CLE: Navigating the Exempt Organization Process
Sponsored by the Section of Taxation
July 9, 2014
1:00 PM - 2:35 PM (Eastern)/10:00 AM - 11:35 AM (Pacific)
Nonprofit Boards of Directors 101: What You Must Know!
Sponsored by the Solo, Small Firm and General Practice Division
August 9, 2014
2:00 PM - 3:30 PM
2014 ABA Annual Meeting in Boston, MA
New Business Law Section Annual Meeting
September 11-13, 2014
Nonprofit Organizations Committee Fast Facts
|Number of Current Members:
|Number of Active Past Chairs:
Newsletter Editorial Board
- Willard L. Boyd III, Des Moines, IA
- Cari Campbell, Kieler, WI
- Emily Chan, San Francisco, CA
- Megan A. Christensen, Washington, DC
- David Levitt, San Francisco, CA
- Matthew G. Wright, Waco, TX
Greetings from the Nonprofit Organizations Committee Chair.
As we look forward to the summer, and that well-deserved special time of the year when the pace slows up just a bit, now is a good time to reflect on
the changes to the Business Law Section's annual meeting calendar that take affect this year. No longer will Nonprofit Organizations Committee members'
summer vacation plans have to be tailored around the annual meeting of the full ABA in August. Instead, this year the ABA Business Law Section premiers
its new Section Annual Meeting in September, scheduled to take place in the early fall when businesses again start gearing up to work at full strength
and schools start the next year of classes.
Going forward, Business Law Section members (including Nonprofit Organizations Committee members) will no longer have Section-specific content
available at the ABA-wide annual meeting in August. Business Law Section leadership will still have governance-related meetings at the ABA-wide
meeting, and there will still be plenty of CLE for those who are able to attend. For example, on Saturday, August 8, the Solo, Small Firm, and General
Practice Division will put on a program called Nonprofit Boards of Directors 101: What You Must Know! with the assistance of the Nonprofit
Featured Programs |
While I will miss the opportunity to host fellow Committee members in Boston at the ABA-wide meeting in August, I look forward to seeing you in
Chicago, September 11-13, for the inaugural Business Law Section Annual Meeting. Business Law Section leadership and staff have been working diligently
to provide a new level of flexibility and responsiveness to member concerns at this new meeting. We will have substantive sessions of the Nonprofit
Governance and Religious Organizations Subcommittees, as well as a new joint substantive session of the Athletic & Recreational Associations and
Trade & Professional Associations Subcommittees on the subject of the continuing viability of tax-exempt status for professional sports leagues
such as the National Football League. This will be the meeting when we will present our Outstanding Nonprofit Lawyer Awards and host a brown-bag
roundtable lunch on current issues in nonprofit practice. In response to requests from the Section, the Committee Dinner will be on Thursday evening,
Sept. 11. Programming for our Committee will not start until late Thursday afternoon at the earliest.
At this first Section Annual Meeting, we will be sponsoring a feature CLE on the topic, Are Charities Under Attack? The Program will be
organized around issues that a number of scholars are grappling with involving the meaning of "charitable" and the appropriate targeting of the
charitable deduction. Some of this work, resonating with some ideas in Congress and in local government, suggests tying the legal meaning of charitable
more closely to relief of poverty, and targeting the deduction and potentially other tax benefits, to charities that explicitly work to address
poverty. Other aims pursued by charities might not be tax-benefitted or not benefitted as much as currently. Some of the topics that the Program will
focus on include: Are some tax exemptions under siege? What are the emerging concepts of what a charity must be? What is behind the concepts and
policies and what changes should charities consider now?
Please consider attending the first Business Law Section Annual Meeting. It will be a very special event.
Register now to get the best pricing on
flights, hotels, and program registration. I hope to see you there.
Michael E. Malamut
Chair, Nonprofit Organizations Committee
Nonprofit Lawyer Profile: Kristen Gurdin
Kristen Gurdin has served as in-house counsel to the Robert Wood Johnson Foundation since 2010. For more than 40 years, the Robert Wood Johnson Foundation
has worked to improve the health and health care of all Americans. The Foundation's vision is to build a Culture of Health, enabling all members in our
diverse society to lead healthy lives, now and for generations to come.
Prior to joining the Foundation, Kristen advised tax-exempt organizations at the firms of Caplin & Drysdale, Chartered, Davis Wright Tremaine LLP and
Reed Smith LLP, representing colleges, universities, private foundations, hospitals and other tax-exempt organizations. She also served as director of
foundation and legal affairs for a small liberal arts college located in Pennsylvania.
Kristen received her JD from Temple University, holds an MLitt in Theatre-in-Education from Trinity College Dublin and an AB in Theater, Speech and Dance
from Brown University, and was a Fulbright Scholar to the Republic of Ireland.
Did you have any previous experiences that were particularly helpful in developing your nonprofit law practice?
