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Q&A #33 – How can we improve Board member engagement with virtual meetings?
Good for you for monitoring Board member engagement, and yes, there are ways to improve engagement and enhance the effectiveness of your organization’s Board meetings. Now that the novelty of virtual meetings has worn off and become a part of our accepted lives for the foreseeable future, making a concerted effort to assess virtual meeting performance and adopt new practices is critical to the overall health of your organization.
Q&A #32 – Should I incorporate my nonprofit in Delaware?
It is a very common assumption that all corporations should be formed in Delaware. However, Delaware’s reputation as being the ideal state of incorporation comes from the world of for-profit corporations and has little relevance to nonprofits. Delaware holds no particular advantages for nonprofit corporations, so my rule of thumb is that you should generally incorporate where you foresee the organization carrying out most of its programs and activities, except in special circumstances.
Q&A #31 – Should a nonprofit scrap and replace a strategic plan adopted prior to the pandemic?
Although this sounds counter-intuitive, as of now the answer is no. The world around us is still changing in unexpected ways with unprecedented volatility. Nonprofits are continuing to learn to pivot and adapt to new approaches. The best way to measure performance and outcomes and communicate on management’s actions taken is to compare results and changes to your old strategic plan.
Q&A #30 – Can a 501(c)(3) organization engage in advocacy related to state ballot initiatives?
Assuming your organization is a 501(c)(3) public charity (rather than a private foundation) you are generally free to engage in advocacy related to state ballot initiatives, up to certain limits. This is because advocacy related to referenda, ballot initiatives, constitutional amendments, and similar procedures is generally considered a form of “lobbying” on legislation, rather than a political campaign activity.
Q&A #29 – Can the executive officer of a 501(c)(3) organization express personal opinions about the election without endangering the organization’s tax-exempt status?
Yes, it is your right as an individual to speak about the election in your personal capacity, and the Internal Revenue Code prohibition against political campaign intervention by 501(c)(3) organizations is “not intended to restrict the free expression on political matters by leaders of organizations speaking for themselves, as individuals” (see IRS Rev. Rul. 2007-41). However, you will need to be careful to avoid speaking in a way that could be attributed to the organization.
Q&A #28 – Can a 501(c)(3) organization engage in public advocacy related to Supreme Court appointments?
The answer is generally yes, 501(c)(3) organizations are allowed to advocate for or against the appointment of Supreme Court Justices. However, you must be very careful in your communications not to cross the line into endorsing or opposing a candidate for public office in the process. This can be tricky because the line between permissible and prohibited activity is very hazy.
Q&A #27 – Can a 501(c)(3) organization have a political candidate speak at its virtual conference?
The safest approach for a 501(c)(3) organization is to avoid having political candidates (or their staffers/surrogates) speak at any organization event, whether virtual or in-person, particularly when the event is so close to an election. There are certain circumstances where this could be allowed, but these circumstances are limited and always subject to a “facts and circumstances” gray area.
Q&A #26 – Should a nonprofit keep track of donated services?
The answer is always yes, keeping track of donated services is very important. You are correct that the Form 990 does not allow inclusion of in-kind gifts of services (only in-kind gifts of goods). Nonetheless, tracking and recording in-kind gifts of services will have significant benefits for your organization.
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).