Nonprofit Law Blog

Nonprofit Tweets of the Week - February 3, 2012

2012-02-03T04:30:00-08:00

Lots of nonprofit-related events and news this week, none stirring as much controversy as the Susan G. Komen Foundation decision to stop funding Planned Parenthood for breast cancer examinations and other breast health services. Here are some of my favorite posts of the week in the areas of nonprofit organizations, corporate governance, philanthropy, and social enterprises:

Kivi Leroux Miller: The Accidental Rebranding of Komen for the Cure - http://ow.ly/1h4ImG
Gene: Lesson - develop & live by organizational values - not directors' personal values. Duty of loyalty. [Agree with Pete Manzo]
Lisa Chiu: IRS fines nonprofit Food for the Hungry re overvaluations of medicine: http://philanthropy.com/article/IRS-Levies-Fine
National Council: What were the Top Ten policy issues for nonprofits in 2011? Find out in this Nonprofit Advocacy Special Edition http://bit.ly/zA8hDF
Emily: An Executive Director’s Guide to Financial Leadership: 8 key principles for sustained financial health via Nonprofit Quarterly - http://bit.ly/xcBcTL
Patrick Sternal: IRS will eventually catch most online UBI - TheNonProfitTimes - http://shar.es/fp2Ir | Good basic guidelines (even if "eventually" = x→ ∞)
Lucy Marcus: Is it time for you to step off the board? You’ve got to know when to go Reuters Opinion - http://reut.rs/zjcNpG
Emily: Who’s Financing the ‘Super PACs’ - Graphic - NY Times - http://flpbd.it/jFMW
Zoe Wong: Lots of socent language in Mark Zuckerberg's IPO letter to prospective investors http://ti.me/w3VLQr via TIME
Gene: Operating In Two Worlds: Tandem Structures In Social Enterprise - http://bit.ly/AFqhih
Liz Maw: The BBC’s take on Davos panel's on lost generation: http://bbc.in/AcGvlw & some perspective from Global Shapers: http://wapo.st/z7KWUQ

And one last item: I was quoted in today's New York Times regarding a contemplated merger between two nonprofit news groups. Nonprofit journalism and nonprofit mergers are fascinating areas of the law (at least for me).

For more interesting tweets, follow me and Emily on Twitter.

Nonprofit Tweets of the Week - January 27, 2012

2012-01-27T04:30:00-08:00

Here are some of my favorite posts of the week in the areas of nonprofit organizations, corporate governance, philanthropy, and social enterprises:

Lisa Chiu: Obama says he won't harm charitable giving: http://philanthropy.com/article
Nonprofit Quarterly: Did U.S. Supreme Court's decision open door to less protection for faith-based employees? http://owl.li/8ACXy
Philanthropy: Nonprofits Added Jobs Faster Than Businesses Last Decade, Study Finds http://ow.ly/8zCKT
Emily: An Executive Director’s Guide to Financial Leadership: 8 key principles for sustained financial health http://bit.ly/xcBcTL (Nonprofit Quarterly)
Emily: Due Diligence Done Well - a guide for grantmakers supporting 501(c)(3)s by Grantmakers for Effective Organizations & La Piana Consulting http://bit.ly/wC6WgU
Gene: For EDs & Boards, Chairs Matter http://bit.ly/yxXFFG & You're not the boss of me http://bit.ly/i8lK1K
Debra Beck: Orienting our nonprofit boards: It's a process, not single event http://bit.ly/yQIxMW
Gene: "Missing Opportunities" - Impt Report Finds Deep Disparities in Funding to LGBTQ Asian American/Pacific Islanders - http://bit.ly/ygnU6g via AAPIP
Jonathan Coburn: Infographic on the history of social business and shared value http://www.mycustomer.com/topic
Lucy Bernholz: Worth a read. The Trouble With Impact Investing – Part 1 | Stanford Social Innovation Review http://shar.es/fXTd4
Social Edge: Sustainability reports are about accountability. Integrated reports are about changing the way companies think http://law4.ch/AtF0DJ

For more interesting tweets, follow me and Emily on Twitter.

Gift Acceptance Policies - NCPGC Program Presented by Barbara Rhomberg

2012-01-23T05:00:00-08:00

On January 12, 2012, I attended the progam "Gift Acceptance Policies: Why, When, What, How, and Who" presented to the Northern California Planned Giving Council by exempt organizations attorney Barbara Rhomberg. Using the example of the Trojan Horse, Barbara quickly convinced us that not all gifts are good ones and the time for a gift acceptance policy is before a charity accepts a problematic gift. Here are some highlights of her talk [and some of my thoughts in bracketed text].

There are 5 factors a charity must consider before accepting a noncash gift:

Costs of ownership.
Costs associated with the sale.
Staff/volunteer time required.
Exposure to liability [and other harm].
Marketability of the gifted asset and any cash flow associated with it.

In addition, a charity must assess the impact of any restrictions on the use or disposition of the asset (e.g., prohibitions against a sale, endowment-related issues); any strings and conditions (e.g., naming opportunities, payment of associated legal or appraisal costs); embarassing gifts (e.g., due to nature of donor's business); and tax shelters.

Gifts of real estate may be of great value to a charity. But there may also be significant costs of ownership (e.g., maintenance, insurance, property taxes) and sale. Additionally, there may be risks of environmental liability (particularly with undeveloped land or land with prior commercial use), title problems, prior mortgages/liens, and marketability. [For fiscal sponsors, there must be consideration of what the sponsoring organization will do with real estate secured for a project if the project committee fails to raise sufficient funds and/or disbands.]

Planned gifts (e.g., charitable remainder trusts, charitable lead trusts, charitable gift annuities) will require special consideration.

A gift acceptance policy will help protect a charity from accepting a bad gift, expedite the acceptance of a good gift, facilitate the tactful decline of a gift, and evidence an appropriate level of governance [which will be reflected on its Form 990]. A good policy will answer the following questions among others:

What assets can be accepted?
Who will review the assets and how will they be reviewed?
How will restrictions, strings, and conditions be evaluated?
Who can accept the asset?

While charities will not want to be bound by rigid rules that fail to consider special circumstances that might make an exception in order, a good policy will identify who is authorized to make such exceptions (e.g., executive director, board committee, or board). A good policy will also take into account the charity's unique set of facts and circumstances. And a charity will benefit from the experience of working through development of its own gift acceptance policy that considers its own unique set of facts and circumstances. Simply copying a template document may be do more harm than good though review of a few strong templates may be a great place to start.

Resources suggested by Ms. Rhomberg include:

Gift Acceptance Policies - Why, When, What, How, and Who - Barbara Rhomberg

Effective Gift Acceptance Policies and Procedures - David Wheeler Newman

Model Gift Acceptance Policy and Procedures - David Wheeler Newman

Understanding and Drafting Nonprofit Gift Acceptance Policies - Kathryn W. Miree

Great presentation, Barbara!

Nonprofit Tweets of the Week - January 20, 2012

2012-01-20T05:00:00-08:00

You can listen to Gene on Tony Martignetti Nonprofit Radio today (1:00 pm ET; 10:00 am PT) discussing board oversight basics. Chase Magnuson and Allen Thomas kick off the show discussing real estate gifts, how to get them, and how to keep a charity safe from bad gifts. Click on the "Listen live" link.

Here are some of my favorite posts of the week in the areas of nonprofit organizations, corporate governance, philanthropy, and social enterprises:

