Impacts on Charitable DonationsA WIN: After considerable opposition from a variety of interests, the IRS has withdrawn their proposed rule allowing nonprofits to ask for donor's Social Security numbers (here's our overview from December). Besides the unease of donors with giving this information, nonprofits themselves would've had to invest in secure systems to store this data.
TAKE ACTION! With a similar obligation/cost on nonprofit operations, legislation in New York (A03394) has been reintroduced that would require that nonprofits provide a receipt for donations to determine and disclose how that donation would be allocated internally. For instance, "administrative expenses"would have to be differentiated from funds "directly...helping with the...charitable work." This bill would require nonprofits to make a near-immediate internal commitment of donated funds, and maintain an internal accounting system tracking donations of all sizes.The publicly available Federal 990 tax return already provides a pretty clear picture of internal resource allocations. For these, and a variety of other reasons, we encourage NYCON members to contact your representatives and/or bill co-sponsors to share their perspective on the merits of this legislation.
Ongoing $15 Minimum Wage DiscussionsOn January 7th, 2016, the NY Senate Standing Committee on Labor invited a diverse cross-section of employers and economists to testify on their view of Governor Cuomo's proposal for a state-wide $15 wage by 2021. To be sure, there was some divergence in the viewpoints on feasibility and net impacts.Only 3 of the official 16 members of the Committee attended.Other news Minimum Wage Updates:
- There are at least a dozen bills pending in the Legislature with bearing on NY's minimum wage. They range from simply tying the existing wage to inflation, to allowing counties to recommend a Living Wage.
- As NYCON has already said, it will be difficult for NY nonprofits to cope with the proposed increase, even if NY attempted to substantially offset an increased minimum wage, as most nonprofits are funded without NY State participation. Now, it appears that the Governor's budget proposal leaves even the State's commitment in doubt.
- As a general reminder, the minimum wage in NY is $9 in 2016, with increases (for those only subject to NY, not Federal, law) in the overtime exempt salary levels of "Administrative" and "Executive" positions from $34,125 to $35,100.
- On that overtime exempt issue, the latest update on the proposed US Dept. of Labor regulations increasing the overtime exempt salary level (as long as the 'duties' test is also met)...is a midsummer 2016 publishing...with a 60 day implementation period. Again, most nonprofits in NY have activities that keep them outside of the Federal rules...whereby they are covered by NY only.NYCON will keep you updated on any developments.
Ongoing Litigation on NY Executive Order 38 Leaves Ambiguity for Many NonprofitsFor those of you not subject to (or familiar with) NY's EO 38, it requires nonprofits that annually receive funding from New York State (or passed through the State) of over $500,000, when that exceeds 30% of their total annual revenues, to be known as "Covered Providers," with limits on administrative expenses and executive compensation.The best guidance we can give is to act as though the entirety of EO 38 is still in effect. Here is an excellent synopsis (from the law firm of Greenberg Traurig) of the litigation and the aspects challenged.
Friday, February 12, 2016
Our staff attorneys have spent more than a year reviewing hundreds of nonprofit bylaws.Here is what they learned about the most common legal pitfalls!
Register Today:Just Announced!
Special Discount on our Nonprofit Revitalization Act Remedial Action Planwill be offered to all attendees!
The Next (and Last) Bylaw Pitfall (#5) Is: Having Overly Generalized Indemnification & Insurance Policies
The ProblemWhen it comes to potential exposure to personal liability faced by board and staff members affiliated with nonprofits, many organizations fail to clearly and sufficiently stipulate what guarantees and protections they offer. In some cases, unfortunately, organizations don't even secure appropriate insurance necessary to truly honor their promises. Virtually all nonprofits should, and do, endeavor to indemnify their stakeholders from legal claims arising as a result of their service to the organization. Such decisions, however, merit requisite due diligence.Indemnification obligations are generally two-fold:
- Coverage of expenses that might be incurred in defending a legal action;
- Payment of any judgments or necessary settlement fees
How do nonprofit meet these obligations?For most nonprofits, only with appropriate insurance coverage can they truly honor their indemnification commitments. In our experience, many nonprofits needlessly expose themselves, and their stakeholders, to liability and potentially disastrous financial obligations by simply adopting brief, catch-all indemnification and insurance clauses in their by-laws.Carefully consider the following questions:
- Does the indemnification and insurance clause expressly require the nonprofit to procure insurance coverage appropriate for its organizational needs and does it provide for procedures to assure that such coverage is maintained and can be adjusted as needed as the organization evolves?
- Assuming a nonprofit's by-laws obligate the organization to maintain insurance coverage for purposes of indemnification, are the by-laws clear as to those who are actually indemnified? Are staff expressly indemnified? What about volunteers? If so, are the terms of the underlying insurance policies in sync with the by-laws?
- Should the nonprofit also guarantee corporate funds in order to indemnify a stakeholder if its insurance carrier were to refuse to pay or if actual damages exceeded coverage limits? Remember, insurance coverage has its limitations.
- What discretion should a board of directors have, if any, in authorizing the indemnification of a stakeholder who acted in bad-faith or engaged illegal conduct while loosely acting on behalf of the nonprofit? (An unfortunate example can be found here.)
Actions to ConsiderRead More about the limitations of insurance, please read the following recent Q&A from the Nonprofit Risk Management Center. Scroll to the last question for the important question regarding what D&O insurance covers.You may also want to read the following: