisticated pure financial investors putting lipstick on some old ideas (like greenwashing) and emphasized the need to create more investment opportunities in the middle.

Kunal Doshi of Capricorn Investment Group discussed some specific impact investments and how their financial and impact goals will not change even with the changing political environment. Capricorn manages the assets for Jeff Skoll, the Skoll Foundation and others who strive for extraordinary investment results by leveraging market forces to accelerate large scale impact.

Perhaps the most pressing question from the audience: How do the monies and ideas find each other? Omidyar looks for consistency with strategy though Berroth mentioned there are some funds for experimentation. Fram discussed the need for honesty and feedback when rejecting an entrepreneur, which can be of great value even if the entrepreneur’s venture is not funded. Gonzales identified the diversity issues when the focus tends to be in Silicon Valley and the coasts but optimistically asserted his belief that efficient markets would eventually fund ideas wherever they originated. Fram noted the still problematic differences between funding ventures with male founders over those with women founders.

Bonus Tweets

  • Invest Impactly: Genius is evenly distributed by zip code, opportunity is not @KaporCenter Dr Freada Kapor Klein
  • Elaine Chou: Foundation endowments spend 95% of capital on gap-widening orgs then expect 5% in grants will fix problems @TheRealFreada

10 Legal Tips in 30 Minutes to Get 2017 Ready

businesswoman on a road ready to start a new year


Watch a recording of our livestream on Grantspace (The Foundation Center) for a list of 10 tips and ideas to get yourself ready for 2017. Michele and I discussed year-end filing requirements, the importance of charitable registrations, required steps before awarding an executive director with a year-end bonus, elections and bylaws compliance, development of next year’s board calendar, and other items to consider before the year ends.


  1. Check off your checklist of filings you have to complete in 2016 and have a checklist for 2017. Annual Filing Requirements for Nonprofits (National Council of Nonprofits); Exempt Organization Annual Filing Requirements Overview (IRS).
  2. Register as a charitable organization in any applicable states (not necessarily just the state in which you are based). The Charleston Principles: Guidelines on Charitable Solicitations Using the Internet (NASCO); The Unified Registration Statement.
  3. Approve executive bonuses in a lawful manner, consistent with applicable laws regarding reasonable (total) compensation and charitable trust. Charitable Trust Doctrine.
  4. Approve executive compensation (including any changes to executive compensation) in a lawful manner (consider using the rebuttable presumption of reasonableness procedures if paying close to market value). Executive Compensation – The Legal Issues.
  5. Review the purpose statements in your Articles of Incorporation and Bylaws and make sure they are consistent with each other, your mission statement, and your activities.
  6. Review and comply with your election procedures for directors and officers.
  7. Review or consider adopting governance policies, including those referenced in the Form 990. Good Governance Policies for Nonprofits (National Council of Nonprofits); Form 990 Policies – Is it better to check “yes” or “no”? Form 990 Policy Series (Public Counsel).
  8. [Private foundation] Ensure you have made or will make your required annual distributions (and understand what counts as a qualifying distribution).
  9. Review the past year’s financials and the coming year’s budget; train board and management staff on how to read, interpret, and use the financials; determine whether a financial audit will be necessary or warranted. Tools & Resources | Financial Management  (National Council of Nonprofits); Financial Management (Grantspace); Nonprofit Finance 101 (Nonprofit Finance Fund).
  10. Develop a board calendar for the upcoming year. Nonprofit Board Meetings – Calendar of Agenda Items.

Crowdfunding Rap

I’m moderating a panel on crowdfunding this morning at the 20th Annual Western Conference on Tax-Exempt Organizations. In honor of the session, and thinking back to my recent trip to New York where reasonably priced Hamilton tickets were impossible to find, I wrote the following (still unfinished) rap –

In the style of Lin-Manuel Miranda‘s Alexander Hamilton 

How does a program, project, dream of a board and a concept,
popped in the middle of a popular site on the Internet by management, unsupported, no hollers,
Grow a big force of supporters and dollars

A ten-dollar contribution for a solution
Goes a lot farther, not working a lot harder
By being a lot smarter
By using a fund starter
By ‘15, 34 billion on sites like Kickstarter

And every day while staff were fundraising their hearts out
Online across the masses, ideas started to breakout
Mil’le’nnials were longing for something to be part of
Their movements were ready to grow, build, advance, and spread love

When a hurricane came, and devastation reigned
People saw their futures drip, dripping down the drain
But a coder started coding, and published on her domain
The creation of a chain, with testaments to their pain

Well, the word got around, they said, “This site is insane, man”
Gave money to the fund just to send them to the pained land “
We are sympathetic, can’t forget from whence we came, and
The world’s gonna know the same: We’re not lame, man.”