Nonprofit Assistance Fund: Great article by Kate S Barr & Jeanne Bell in the Nonprofit Quarterly - An Executive Director’s Guide to Financial Leadership - http://ow.ly/8wowx
Emily: How can nonprofits that rely on government funding navigate the financial crisis? 5 ways discussed in Stanford Social Innovation Review - http://bit.ly/z0puQN
Gene: Protecting Your Nonprofit's Money in the Post-Madoff Era - http://www.venable.com/files
Tony Martignetti: Listen to my December teleseminar titled "Charity Registration Demystified" in association w/ NonProfit Direct - http://tony.ma/yablVa
Emily: Can an Effective Whistleblower Policy Prevent Misconduct? via JD Supra - http://bit.ly/yDkOVC
Nonprofit Quarterly: Controversy spins local nonprofit out of control - how conflict of interest can damage a nonprofit - http://owl.li/8swf8
Emily: Build a Board w/ skills useful for start-ups & sell your potential impact to funders MT Foundation Center New York: Launching a Nonprofit - http://ow.ly/8r7ye
Foundation Center: The Duty to Inform for DC Nonprofits: Originally posted in the Legal Alert published by DC Bar Pro Bono Program ... http://bit.ly/zpMcZm
Don Kramer: If a 501(c)(7) pays the start up costs of a related 501(c)(3) #nonprofit, can the 501(c)(3) reimburse the 501(c)(7)? - http://bit.ly/zG2awr
Gene: Daily Kos: The Start of a Revolution - California benefit corporations http://j.mp/yUaV2R
Cynthia Rowland: Happy to announce our free Spring seminars for nonprofits: http://NonprofitRoundtables [San Francisco]
Rob Reich: "Electoral skullduggery." Super PACS & democracy - http://www.colbertnation.com

And two quotes from Dr. King posted during Martin Luther King, Jr. Day:

Foundation Center DC: "Life's most persistent & urgent question is: 'What are you doing for others?"
Reshma Saujani: "Not everybody can be famous. But everybody can be great, because greatness is determined by service."

For more interesting tweets, follow me and Emily on Twitter.

Youth Board Members: Can minors serve on a nonprofit board?

2012-01-19T12:20:44-08:00

Youths represent a growing volunteer population for nonprofits and for some, a potential pool of nonprofit board members. The 2007 National Survey of Children's Health estimated that 78% of youths between 12-17 years of age had participated in at least a few volunteer work or community service events that year. Some groups have taken note of this increasingly service-oriented age group and focused discussions about integrating younger individuals into nonprofit boards beyond young professionals and even young adults to youths (i.e., person under the legal age of adulthood).

Youth board members are most commonly found in youth-serving organizations such as, for example, America’s Promise Alliance which has two youth board members and Youth As Resources which has a primarily youth board. While interest in the idea of youth board members may be growing in recent years, in practice, it still remains an anomaly. For example, as the 2010 BoardSource Nonprofit Governance Index reported, the number of nonprofit board members under 30 years old has barely changed from 2 percent since 2007 while 71 percent of nonprofit board members are over 50 years old.

A youth board member can bring potential benefits to an organization (especially in youth-serving organizations) such as reinforcing the mission and values of the organization to internal and external audiences, providing a voice at the highest governance level of the organization on behalf of the population being served by the organization, bringing a fresh perspective, tapping into new networks and, in a broader context, developing the next generation of organizational leaders. Having a youth board member can also create risks, raise legal uncertainties, and cause further dysfunction in pre-existing weaknesses of a board due to the new challenges that accompany such an addition. Accordingly, a board must thoroughly analyze the pros and cons and exercise reasonable care in deciding whether to bring on a youth board member. This decision can raise any number of legal, governance, and practical considerations, some of which we have highlighted below.

Get familiar with the legal implications.

Is there a required minimum age of a nonprofit board member?

The minimum age of a director of a nonprofit may be addressed by state law. Some states explicitly provide for youth board members, other states explicitly prohibit it, while most states are silent on the issue. According to “Your Guide to Youth Board Involvement and the Law,” a publication by Youth on Board, authors Kelly Bates, Esq. and Karen S. Young reported that as of 2002:

3 states have laws providing for youth board members (specifically, Michigan, Minnesota, and New York);
7 states have laws prohibiting youth board members (specifically, Colorado, Florida, Georgia, Nevada, New Jersey, Pennsylvania, and Utah); and
40 states and the District of Columbia are silent on the issue of youths on boards.

