1. 1 Legal Issues of Not-for-Profit Organizations Robert L. Waldman Venable LLP 410-244-7499 rlwaldman@venable.com

2. 2 Organizational Issues Corporate Documents Articles of Incorporation Bylaws Minutes Application for Tax-Exempt Status (Form 1023) - Make Sure Determination Letter is Current

3. 3 Information Found in Corporate Documents Name of Corporation Corporate Purposes Board Number and Selection Process Self-Perpetuating Member Selected Term Limits Resident Agent and Address Committee Structure Officers Indemnification Procedure Public Charity Status (IRS Determination Letter)

4. 4 Board Meetings Quorum Approve Minutes Committee Reports Accurate Minutes Record Dissents (By Name or Number) Record Votes No unnecessary or irrelevant information

5. 5 Rights and Responsibilities of Board Members Two Duties Duty of Care Duty of Loyalty

6. 6 Duty of Care Informed, good faith decisions Regular attendance at board and committee meetings Can rely on reports and consultants, if reliable Delegation is permissible Monitor investments

7. 7 Duty of Loyalty Undivided allegiance Disclosure of conflicts/Conflict of Interest Policy Intermediate Sanctions

8. 8 The 17 Questions What are the stated purposes of the organization? Does the transaction advance the stated purposes? Does the transaction benefit a private individual? Were any promises made when the funds were raised? Were any conditions placed on the donated funds?

9. 9 17 Questions (cont.) Does the director attend the meetings? Are meetings held regularly? Does the director have all the relevant facts? Is there any reason not to trust the information being furnished? Are taxes being paid? Is there a conflict of interest or self-dealing?

10. 10 More Questions Is the transaction fair to the organization? How would an ordinarily reasonable and prudent person decide the matter? Are there other laws that affect the particular situation? How accurate are the records? Is the director acting honestly, in good faith and with total integrity? Is this transaction in the best interests of the organization?

11. 11 Operational Issues Conflicts of Interest Private Inurement Private Benefit Intermediate Sanctions –Applies to Excess Benefit Transactions (including compensation arrangements) –25% Tax on the Self-Dealer (200% if not corrected) –10% Tax on the Board (up to $10,000) Conflict of Interest Policy Sarbanes-Oxley Best Practices –New York Situation

12. 12 Lobbying Two Types of Lobbying: Direct Lobbying Grassroots Lobbying

13. 13 Direct Lobbying Communication with a legislator, legislative staff, or other government official (state, federal or local) Refers to specific legislation or legislative proposal Takes a position

14. 14 Grassroots Lobbying Communication with the general public Refers to and takes a position on specific legislation Includes a “call to action”

15. 15 Exceptions to Lobbying Nonpartisan Analysis and Research Self Defense Technical Assistance in Response to a Written Request Discussion of Broad Social Issues

16. 16 Impermissible Lobbying Two tests Insubstantial Part 501(h) election –Expenditure Test (20%) 501(c)(4) Alternative

17. 17 Political Activity Cannot participate or intervene in any political campaign on behalf of any candidate for public office Watch out for “indirect” campaign activity (biased voter guides, issue advocacy tied to a candidate, etc.) Voter education and candidate forums may be ok.

18. 18 Unrelated Business Income Tax (“UBIT”) Three elements Trade or Business Regularly Carried On Unrelated to Exempt Purposes

19. 19 Exceptions to UBIT Passive Income (Rents, Royalties, Interest, Capital Gain) Services provided by Volunteers Most fundraisers Bingo

20. 20 Special UBIT Conerns Corporate Sponsorships (Acknowledgement vs. Advertising) Debt Financed Property Mailing Lists Royalties vs. Compensation Affinity Credit Cards

21. 21 Other Hot Legal Areas Contracts (Employment Contracts) Environmental Intellectual Property Trademarks Patents Copyrights

22. 22 Liability Protection Insurance (D&O, property, E&O) Corporate Protection Volunteer Protection Acts (State and Federal) Indemnification

23. 23 Fundraising Issues Registration Requirements Raffles and Auctions Planned Giving Tools Sample Will Language Naming Opportunities Donor Advised Funds Charitable Gift Annuities Charitable Remainder Trusts Pooled Income Funds

24. 24 Structure Issues Use of Subsidiaries (for profit and nonprofit) LLC’s Title Holding Companies Supporting Organizations Joint Ventures

25. 25 Filing and Disclosure Issues Form 990 Personal Property Tax Returns Charitable Solicitation Make available 990’s, 1023 Charitable Substantiation Rules (Receipts) What Portion is Deductible