Fundraising through crowdfunding
It’s online fundraising through crowdfunding
And there’s a million things that you can fund
But just you wait, just you wait …

When it started the skeptics said, full of dread, forbidden
Registration, conduit and quid pro quos are hidden
Private interests advanced each click, just a schtick
But the sites got better and grew bigger real quick

Built as platform, not a fundraiser they clarified
No handling money, not qualified, but unsatisfied
A voice saying
“You gotta market yourself.” – “FundMe, you gotta market yourself.”

They started exceedin’ and placin’ other platforms on the shelf

There could have been AGs hot to sue
Concerns were so acute
They coulda feared fraud and ill-repute
Without a chance for restitution
It’s concernin’, learnin’ ‘bout false substantiation
Lettin’ donors deduct gifts though no charity donation
Scammers for every cause they can get their minds on
Clamor for the money, see them now as they stand on
The claim of a cool platform for a new land
On the web, you can have a new plan

On the web, you can have a new plan

20th Annual Western Conference on Tax-Exempt Organizations


The 20th annual Western Conference on Tax-Exempt Organizations (WCTEO) will take place at the Millennium Biltmore Hotel in downtown Los Angeles this Thursday and Friday, December 1-2, 2016. The WCTEO has been my top go-to conference every year since starting NEO Law Group, and I’m particularly excited about this year, my first as a member of the planning committee. With a schedule that features panels led by some of the country’s top tax-law experts (no hyperbole!), I highly recommend the WCTEO to all of my professional colleagues serving or working in the nonprofit sector and am happy to talk with anybody considering attending. You can submit your name on the waitlist for registration here and you’ll be contacted by the staff to complete your registration.

Some Highlights from the Schedule:

  • Exempt Organization Practice: A Twenty Year Retrospective – Marcus Owens (former Director of the IRS Exempt Organizations Division).
  • Current Developments – Bruce Hopkins
  • Investing in the Future: What Does Mission Have to Do with It? – Jeffrey R. Hom,  David A. Levitt
  • Funding Through Exploitation – The Life Cycle of Nonprofit IP and Other Desirable Assets – Ofer Lion,  Michael I. Sanders 
  • A Twenty Year Prospective – Exempt Organizations Through 2036 – Ofer Lion,  Alexander L. Reid,  Jean L. Tom,  Stephanie Wilkinson

In addition, there are sessions on tax compliance issues, property tax exemption, private foundations, charitable solicitations, charitable giving, accelerators and incubators, and international activities, and an update from the IRS and Treasury. I’m looking forward to moderating an informative and fun session on crowdfunding with panelists Jeanette Lodwig, Arthur M. Rieman, and Jean L. Tom.

Check out this profile on WCTEO Co-Chair Ellen April: Loyola Tax-Law Leadership Exemplified in Conference.

Washington Update

Compliance Issues – Not Just Your 990

  • Form 990: Much more than financial information. Also mission, program services, governance, compensation, transactions with insiders, related organizations.
  • Who cares? IRS, media, individual donors, watchdog organizations (and state charity officials, state revenue authorities, potential board members, private foundations, corporate sponsors and donors, etc.).
  • Disclosures of uncertain items on Form 990 may be important to start statute of limitations (e.g., potential unrelated business taxable income).
  • IRS moving from a subsector-driven compliance model (e.g, universities and hospitals) to data-driven compliance model (from information submitted on the Form 990). Panel discussed several possible triggers of examination (audit) on the Form 990.
  • IRS TE/GE FY 2017 Work Plan – reinforces 5 issue areas of focus: (1) exemption; (2) protection of assets; (3) tax gap (e.g., employment taxes, unrelated business income taxes); (4) international (e.g., conduit to foreign persons or entities, inadequate oversight of grants); and (5) emerging issues (e.g., 501(r)).
  • For independence of directors, be careful if director has a material financial transaction with a related organization – nonprofit or for-profit (can blow her or his independence as a director).
  • Form L of the Form 990 – identifying business transactions with interested persons can be very challenging. Consider using a negative confirmation letter with no need to respond if the “interested person” (including any Schedule B contributors) has no disclosures to make.