Even if state law provides for youth board members, organizations must still check the applicable statute for any restrictions. For example, New York state law provides in part that only certain nonprofit corporations may have a director of sixteen years of age or older, such as a nonprofit corporation “organized for educational purposes primarily for the benefit of individuals below eighteen years of age” or “organized for recreational or youth development and delinquency prevention purposes primarily for the benefit of individuals below eighteen years of age.” (New York Non-For-Profit Corp. Code §701(a)).

Additionally, organizations incorporated in states where the laws are silent may face a different set of obstacles. As Paula Allen discussed in her article, “Youth and philanthropy: Legal issues, practical consequences,” multiple state agencies in Indiana (where the law is silent), including the Attorney General and Secretary of State offices, were unable to provide a uniform response about whether a minor could serve on the board of an Indiana nonprofit. A takeaway for organizations is not to assume silence in the law means the same as authorization. Organizations incorporated in states where the law is silent may face similar uncertainties from state agencies and should do their homework.

What are the rights and obligations of a youth board member? What about D&O insurance?

A youth board member would have many of the same legal rights as the other board members such as full voting rights as a director and access to corporate records of the nonprofit. However, a youth board member’s authority and obligations are likely limited in other ways. For example, youth board members would generally not have signing authority because minors have limited ability to enter into or sign contracts under general contract law principles. Additionally, while the law articulates that board members have fiduciary duties and a youth board member should strive to carry out his or her position according to such standards of care and loyalty, these may not be legally enforceable duties against a youth board member. As Allen noted in her article, as of 2002, there has not been extensive examination of the limitations on minors under contract law and common law nor case law research on suits brought against boards with youth board members. Notwithstanding whether a youth board member could be legally accountable for his or her observance of a director’s fiduciary duties, some also believe a plaintiff would likely be dissuaded from including a youth board member in a lawsuit for breach of such duties in all but the most egregious circumstances because of the potential backlash.

Furthermore, whether the youth board member is covered under the organization’s directors and officers (D&O) liability insurance may depend on the organization’s specific policy. Many D&O policies do not specify a minimum age for directors. However, an organization is well advised to check its policy and speak with its insurance carrier.

Thus, the uncertainty surrounding the liabilities and protections of a youth board member may create enough cause for concern for both the organization as well as the minor, and possibly his or her parents, that adding a youth board member is not a desirable situation for any party involved.

Evaluate the "why."

Nonprofit organizations are often criticized for seeking “diversity” without definition or direction and the appeal of a youth board member should not fall into the same trap. Even if legally permissible, a board must seriously consider the reasons why the organization seeks a youth board member to begin with. Useful questions may include:

What skills will a youth board member bring and are these skills valuable to the board and organization?
What perspective will a youth board member provide and would this fill a current and important void?
What does the board expect or hope to gain from a youth board member?
Is there a particular youth in mind that the board finds to be exceptional and if so, what are the qualities and attributes the board believes are appealing and valuable to the organization?
What does the organization gain from a youth’s participation as a board member that it would not get through alternative forms of involvement (e.g., through participation on an advisory committee)?
Is having a youth board member consistent with the organization’s mission and values?
How will staff, funders, donors, and other constituents react to a board with a youth board member?

Thoughtful consideration about the underlying purpose and objectives will not only help the board determine whether to continue its discussion about a youth board member but also subsequently help steer the board in the right direction when determining how to either incorporate a youth board member or pursue an alternative arrangement.

Assess the board and organization’s capacity.

Have we honestly self-assessed the current board?

Even if board members believe they are supportive about bringing a youth onto the board, there should be honest discussion about the current state of the board before voting on that decision. Dysfunction is not uncommon among nonprofit boards and prematurely adding a youth board member may significantly exacerbate some pre-existing problems as well as result in a bad experience for the youth board member. Questions to consider may include:

Does the board deal well with changes?
Does the board respond well to new leadership?
Are respect and open-mindedness strong characteristics of the board?
Is there a welcoming and supportive environment to different ideas and opinions?
Is the board generally organized and does it have clear lines of communication?
Is the board productive at meetings and in-between meetings?
Does the board consistently follow its procedures for electing or appointing new directors as outlined in its governing documents or other board policies?
Is the board prepared, willing, and able to review its governing documents for consistency with having a youth board member and make any amendments, if necessary?
Does the board have a good process for orientation and training of new board members?
Is there a potential for burnout or overburdened board members given other ongoing projects or tasks?
What were some of the recent problems or missteps of the board and how have they been addressed since then?

