Blog.
Most Recent Posts
Q&A #25 – What’s the difference between a merger and a transfer of assets?
The key difference is that a merger generally means that the “surviving” organization takes on all of the assets and liabilities of the organization that it is absorbing, while a transfer of assets can be structured so that the surviving organization receives only the assets that it wants, without the transferor organization’s other liabilities (except for liabilities that are attached to the specific assets that are transferred, such as a transfer of real estate that is subject to a mortgage).
Q&A #24 – When must a newly-classified private foundation start complying with the 5% minimum distribution rule?
This seemingly simple question is actually quite complicated. Private foundation status comes with numerous new rules, restrictions, and reporting requirements (the 5% minimum distribution rule is only one of many new requirements that you need to be aware of), so you are on the right track if you are starting the planning process for this transition as early as possible.
Q&A #23 – Is it better to file a late Form 990 or file an incomplete Form 990 by the deadline?
The short answer is that you should wait until your Form 990 is complete and accurate before filing, even if it is late. In the worst-case scenario, you may have to pay late filing penalties. Also, be aware that your organization’s tax-exempt status will be auto-revoked for failure to file for 3 years in a row, so a late filing can trigger this revocation if you have already failed to file for the previous 2 years.
Q&A #22 – How should I communicate with my Board during tough times in between Board meetings?
Balancing regular and new communication pathways to the Board of Directors is the key to providing information in between Board meetings. I suggest leaning slightly towards over-communicating vs. under-communicating. Organizations that do not currently send out Board reports in between Board meetings (where the Board meets quarterly or less frequently) should immediately consider adding monthly Board reports that include financial reporting and performance updates.
Q&A #21 – Which state’s laws govern our telecommuting employees?
You have correctly identified an extremely complex issue for which you will certainly need individualized advice. The issue of which state employment laws govern telecommuting employees impacts your organization’s responsibilities on a wide range of laws including but not limited to unemployment insurance, income tax withholding, wage & hour laws, workplace safety, anti-discrimination, and paid and unpaid leave.
Q&A #20 – Which state’s laws should govern our contracts?
The short answer is that it is generally up to the parties to select the state whose laws will govern interpretation of the contract, and there is no one “correct” state that you have to select. Only in rare instances will a court override the state of governing law specified in a contract. Which state is the best choice is a more complicated question that depends on the circumstances.
Q&A #19 – What’s the difference between an MOU and a contract?
In my experience, the concept of a “memorandum of understanding” or “MOU” is widely misunderstood in the nonprofit community. The same goes for similar terms like “memorandum of agreement” (MOA) and “memorandum of intent” (MOI).
Q&A #18 – Is it reasonable to use the same CPA firm to do our audits for more than 6 years?
This is a very common and important question that must be considered on a regular basis. The key to the answer is defining and establishing what is the “regular basis” in your governance related financial statement audit management practices.
Q&A #17 – Is it a conflict of interest to make a grant to another nonprofit founded by one of our Board members?
This is not the type of conflict of interest that is the main concern of the rules applicable to 501(c)(3) organizations, but there are a few good reasons to approach this situation carefully regardless.
Q&A #16 – Should I take over a dormant 501(c)(3) rather than form a new organization?
I have seen numerous people try this approach over the years, but it is almost always a bad idea. The main problem is that you are going to have a very difficult time keeping the previously inactive organization’s status as a 501(c)(3) “public charity” (as opposed to a “private foundation,” which is a type of 501(c)(3) organization that is subject to less favorable rules).
Q&A #15 – Is it a good idea to switch to filing the Form 990-EZ to save costs?
I have gotten this question a lot over the years and not just during a protracted downturn. The simple short-term answer could be yes, but the longer-term impact might not be what you wanted or expected.
Q&A #14 – Can a nonprofit organization have non-Directors on its standing committees?
It is quite common for nonprofit organizations to have non-Directors on their standing committees, but whether this is permitted is a surprisingly complicated question. The answer depends on the applicable state nonprofit corporation statute, and these laws are often more restrictive on this subject than you might think.
Q&A #13 – What are the eligible expenses that EIDL funds can be used for?
There are some important restrictions on the permissible uses of Economic Injury Disaster Loan (EIDL) funds, especially for organizations that have received a PPP loan.
Q&A #12 – What is the deadline to submit the application for PPP loan forgiveness?
There is not one hard deadline that applies to all organizations. For practical purposes, you want to submit the PPP loan forgiveness application before any repayments are due (though you should keep a close eye on whether your lender has their own requirements about when loan forgiveness applications must be submitted).
Q&A #11 – Can my 501(c)(6) organization get in trouble for receiving a PPP loan?
Yes, there are risks for accepting a Paycheck Protection Program loan when the organization was not eligible to receive it. It is clear from the text of the CARES Act statute and from prior SBA guidance regarding eligibility for the “Section 7(a)” loan program (of which the PPP is one type) that the only nonprofit organizations eligible for PPP loans are 501(c)(3) and 501(c)(19) organizations. I do not see a credible argument that any other types of nonprofits (such as 501(c)(6) organizations) were ever eligible to receive a PPP loan.