Expanding Your International Footprint

  • Regulatory Trends: shifting enforcement of tax-related regulations, stricter immigration, linking immigration to tax reporting, NGO registration and reporting.
  • Many issues with operating outside of the United States, including unfamiliar laws of foreign countries, no existing legal structure in foreign country, different health and safety considerations.
  • War stories include independent contractors in foreign countries claiming to be employees, foreign parter non-compliance, detention of employees or volunteers.
  • Forms of international activities: grant to an existing overseas entity, collaboration with a partner organization. branch office, new NGO, new for profit subsidiary.

Exempt Organization Practice: A Twenty Year Retrospective

Former head of the IRS Exempt Organizations Division Marcus Owens provided a twenty-year retrospective and included some insightful thoughts for the future, including a forecast of problems for the IRS hidden by use of the Form 1023-EZ.

Expecting the Unexpected in Property Tax Exemption (California)

  • Even if you haven’t received an Organizational Clearance Certificate (OCC) yet, file with the County Assessor before the February deadline.
  • The court in the Jewish Comm Center Dev. Corp v. LA case in 2016 held that an operator of a property does not need to file an exemption claim with the assessor or hold an OCC issued by the Board of Equalization (BOE). The BOE has revised (but not yet released) BOE-267, Claim For Welfare Exemption (First Filing), and BOE-267-A, 20__ Claim For Welfare Exemption (Annual Filing), to remove instructions requiring that both the owner and operator must file a separate exemption claim form and each must hold a valid OCC issued by the BOE. In addition, the BOE has created a supplemental affidavit, BOE-267-O, Welfare Exemption Supplemental Affidavit, Organizations Operating On Claimant’s Real Property, for the property owner to demonstrate that the property is used exclusively for welfare exempt purposes by an operator that is organized and operated for an exempt purpose.
  • The “exclusive” use requirement for property tax exemption remains elusive to define. There are precedents both for a fairly strict interpretation  (“incidental use must be directly connected with, essential to, and in furtherance of the primary use”) and a more permissive interpretation (allowing for some non-qualifying uses).

Investing in the Future: What Does Mission Have to Do with It?

Funding Through Exploitation – The Life Cycle of Nonprofit IP and Other Desirable Assets

  • Traditional intellectual property (IP): patents, copyrights, trademarks/servicemarks, trade secrets
  • Non-traditional IP: provision of assets to captive audiences, corporate sponsorships, naming opportunities, endorsements
  • IP license income or royalties (excluded from unrelated business income tax or UBIT) vs. service income (which, if unrelated, may be subject to UBIT)
  • Where IP is being transferred to a related organization, additional issues may arise, including conflicts of interest, resource-sharing, fair market value, and taxable subsidiary issues.
  • Fascinating discussion of National Geographic Society (nonprofit) – 21st Century Fox (for-profit) joint venture from Michael Sanders – 73% Fox; 27% NG equity split but 50:50 representation on board (based on IRS Revenue Rulings and seminal cases on joint ventures)
  • Big challenge is how to value nonprofit’s contribution to the joint venture if it involves non-traditional IP
  • Negotiating issues on behalf of nonprofit to joint venture with for-profit involves educating for-profit counsel regarding control requirements and critical provisions in the operating agreement to protect the nonprofit’s exempt status; also consider exit strategies in advance

Current Developments



  • About $16.2 billion was raised globally through crowdfunding in 2014 , and that number has been projected to reach $34 billion in 2015 . According to a 2013 study commissioned by the World Bank, crowdfunding is projected to become a $90-96 billion industry by 2025, almost twice the size of the current global venture capital industry.
  • Donation crowdfunding can be hosted on a site/platform owned and operated by either a nonprofit or for-profit organization.
  • Donation crowdfunding campaigns can be run by charities or individuals who may not may not be operating with a charity’s authority.
  • For fundraising campaigns run by charities, issues include mission-consistency, charitable class, conduit (jeopardizing a donor’s ability to deduct her contribution), registered vs. unregistered professional fundraisers, restricted gifts, and substantiating contributions; and, if rewards are involved, unrelated business income, commerciality, seller’s permit and sales tax, and quid pro quo written disclosures.
  • For fundraising campaigns run by individuals, issues include charity vs. charitable class vs. private beneficiaries, charitable trust jurisdiction, characterization of income, diversion of assets, charitable trust vs. consumer protection laws, delegation of authority with due care (including terms and limitations), and registration requirements.
  • Cautionary tales regarding over-reliance on an annual crowdfunding campaign. See, e.g., Technology Glitch Results in Day of Giving Fiasco (Nonprofit Quarterly).

