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Q&A #10 – Is now a good time to start a 501(c)(3) subsidiary?
This question surfaces a lot from 501(c)(6) entities and other non-501(c)(3) nonprofit organizations. The answer is almost always a strong yes. Even during this crisis, organizations should not hesitate to pursue this strategy as it will open doors to new opportunities and funding not previously available.
Q&A #9 – Is the Executive Committee allowed to cut programs and terminate staff without consulting the full Board?
It is common for Executive Committees to have fairly wide latitude to make operational decisions without consulting the full Board, usually in collaboration with the Executive Director. This can include operational decisions like cutting programs and terminating staff. Whether or not this is legal in your case will depend on your organization’s Bylaws (or perhaps the Executive Committee charter or authorizing resolution).
Q&A #8 – Should my organization create a separate bank account for PPP funds?
The answer is that you do not need a separate bank account to hold PPP funds. Having a separate bank account for PPP funds is not required and not particularly helpful. Your main priorities should be proper and concise documentation of eligible transactions, which can be achieved just as well through good accounting practices and processes.
Q&A #7 – Can my 501(c)(6) organization provide funds to help struggling businesses?
A 501(c)(6) organization is allowed to provide support to struggling businesses, but there are important restrictions and limitations to be aware of.
Q&A #6 – Are there legal restrictions on my company’s ability to raise money for charity?
The main issue to consider is compliance with State “charitable solicitation registration” laws.” These laws, which have been enacted in about 40 States, are basically consumer protection laws aimed at protecting the public against being scammed by fraudulent fundraisers or illegitimate charities. These laws generally apply to anyone raising money for charitable purposes (with a few exceptions).
Q&A #5 – Is my nonprofit organization allowed to extend Board terms during a crisis?
The simple answer is that you cannot violate your Bylaws with a simple Board resolution to extend Board terms (even on a temporary basis and even during a crisis). You should review your Bylaws and the laws of your State of incorporation closely to see what options may be permitted. There may be some flexibility built into your Bylaws that will allow you to retain the desired continuity.
Q&A #4 – What options does my organization have related to restricted funds for a project that we’ve had to put on hold due to the pandemic?
Restricted funds, of course, cannot be used for purposes outside of the restrictions agreed to unless the donors/grantors consent to modify the restrictions (or, alternatively, the modifications are approved by a court). However, there are several steps you can take to get a better sense of how narrow or flexible the restrictions actually are, and to work with your donors and grantors to seek the appropriate modifications that will benefit your organization.
Q&A #3 – Is my Board allowed to have virtual meetings?
It is very likely that virtual Board meetings of this type are allowed based on your description of the Bylaws. Unless your Bylaws have specific restrictions, “virtual” attendance at a Board meeting counts as attendance in person, and the meeting is treated the same as any other Board meeting for all purposes (quorum, notice, voting, etc.).
Q&A #2 – Can donors use the charitable deduction for pre-paid fees for events that have been cancelled if the donor lets the organization keep the fees in lieu of a refund?
The IRS has never, to my knowledge, issued guidance on this particular question. But applying fundamental principles of the charitable deduction rules, people who affirmatively decline to receive a refund for cancelled events, and instead let the organization keep the remaining fees, should be able to deduct this portion as a “donation.”
Q&A #1 – Can my nonprofit raise money to help people affected by COVID-19?
Yes, this is generally something that a 501(c)(3) public charity can do so long as proper processes are followed. This is similar to the “benevolence funds” that are often established by churches, community foundations, and other similar types of publicly supported nonprofit organizations.