Non-Profit Organizations: A Roundup of Recent Legal Commentary and Analysis

“The honeymoon phase does not last long for a new general counsel (GC) — on day one of your new job, you are going to start learning about all those things that could not be disclosed during the courting phase, whether out of concern for protecting the attorney-client privilege or out of concern for not scaring you away. Still, there will usually be a period of time when you first start when you can identify issues and make changes with support from management. Given that brief window of time, where should a new GC start?” (From Top Ten Things a New Nonprofit General Counsel Should Investigate by Venable LLP) 

The legal issues (and challenges) of non-profits can keep even the most experience general counsel wondering where to start… For your reference, a roundup of recent commentary and analysis on non-profit law, from law firm Venable LLP and others on JD Supra:

On Personnel Considerations…

Volunteering for Trouble or Trouble with Volunteers?: A Guide to the Liability Risks for Nonprofits and their Volunteers (Venable LLP):

“Volunteers often constitute an essential portion of the “workforce” of nonprofit organizations. Volunteers can play an essential role in providing important charitable services and constitute a vital link to an organization’s constituency and the public—enhancing or harming a nonprofit’s image and functioning. The use of volunteers, however, entails risk—both from and to volunteers.” Read full update»

Problems in Association Governance 301; Handling the Wayward Director (Venable LLP):

“Business judgment rule—bad decisions are more easily defended than ignorance; court will not view decisions from benefit of hindsight, but, rather, from the perspective of the directors making the decisions at that time (was it an informed, reasoned decision, even if wrong?)” Read full update»

Personal Liability Associated with Non-Profit Board Membership (Collins & Collins, P.C.):

“Sitting on a non-profit board can be very rewarding with significant contributions to the community and to causes close to your heart. However, there are a number of potentially very serious financial risks associated with non-profit board participation. Non-profit does not mean non-accountability. Non-profit board members are largely held to the same levels of responsibility and accountability as other board members. And just like other boards, a board member’s private assets may be placed at risk in case of many lawsuits.” Read full update»

On External Communication…

Communicating with Members after Citizens United (Venable LLP):

“Although associations have always had broad leeway to communicate with their members, many association communications reach beyond just the membership and include the general public. In the past, this presented a problem because federal law prohibited corporations—including associations—had always been prohibited from spending money for communications to the general public that advocated electing or defeating a federal candidate. The U.S. Supreme Court’s Citizens United decision loosened these constraints, offering associations more choices in what they may communicate through newsletters, mailings, the web, paid advertisements, and other communication vehicles that go beyond just their membership.” Read full update»

Political Overtures from Church in Memphis (Darrin Mish, Tampa Tax Attorney):

“A Baptist church in Memphis has sent loud signals to all and sundry as to who it feels are considered worthy political candidates for the present municipal elections. The Bellevue Baptist Church, Memphis has linked to another website that lists three candidates deemed pro-family, indicating that they should be supported. The action taken by the church appears to be a reprisal against what a political action committee run by the Tennessee Equality Project (TEP) did. The TEP political action committee wants to see some anti-gay council members replaced with candidates who are friendlier to the cause of gay rights.” Read full update»

On Taxation…

Lobbying: What Does It Mean for 501(c)(3) Organizations? (Venable LLP):

“501(c)(3) organizations that engage in federal lobbying are subject to at least two separate — and very different — definitions of lobbying in order to comply with applicable federal tax and lobbying disclosure laws. This QuickCounsel will review the definitions and reporting requirements for 501(c)(3) public charities under the Internal Revenue Code and under the Lobbying Disclosure Act and provide a guide for compliance efforts under each legal framework.” Read full update»

The Birth of a New Class of Corporation in California “Benefit Corporations” (Manatt, Phelps & Phillips, LLP)

“Benefit corporations are for-profit corporations organized under California law… that differ from traditional corporations in that they may set a goal to create public benefit while, at the same time, delivering economic returns to their investors. The new law provides legal protection to directors of this new class of corporations in pursuing what social entrepreneurs have termed a double bottom line-creating a beneficial social and environmental impact as well as financial returns to shareholders.” Read full update»

Unrelated Business Income Tax for Nonprofits: The Basics (Venable LLP):

“A tax-exempt organization is generally exempt from federal corporate income tax on income derived from activities that are substantially related to the organization’s tax-exempt purposes. However, a tax-exempt organization may be subject to a federal corporate income tax on income derived from unrelated trade or business activities. This is known as the Unrelated Business Income Tax.” Read full update»

On Managing the Nonprofit…

Nonprofit Strategic Partnerships: Building Successful Ones and Avoiding the Legal Traps (Venable LLP):

Commercial Co-Venture is an “arrangement between a charity and a commercial entity under which the commercial entity advertises in a sales or marketing campaign that the purchase or use of its goods or services will benefit a charity or charitable purpose…” Read full update»

Fiduciary Self-Audits for Nonprofits: Evaluating Decision-Making Processes and Controls (Venable LLP):

“Due Diligence in a Nutshell: Can you answer the following:

  • Do you know what you are buying?
  • Who is managing the money?
  • How were they selected?” 

Read full update»

See also:

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