Charitable Giving Update


Accelerators and Incubators

  • The terms “incubator” and “accelerator” are not defined in the law. However, according to UC Senior Counsel Thomas Schroeder, “these terms are commonly understood to refer to programs designed to nurture and accelerate the growth and success of private start-up companies by providing resources such as physical space in a collaborative environment with other start-ups, shared office equipment, technology and administrative services, mentoring and management training, networking opportunities, and, in some cases, capital or access to some other form of financing.”
  • There is still little guidance from the IRS regarding university incubators and accelerators and the circumstances under which they further 501(c)(3) educational purposes. For colleges and universities, they may want to tie the incubator to the students’ curricula. They must differentiate themselves for for-profit incubators in their exemption application and operations.
  • Other possible 501(c)(3) exempt purposes: scientific, charitable (relief of the poor, economic development, lessening the burdens of government)
  • Some of the tax issues for a 501(c)(3) incubator include: related or unrelated business activities, private benefit, in-kind payments of equity, and joint venture.

A Twenty Year Prospective – Exempt Organizations Through 2036

  • Ofer Lion: Nonprofits looking to access capital markets, high brow arts organizations tax-exempt status will be questioned (populist movements). 501(c)(3) hospitals will still be around (not all will convert or be forced to convert to for-profits) but there will be more consolidation. IRS will still be around to provide tax law enforcement over charities and other exempt organizations (perhaps doing less with less). More mission-related investments and shareholder activism (with 70% of U.S. equities being held by tax-exempt organizations).
  • Stephanie Wilkinson: Tax reform under Trump may severely and detrimentally impact charitable contributions (changes to standard deduction, limiting number of people who can get tax benefit of charitable contributions to 5%; elimination of estate tax). IRS will operate picking a few select areas of enforcement on which to focus; practitioners will specialize accordingly.
  • Jean Tom: Artificial intelligence (AI) using big data to help charities target particular prospective donors, virtual reality used in communications and fundraising, self-driving cars, drone deliveries, laws trying to catch up. With the devaluing of tax benefits associated with charitable contributions, despite the Trump-supported Johnson Amendment, which would blur difference between 501(c)(3)s and 501(c)(4)s (it would allow 501(c)(3)s to engage in electioneering), more 501(c)(4)s formed in place of 501(c)(3)s. More use of for-profit vehicles (instead of private foundations) to engage in charitable and other social good activities (like Omidyar Network and Chan Zuckerberg Initiative). Tech tools will help improve public accountability and self-regulation (where the public sector may fail).
  • Alex Reid: Increase in corporate civil rights, leadership by AI. Some DAF regulations! Challenge to charitable grantmaking as a charitable activity. Consumption tax in the form of exempting savings from income tax. Possible move of charitable contribution deduction moving ‘above the line” so not impacted by increase in standard deduction (but would only a type or part of charitable contributions move above the line?).

New Frontiers: 2016 Independent Sector Annual Conference


Washington DC is the site for New Frontiers, the 2016 Independent Sector Annual Conference and Public Policy Action Institute, taking place  November 15-18. The Conference comes at a pivotal time for the nonprofit sector and our nation, rigidly divided on so many issues and characterized in many ways by a disengaged and disenchanted citizenry. The opening reception will be held at the Smithsonian’s brand new National Museum of African American History and Culture.

The Independent Sector Conference is the meeting ground for leaders and changemakers looking to drive momentum for the charitable community, set the sector’s agenda for the coming year, and collaborate on strategies for success.


We’ll take our messages to Capitol Hill, learn from insiders about how we can connect with the new administration, and collaborate to revitalize the ideals of democratic engagement in service of the common good.