Addressing such concerns now could make all the difference in the long term for developing a board that could properly support a youth board member. An organization that is not ready to make that step today is not necessarily unable to make that step down the road and regularly having honest self-assessment conversations may help an organization to get there much faster.

Are all or only some board members supportive of a youth board member?

While most board decisions do not require unanimous approval (unless otherwise required by law or the organization’s articles or bylaws), a board may desire unanimous or supermajority approval for incorporating a youth board member. Given the potential challenges and legal risks involved, organizations will want all hands on deck for facilitating the best transition and producing the most beneficial and meaningful experience possible. A disruptive or unsupportive board member can intensify difficulties while a fully supportive board is probably in a better position to withstand challenges and hold each other accountable for being cooperative, supportive, and engaged in the process.

Are we prepared to handle unfamiliar and difficult governance issues?

Incorporating a youth board member will likely present new challenges that are unfamiliar and difficult for even the most experienced or competent boards. An organization should brainstorm potential issues that could arise beforehand and assess the board’s ability to successfully work through such a scenario. Examples could include:

Will the youth board member feel isolated and if so, how will this be addressed?

Will the youth board member benefit from a mentor and if so, who are the appropriate candidates?

What kind of skills or training might the youth board member need that the organization currently does not provide?

Will all board members need training in youth-adult partnerships (e.g., little to no experience in working directly with youths and vice-versa)?

Are some conversations potentially too sensitive or complicated for a youth board member and if so, how will those situations be handled without excluding the youth board member?

Will there be an issue among board members if a youth board member is the tie-breaking vote on an important decision and if so, how can such issues be mitigated or prevented (e.g., amendments to bylaws to require unanimous or supermajority approval for certain actions)?

Will the board handle board-related disciplinary issues any differently with a youth board member?

Should the youth board member abstain from voting on certain decisions (e.g., issues involving contracts) and if so, how will this be determined and handled (e.g., amendments to the bylaws)?

Will logistics need to be altered to accommodate the youth board member (e.g., time and place of board meeting)?

Consider alternatives.

Membership on a board of directors is not the only option for an organization seeking the value and benefits associated with youth leaders. If a youth board member is not the best or appropriate course of action at this time, it is worth considering other ways to implement youth leadership at the organization. Alternatives to board membership include:

Creating a youth advisory board;

Having the youth join an already existing Advisory Board;

Having the youth join a committee;

Establishing a mentor-mentee relationship between the youth and an individual in a leadership position at the organization;

Assigning special projects or assignments to the youth that utilizes his or her skills and perspective; or

Having the youth regularly attend and participate in board meetings (as a nonvoting guest).

These alternatives or similar options may strike the right balance between providing increased leadership and involvement opportunities at the organization while avoiding the legal risks and practical challenges involved in having a youth board member.

The decision of whether to have a youth board member will inevitably vary across organizations. There are serious legal and practical implications for taking on a youth board member, and the risk of such consequences can vary in any given situation. At the same time, with the right youth and under the right circumstances, an organization can gain much value from bringing that youth onto its board. Ultimately, the board must engage in careful, thoughtful, and honest analysis, not only in the areas we have highlighted, about whether the potential benefits outweigh the potential risks for that specific organization with respect to that particular exceptional youth.

Resources:

“Your Guide to Youth Board Involvement and the Law” by Kelly Bates, Esq. and Karen S. Young (for purchase).

“Youth and philanthropy: Legal issues, practical consequences” (New Directions for Philanthropic Fundraising, Special Issue: Engaging Youth in Philanthropy, Volume 2002, Issue 38, pages 49–66, Winter 2002) by Paula Allen (for purchase).

