NAEYC Affiliate Leadership Day Association Tax and Legal Primer NAEYC Office of General Counsel...
-
Upload
oliver-powers -
Category
Documents
-
view
216 -
download
0
Transcript of NAEYC Affiliate Leadership Day Association Tax and Legal Primer NAEYC Office of General Counsel...
NAEYC Affiliate Leadership Day
Association Tax and Legal Primer
NAEYC Office of General CounselNAEYC Office of General CounselNovember 2015November 2015Lakshmi Sarma Ramani, General Counsel
Introduction• NAEYC’s General Counsel since January 2014
• Advise on all Association matters, including accreditation and governance
• Overview of relevant matters, not intended to be legal advice
• Hope to provide additional resources for Affiliates
What we’ll cover today:• Legal Overview• Governance Overview• Tax Overview• Governance Best Practices
Legal Overview• What is a 501(c)(3) public charity
• What is a non-profit corporation
• What is the difference between the two?
Legal Overview• A 501(c)(3) public charity is a designation granted by the
Internal Revenue Service. Refers to federal income tax exemption. Various forms of exemption ((c)(3), (4), (5), (6), etc))
• A corporation receives a nonprofit designation from the state in which it is incorporated.
• Nonprofit corporations don’t need to be tax-exempt for federal tax purposes.
Legal Overview• Public Charity, determined by IRS.
• Nonprofit corporation and fiduciary duties, determined by state of incorporation.
• Overlaps seen on tax forms and corporate filings
Fiduciary Duties• Generally apply to Board members and Officers of a
corporation
• Developed through common law and case law
• Each state has specific rules that guide these duties, following is an overview only
Exercise ordinary and reasonable care in the performance of duties, exhibiting honesty and good faith.
Act in a manner which you believe to be in the best interests of the association, and with such care, including reasonable inquiry, as an ordinarily prudent person in a like position would use under similar circumstances.
Obligation to protect confidential information
Fiduciary duties: Duty of Care
Duty of faithfulness to the association.
Undivided allegiance to the association when making decisions affecting the association
No conflicts of interest—the interests of the association come before personal interest
No competition with the Association
Fiduciary duties: Duty of Loyalty
Board members must act in accordance with the mission, articles of incorporation, bylaws and other governing documents, as well as all applicable laws and regulations.
No willful ignorance or intentional wrongdoing
Fiduciary duties: Duty of Obedience
Tax Overview501(c)(3) public charities are held to different standard
than other tax-exempt organizations private foundations501(c)(6) trade associations
Tax OverviewTax exemption can be at risk for various reasons:
Mission implementation/driftPrivate inurement: conflicts/excess compensationPrivate Benefit/excess unrelated business incomeImproper political campaign activity
Tax OverviewPrivate Inurement
No use of charitable assets for personal gainLook at relationships and position of influenceFinancial relationships with Board members
strictly scrutinized
Tax OverviewPrivate Benefit
No windfall to for-profit/individualMinimize income from unrelated activities
Tax OverviewAttempting to influence legislation
No “substantial part” of 501(c)(3) activities used carrying on of propaganda or otherwise attempting to influence legislation
501(h) elector Grassroots v. Direct Lobbying
Tax OverviewPolitical campaign activity
Absolute prohibition: no political campaigning allowed by 501(c)(3) public charities
Political campaigning, generally giving of support for the election or defeat of a candidate for office
“candidate” is broadly defined
Governance Best PracticesSarbanes-Oxley
Whistleblower ProtectionRecords retention and destructionOther provisions incorporated into IRS 990 tax
returnConflicts policyAudit CommitteeFinancial Disclosures Certified/Audited Financials
Governance best practices
State lawsState charity and consumer protection laws
Apply to fundraising, which is a regulated activity
State tax requirements, different from federalCorporate requirements
Questions?
Thank you!
Reference/Source materials
Spacone, Andrew C. & Stolzman, Robert I., “Implementing Practical Risk Management: A Guide for 501(c)(3) Nonprofits, Rhode Island Bar Journal, Vol. 62, No. 4, (March/April 2014).
Venable, LLP, “Legal Duties of Association Board Members.” www.venable.com.
Mosher & Wagenmaker, LLC, “Not-for-Profit Directors’ and Officers’ Liabilities.” www.mosherlaw.com.