Theater was my first "nonprofit career." I worked for an organization that used theater produced by award-winning playwrights as a tool to reach
disadvantaged youth. The organization's staff was talented and mission-driven, but routinely addressed management issues and legal and funder requirements
as an afterthought. That type of neglect ultimately contributed to the organization's demise. It was tragic. Unfortunately, as anyone who represents
nonprofits knows, this is not an unusual story. That experience taught me that I need to work hard to unpack the stuff that clients see as intimidating and
boring (like federal tax law) and help them understand exactly how that "stuff" relates to achieving their mission and sustaining their organizations.
What do you see as the top one or two legal issues that are currently of concern for the nonprofit sector?
My primary concern is not about any single legal issue, but rather about the capacity of small and midsize nonprofits to handle legal issues in general.
Operation of even a small nonprofit can involve a lot of legal complexity these days. Unfortunately, in many areas of the country it is very difficult for
nonprofits to find affordable legal counsel with the expertise they need. At the same time, there is pressure not to squander precious donations on
administrative costs, including lawyer fees. As a result, otherwise strong organizations are often vulnerable to unforeseen legal risks. This is not a new
phenomenon, of course. As the list of potential legal issues grows, the problem grows more acute. I believe that the issue of access to legal resources is
something funders need to consider.
What has been the most rewarding experience as a nonprofit lawyer?
I get to work with people who inspire me to be a better lawyer and a better human. I've been lucky to have a number of world-class lawyer mentors, who
offered their time, their expertise, and their networks. Moreover, I have had the great privilege of representing organizations that strive to make the
world a better place. Those organizations are filled with smart, dedicated people, from whom I have learned so much. It doesn't get any better than that!
What advice would you give a law student or fellow attorney about becoming a nonprofit lawyer?
You will need more than an interest in social change to be successful. Success requires both technical skills and empathy for those you counsel. Learn to
master analysis of complex statutory language and precise contract drafting. Make sure you understand your client's mission, organizational perspective,
risk tolerance, and the internal politics of their decision-making process. There is a wonderful, supportive network of lawyers who do this work across the
country, become part of it and learn all you can. If you are prepared to do that, you've found a rewarding and dynamic path.
Nonprofit Organizations Committee Announces 2014 Outstanding Nonprofit Lawyer Award Recipients
On June 5, 2014, the legal nonprofit community named the recipients of the 2014 annual "Outstanding Nonprofit Lawyer Awards."
The Nonprofit Organizations Committee of the American Bar Association, Business Law Section, recognizes accomplished and civic-minded nonprofit lawyers
in the categories of Academic, Attorney, In-House Counsel, and Young Attorney. Additionally, the Committee bestows the Vanguard Award on a leading legal
practitioner for his or her lifetime commitment to the nonprofit field.
Megan A. Christensen, Blank Rome LLP, Washington, DC
IRS Releases Draft Form 1023-EZ.
In the March 31 Federal Register, the IRS released Draft Form 1023-EZ Streamlined Application
for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code. The draft is a 2-page form available to applicants expecting to have no
more than $200,000 in annual gross receipts and no more than $500,000 in total assets. Additionally, the form would not be available to churches,
hospitals, supporting organizations, foreign organizations, credit counseling organization, previously revoked organizations (other than automatic
revocation for failure to file Form 990) and certain other types of organizations. In order to determine eligibility, the
draft instructions include an eligibility worksheet, which
asks twenty-two yes or no questions and if the answer to any question is yes, the organization is not eligible to apply for exemption using Form 1023-EZ.
The supporting statement filed with OMB states that Form
1023-EZ applicants will be able to file electronically beginning in 2015.
IRS: Tax-Exempt Organizations Should Consider Healthcare Tax Credit.
The IRS has encouraged small businesses and tax-exempt organizations to consider the
health care tax credit that was included in the Affordable
Care Act. Small employers that pay at least half of the premiums for employee health insurance coverage under a qualifying arrangement may be able to claim
the credit for 2010 through 2013 and for two additional years beginning in 2014. Importantly for small tax-exempt organizations, the credit is refundable
and, thus, even without taxable income, a tax-exempt employer may be eligible to receive the credit as a refund, provided it does not exceed income tax
withholding and Medicare tax liability.
IRS News Release IR-2014-27,
issued on March 10 also includes health care tax tips that provide useful information
to employers, families and individuals.
Proposed Rules Could Greatly Impact 501(c)(4) Political Activity.
On April 22, 2014, the Congressional Research Service (CRS) published a
report that analyzed campaign finance policy,
focusing on tax-exempt entity issues, campaign contributions, and disclosure requirements. In the report, CRS noted that the recently proposed Treasury
Department rules that would curb the political activity of 501(c)(4) groups could be critical in both campaign finance law and tax law debates. CRS
suggested that lawmakers consider the November 2013 IRS notice of proposed rulemaking that could
narrow how 501(c)(4) groups participate in campaign activity when Congress examines campaign finance issues. The IRS has received over 150,000 comments on
the proposed rule. Commissioner John Koskinen stated that the agency may revise the draft rules based on that input.