Public Policy Action Institute (pre-conference)

Whether you’re a policy novice or an expert, the Public Policy Action Institute gives charitable sector leaders, policy advocates, and communications specialists effective strategies for getting your mission and message front and center with policymakers. And new this year, we’ll take our messages directly to the Capitol for Independent Sector Hill Day. You’ll meet face-to-face with policymakers about the issues most important to your work.

Making our Voices Heard in an Election Year and Beyond

  • “America is great because America is good, and if America ever ceases to be good, America will cease to be great.” – Alexis de Tocqueville
  • “The independent sector is our best line of defense for vulnerable populations. … Advocacy is not a luxury; it’s essential.” – Tom Sheridan
  • America doesn’t believe government is working for them but overwhelmingly believe in the nonprofit sector. See The Power of Nonprofit Advocacy: Best Lobbying Resource
  • 85% of young voters believe fed gov’t should be doing more to engage charitable sector to help address economic & social challenges. United For Charity (p. 8)
  • Report Shows Foundation Funding of #Advocacy Produces a Return on Investment of $115 to $1. NCRP
  • We don’t change without some level of disruption and revolution. Allow and don’t suppress millennial activism. Focus on engagement and empowerment of millennials.
  • To leverage engagement with elected officials, some charities (like Save the Children) have formed an affiliated 501(c)(4) organization that can lobby without limitation and endorse and/or oppose political candidates. The 501(c)(4) allows you to “thank and spank;” it’s the hammer to hold elected officials accountable.
  • Use the arts to further your message and engagement with elected officials.
  • Data is important (particularly for federal grants – see the Commission on Evidenced-Based Policy Making) but it’s expensive, can be skewed, and campaigns have been shown to win without good data. Sheridan advised organizations to “spend just enough on data to get you where you need to go.” He added that organizations should do (1) message-focused research to ensure they are avoiding the common trap of simply preaching to the choir and (2) impact-focused research to ensure they are satisfying donors and funders. Of course, impact-related data is important to inform nonprofits and their boards about their activities and decision-making.

Positioning our Tax Policy Soapbox for 2017

Continuing the Public Policy Legacy of John Gardner

  • “We can’t write off the danger of complacency, growing rigidity, imprisonment by our own comfortable habits and opinions.” – John Gardner, Personal Renewal
  • “You have within you more resources of energy than have ever been tapped, more talent than has ever been exploited, more strength than has ever been tested, more to give than you have ever given.” – Gardner – appropriate on an organizational and national level too

Sway the Other Branches of Government

Effectively Communicating with Congress: How to Develop and Implement an Effective Communications and Advocacy Strategy

  • Consider allies and opponents resulting from your advocacy and how that may play out in the future
  • Review levels of engagement mapped against audiences – see Evaluating Public Policy Advocacy (Framework for Policy & Advocacy Outcomes)
  • Communications: modern storytelling with peer voices (e.g., Humans of New York); humor; real-time; value-based; best practices (curating content, inviting others to conversation)
  • Jab-jab-jab-right hook – only every fourth piece should be an “ask”
  • “If you’re not at the table, you’re on the menu.” Keep messaging (use social media but don’t let it be stagnant).
  • “We in America do not have government by the majority. We have government by the majority who participate.” – Thomas Jefferson
  • Congressional offices are using social media to help gauge public opinion but district services still #1
  • How many similar comments on a social media post would be enough for your office to pay attention to? 80% of Congressional staff say less than 30. But you have to respond to them in 24-48 hours tops.

2020 Census

  • Census is connected to when redistricting [gerrymandering] gets done.
  • Policy decisions will matter. Immigration status could be added, which would result in significant reporting issues with many in fear of sharing information with the government.
  • Get-out-the-count will matter. Note that in the 2010 Census over 10% of Blacks and Latinos were missed in certain urban areas because of undercounting, particularly of children under 5.
  • Check out Annie B. Casey Foundation’s Kids Count Data Center

New Frontiers – Independent Sector Annual Conference

The Great Shared Task (Opening Plenary)

Christylez Bacon, Grammy-nominated hip hop music artist, opened the plenary with It’s the Beatbox. Immediately after, a panel reacted to the recent Presidential election.

  • Media may be the most effective check against the President; the First Amendment is first for a reason.
  • How do we discuss race and sexism in ways that aren’t so divisive? How can we listen to racists without getting angry at them? We should be angry.
  • Americans have deliberately chosen to blow up the system and elect a leadership in which anything is possible. But power is not permanent. – Michael Steel
  • Charitable organizations provide a voice for marginalized groups. The sector has a collective responsibility to influence policymakers.
  • Must work like hell to make sure we make good decisions on the state level. – Ellen Alberding
  • Private foundations should be much more aggressive on the advocacy front on the issues they care about. Many private foundations do not take the opportunity to fund advocacy.
  • What people care about are big issues, not your institution. Charities of all sizes and types must have a policy strategy, lock arms, and go after the big issues (including tax policy). – Brian Gallagher
  • Anti-establishment sentiment has already colored how people think about foundations and charities. – Gallagher

Live From IS: Where Nonprofits Fit After ‘Primal Scream’ – The NonProfit Times

Frame-Breaking Ideas for 21st Century Fundraising

  • Jeanne Bell (CompassPoint) shared with the audience the following publications:
    • Underdeveloped – nonprofits struggling with high turnover & long vacancies in development director post – results in vicious cycle –
    • Fundraising Bright Spots – 1. Fundraising is core to the organization’s identity; 2. Fundraising is distributed broadly across staff, board, and volunteers; 3. Fundraising succeeds because of authentic relationships with donors built on strong, trusting relationships among staff, board, and volunteers; 4. Fundraising is characterized by a systematic approach to donor engagement and continuous improvement
  • Discussion Issue: What is most challenging about engaging the broader staff in fundraising at your organization? Groups quickly moved to looking at solutions, including focusing on understanding charitable motivations of staff and framing it also as leadership training.
  • Anne Wallested (BoardSource) noted our unhealthy obsession with cost of fundraising and introduced a new way of measuring fundraising effectiveness with a preliminary draft paper:

1. Are we raising enough money to fund our mission now and in the future? (Total Fundraising Net)

2. To what extent are we dependent on a small number of large-scale donations? (Dependency Quotient = sum of contributions from top five donors or funders/total expenditures)

3. How efficiently are we raising funds? (Cost of Fundraising = total fundraising expenses/total fundraising net)

Equation: Enough money to fund programs + A responsible balance of risk and reward = Healthy fundraising programs

Communications: Talk impact, not percentages; focus on overall results, not individual tactics; be transparent, but holistic

  • Ann Hale (AFP) discussed competencies of fundraisers – relationship building, leadership, professional judgment, and organizational management.

Opening Reception (National Museum of African American History and Culture – Smithsonian)

The reception allowed us to visit the National Museum of African American History and Culture and it was a powerful, moving experience.

Community Town Hall (Plenary)

The Duke Ellington School of the Arts Show Choir opened the plenary with Hit Me With a Hot Note.

  • We were introduced to Independent Sector President and CEO Dan Cardinali (bio).
  • Dan learned from Native Americans in Philanthropy CEO Sarah Eagle Heart that “New Frontiers” meant something other than intended to some people, which left him feeling embarrassed but also hopeful that we could openly have this discussion at a meeting with newcomers to the Conference.
  • “We as a community care about the means as much as the ends.” – Cardinali
  • Through relationships, toxic stress diminishes in the body and the community. Nonprofit sector has the treasure of public trust and the public confidence in having expertise. Nonprofit sector is trusted to heal the country. – Cardinali

Community Dialogues

  • What are the three unique assets the sector has that are critical to healing the nation?
  • What are the commitments of the nonprofit sector?
  • What are the commitments we should expect of government?

Philanthropy Making a Difference with Government

  • Bad systems trump good programs – this is why philanthropy must partner with government
  • Philanthropy allows government to be more nimble, take risks, and create change
  • Lessons learned from collaborations: (1) role confusion and conflation; (2) defined responsibilities; (3) resources – whose; (4) results – shared definition; (5) risk – allocation (and who is going to move first). Add readiness (agencies may have many barriers to saying “yes” to anything but some barriers may be historical and not true legal barriers).
  • Foundations should invest heavily in having the community’s voices heard. One type of investment is higher risk tolerance.
  • Lean in, don’t step back in collaborating with government now. Mechanisms may be different, your missions are the same.