"Engaging Youth: A How-To Guide for Creating Opportunities for Young People to Participate, Lead and Succeed" by Andy Paul and Bina Lefkovitz of the Youth Services Provider Network.

"The Power of an Untapped Resource: Exploring Youth Representation on Your Board or Committee" by Hans Bernard.

“Youth Board Members” webinar presented by the National Youth Advocacy Coalition.

Earned Income 101 for Nonprofits - Webinar

2012-01-18T23:41:08-08:00

Earlier today, Emily and I presented Earned Income 101 for Nonprofits for Nonprofit Webinars. You'll find our PowerPoint presentation on the site. I've reproduced the introduction here:

Many nonprofits use earned income as a source of revenue generation. For example, it was estimated in 2008 that nearly 70% of the $1.4 trillion generated by nonprofits came from the sale of goods and services. However, despite its long-standing, common use in the nonprofit sector, the area of earned income for nonprofits is often wrought with misconceptions and misunderstandings which can lead to untapped sources of revenue or unknowingly jeopardizing the organization’s exempt status. Especially in light of current economic challenges facing the nonprofit sector, nonprofits should become familiar with the basic principles related to earned income to best help their organizations more effectively further their missions.

Takeaways:

IRS rules for determining whether business income is unrelated business taxable income

Exceptions and limitations to unrelated business income

Key considerations when choosing between a nonprofit and for-profit entity to house a business activity

Other key considerations for carrying out your business activities.

Also check out Emily's popular posts: The Profitable Side of Nonprofits – Part I: Earned Income and Part II: Different Legal Structures

Here are some more resources:

IRS Publication 598 - Tax on Unrelated Business Income of Exempt Organizations

Social Velocity - Financing Not Fundraising: Evaluate Earned Income

Can Nonprofits Terminate Employees for Their Social Media Posts?

2012-01-17T05:00:00-08:00

Emily's article, "I Thought We Were Friends!" Can Nonprofits Terminate Employees for Their Social Media Posts? was published in the current issue of The Nonprofit Quarterly. Here are some excerpts:

Terminations due to actions on social media sites, commonly referred to as “Facebook firings,” have been gaining widespread attention over the past year, including from the National Labor Relations Board (NLRB), the federal agency charged with enforcing the National Labor Relations Act (NLRA).

Section 7 of the NLRA is the provision generally implicated by Facebook firing cases, and states, in relevant part: Employees shall have the right to self-organization ... and to engage in other concerted activities for the purpose of ,,, mutual aid or protection ....

Nonprofit leaders are typically unaware that the NLRA applies to their organization.

Starting next year, the NLRB will require employers to post a copy of a notice advising employees of their NLRA rights and provide information pertaining to the enforcement of those rights. This new requirement may also be a sign that the NLRB will be increasingly unsympathetic to employer policies that fail to reference NLRA rights or provide a Section 7 disclaimer.

Nonprofit Tweets of the Week - January 13, 2012

2012-01-13T08:09:50-08:00

Here are some of my favorite posts of the week in the areas of nonprofit organizations, corporate governance, philanthropy, and social enterprises:

Nonprofit Quarterly: What's trending on NPQ: “I Thought We Were Friends!” Can Nonprofits Terminate Employees for ⁰Their Social Media Posts? http://owl.li/8pAZM [Our own Emily Chan wrote this piece.]

Social Edge: Absolute must read on LawForChange: Legal Risks in Social Media Use: legal traps your social sector org should avoid http://law4.ch/zE5bhY

National Council of Nonprofits: New resources posted about boards and diversity http://bit.ly/9y7lFo

Westlaw: Is new Supreme Court ruling a retreat from Citizens United? law4.ch/wLAz3g

Emily Chan: Montana Supreme Court Defies Citizens United Ruling via @lawdotcom http://bit.ly/xevbji

Foundation Center - New York: Reasons NOT to Start a Nonprofit http://ow.ly/8n2tZ

Gene: Are many nonprofit leaders scared to learn about legal requirements because it would force them to allocate limited resources to compliance?