IRS Cautions Tax-Exempt Organizations to Not Include Personal Data of Form 990.
In May, the IRS reminded tax-exempt organizations to
not include social security numbers or other unneeded personal information
on their Form 990. Both the IRS and most tax-exempt organizations are required by law to publicly disclose parts of Form 990 filings, including schedules
and attachments. Forms that must be made public by the IRS are clearly marked "Open to Public Inspection." The public release of sensitive personal
information about donors, clients or benefactors could give rise to identity theft.
IRS News Release IR-2014-57,
issued on April 29, 2014, also encouraged tax-exempt organizations to
file forms electronically in order to reduce the risk of inadvertently including
social security numbers or other unnecessary personal information.
IRS Advisory Panel Recommends Rule on Commerciality for 501(c)(3) Organizations.
In light of the IRS's recent focus on unrelated business taxable income, an
IRS Advisory Committee on Tax Exempt and Government Entities
has issued several recommendations for specific changes. Included among the recommendations contained in the committee's June 11, 2014
report, is a regulation project to formalize the commensurate test set forth in
Rev. Rul. 64-182 so that profits from a substantial commercial activity will not preclude
exemption under Section 501(c)(3) as long as an organization's income and financial resources are used commensurate in scope with its charitable program.
The committee also recommends that the regulation project reject application of the "commerciality test" recently used by courts and the IRS to determine
what constitutes an unrelated business generating taxable income and when certain business activity conducted by charitable organizations precludes tax
exemption. The committee concluded that neither tax law nor the implementing regulations support the commerciality test.
Emily Chan, Adler & Colvin, San Francisco, CA
On March 7, 2014, the Center for Competitive Politics (CCP) filed a complaint in the U.S. District Court for the Eastern District of California
against state Attorney General Kamala Harris for declaratory and injunctive relief. The complaint is in response to the Attorney General's request for an
unredacted IRS Form 990, Schedule B. The case concerns whether the state may require nonprofit organizations to provide the names and addresses of their
principal donors before being permitted to solicit charitable donations. CCP asserts this requirement violates both the Supremacy Clause (because it is
preempted by the Internal Revenue Code) and its First Amendment right to freedom of association. CCP's motion for a preliminary injunction was denied on
May 13, 2014.
On May 14, 2014, Governor Jerry Brown signed into law SB 27 which contains a number of reforms related to the Political Reform Act of 1974 and
affects the regulation of multipurpose organizations, such as Internal Revenue Code section 501(c)(4) organizations, involved in candidate and ballot
measure elections in California. SB 27 is intended to address transparency in "dark money" and strengthen the laws requiring disclosure of contributions
and expenditures in California elections by multipurpose organizations. SB 27 is effective July 1, 2014.
Governor Paul LePage signed into law LD 1799, "An Act To Amend the Laws Governing Charitable Solicitations," on April 10, 2014. LD 1799 amends the state
Charitable Solicitations Act to exclude from professional solicitation regulation persons who solicit donations on behalf of a charitable organization
without remuneration. It also revises the definition of "charitable organization" to remove the carve-out for solicitors for organizations serving bona
fide religious purposes from regulation under the Act.
On April 23, 2014, the Massachusetts Attorney General's Office announced it had filed a lawsuit in Suffolk Superior Court against Dr. Robert Gee, former
president of National Graduate School of Quality Management, Inc. (NGS), for breach of his fiduciary duty to NGS by collecting excessive compensation and
other unjustified benefits, such as a vacation property, a private residence, and several personal luxury vehicles. The Attorney General's Office has also
entered into a related settlement agreement with NGS and its Board of Directors, which will result in dissolution of the charity if NGS and its Board of
Directors fail to abide by the settlement terms.
On April 4, 2014, Governor Terry McAuliffe signed into law SB 175 which clarifies that state property tax exemption for real property owned by churches and
religious bodies includes: (i) property used primarily for outdoor worship activities; (ii) property used for ancillary and accessory purposes as allowed
under the local zoning ordinance, the dominant purpose of which is to support or augment the principal religious worship use; and (iii) property used as
required by federal, state, or local law. This act is effective July 1, 2014.
On March 10, 2014, Governor Matt Mead signed into law HB 21 which amends the state property tax exemption law to include property owned and used by: (i)
any fraternal organization officially recognized by the University of Wyoming or a community college to the extent it is not used for private profit nor
primarily for commercial purposes by the organization or community college, (ii) a senior citizens center to the extent it is not used for private profit
nor primarily for commercial purposes by the center, and (iii) a charitable organization or association that directly uses the property for the operation
of charity and which is directly beneficial to the people of Wyoming. This act is effective January 1, 2015.