Dog Whistle Politics: How Racism Wrecks the Middle Class

  • “Strategic racism helps win elections…and not just this one.” Ian Haney Lopez
  • Call to Action: “This is the best opportunity in a generation to convince people that racism is a divide and conquer weapon that hurts all of us.”
  • “To restore our country–we need an inclusion revolution.” – Lopez. We must organize around identity, not class.

Keeping Up With Forces Shaping Our Future

  • Futurists look for trends and signs of change across the “STEEP” categories: social, technological, environmental, ecological, and political.
  • A futurist can help shape plans – see Perez Art Museum’s plans for surviving a hurricane.
  • Changing future of work – jobs are rapidly changing, millennials change jobs every 2 years or less (is this a symptom of a big problem?), rise of the “gig” economy, fight for $15 hour minimum wage, technology (e.g., artificial intelligence, diverless cars) automating work.
  • Pace of change is so rapid, it may require multiple pivots in organizational direction and structure.
  • Scenario planning is a structured way for organisations to think about the future.. The Economist

America Divided: How Can Our Sector Work Together Better? (Screening)

This series cuts to the heart of the inequality crisis, exploring life-and-death struggles around the economic, social and political divide. Our aim is to expose the damage extreme inequality inflicts on all Americans, reveal its systemic causes, and celebrate real-world heroes fighting for solutions.

The creator and executive producer of America DividedSolly Granatstein, provided us with a glimpse at some of our problems with inequality, including through subtle (to the prospective tenant) but pervasive housing discrimination.

On Shifting Ground – A Production of the Hilton Prize Coalition (Screening)

Steve Connors, Master Storyteller and Director, Hilton Prize Coalition Storytelling Program, noted the challenges of collaboration among local NGOs after the devastating 2015 earthquake in Nepal. They simply didn’t know each other.

With the production of “On Shifting Ground” as the Storytelling Program pilot, The Hilton Prize Coalition has created a new model for collaboration to achieve collective impact. With tools and support from the Coalition, the organizations featured are now formalizing a collaborative framework around program delivery that arose organically from their participation in the film.

Leadership Awards Luncheon

The Luncheon celebrated the transformative leadership of Bryan Stevenson, recipient of the 2016 John W. Gardner Leadership Award, and Diana Nambatya Nsubuga, recipient of the 2016 American Express NGen Leadership Award. Stevenson’s powerful messages inspired and resonated with the attendees:

  • “I don’t believe slavery ended in 1865, it just evolved.”
  • Whenever you allow yourself to be governed by fear and anger, you will tolerate inequality and oppression.
  • “If we do the uncomfortable things, we’ll find something on the other side of that.” We don’t create change when we only do what’s convenient and comfortable. Progress is never comfortable.
  • We need to change the narrative and be willing to talk about things we’ve been afraid to talk about.
  • You are beating the drum for justice. “We’ve got to be brave, brave, brave.”
  • Hopelessness is the enemy of justice. Hope will get you to speak, stand when others try to hold you down.
  • There is power in proximity. Too often we are trying to help suffering people from afar.
  • Beware of any romanticization of civil rights activism; it’s nothing like a “3-day carnival”.

Some final words from the Conference:

  • “America faces breathtaking opportunities disguised as unsolvable problems.” – Gardner
  • Make a career of humanity. Commit yourself to the noble struggle for equal rights.

2016 National Conference on Philanthropic Planning

Dallas City skyline at dusk, Texas, USA


The 2016 National Conference on Philanthropic Planning (NCPP) Conference in Dallas taking place from October 17 to 19 features several notable speakers including NEO Of Counsel Brigit Kavanagh, who will be co-presenting a session on Why Donor Advised Funds and Supporting Organizations are a Gift Planner’s Friend with Wendy Chou, senior philanthropic advisor with The Oregon Community Foundation.

Donor advised funds and supporting organizations are increasingly familiar features in philanthropic planning, presenting an opportunity for gift planners to think creatively about ways these vehicles can be mutually beneficial to donors and charities alike. Using a series of case studies, the presenters will demonstrate how donors are using donor advised funds and supporting organizations to achieve their philanthropic objectives, dispel some myths about these giving vehicles, and discuss ways that gift planners can work with donors to secure gifts from donor advised funds and supporting organizations.

Over 40 speaker papers are offered at this year’s conference. A sample of last year’s papers are available for download on the NCPP site. On-site registration is available on Monday, October 17, starting at noon at the Sheraton Dallas.