Gene: Nonprofit leaders can find new opportunities (not just burdens) and a stronger sense of security with a greater understanding of the law.

Alex Todd: Governance Committee Job Description - http://bit.ly/ys9ASd

Alex Todd: Job description of the Chair of the Governance Committee - http://bit.ly/wak1N6

Emily Chan: Twelve California Companies Seize the Moment to Become Benefit Corporations via GOOD - http://bit.ly/zdDd61

For more interesting tweets, follow me and Emily on Twitter.

Top 10 Events in 2011

2012-01-09T05:00:00-08:00

Here are our top 10 events of 2011 affecting the nonprofit sector (listed in chronological order):

The Arab Spring

NPR fundraising scandal

The Great East Japan Earthquake

275,000 organizations lose tax-exempt status

Mortensen and the ‘Three Cups of Tea’ scandal

501(c)(4) gift tax examinations halted

Occupy Wall Street

Steve Jobs dies

Corporate Flexibility Act of 2011 signed into law in California

Super committee and the charitable deduction

1. The Arab Spring – 2011 kicked off with eyes and ears across the nation focused on a series of grassroots uprisings and demonstrations that were occurring across the Middle East in what is now referred to as the Arab Spring. As the new year began, a revolution continued from late 2010 in the streets of Tunisia after a young fruit seller, Mohamed Bouazizi, set himself ablaze in front of the provincial headquarters in an individual act of anti-government protest and we watched as Tunisian protesters successfully overthrew the government and forced then-President Zine el Abidine Ben Ali to flee into exile. In January, we also witnessed Egyptian protesters organize a day of revolt in Tahir Square that lasted for 18 days until former President Hosni Mubarak stepped down from power. Uprisings in Libya soon followed in February and by the end of August, Libyan protesters had overthrown the government and ousted then-dictator Moammar Gadhafi who was later killed by transition forces in late October. Other demonstrations occurred in nearby countries such as Syria and Yemen and the Arab Spring has been credited with inspiring anti-government movements throughout the world, including the U.S. Occupy Wall Street movement. These events have amplified an ongoing conversation about the evolving role of social media in revolution and social change, not only in reporting but also organizing large-scale demonstrations, as well as raised discussions about the role of philanthropy in these areas and during these times of transition. What we witnessed throughout 2011 with the Arab Spring has been nothing short of a powerful and emotional showing of grassroots democracy.

Additional resources:

Arab spring: an interactive timeline of Middle East protests – The Guardian

The New Social Media and the Arab Spring – Oxford Islamic Studies Online

Which way now for Arab philanthropy? – Alliance Magazine

2. NPR fundraising scandal – On March 8, National Public Radio (NPR) found itself in the middle of a fundraising scandal after a secretly taped video was released of then-Senior Vice President for Development Ron Schiller making inappropriate comments during a meeting with people disguised as prospective donors. Ron Schiller resigned within hours after the scandal broke and then-Chief Executive Officer Vivian Schiller (no relation) submitted her resignation to the NPR Board of Directors by the end of the same day. This story spread quickly in part because NPR, which reaches 26.8 million listeners each week, is a highly respected organization by many groups and Ron Schiller’s behavior on the video was in such contrast to the practices and values that would be expected of NPR and its senior managers. It also came at a particularly sensitive time for NPR, following on the heels of a negative backlash stemming from the firing of Juan Williams, then-NPR senior news analyst, for certain comments made as an analyst and commentator for Fox News and in the midst of Congressional battles after the U.S. House had approved a proposed $50 million cut in public broadcasting funding. Public concerns about NPR’s practices were only exacerbated by a subsequent release of another secretly recorded conversation, this time with Betsy Liley, NPR’s director of institutional giving, about shielding a donor group from a government audit. The NPR controversy spurred many sector-level conversations about the jeopardy of federal funding for public broadcasting and also underscored many lessons to be learned regarding fundraising tactics and the importance of succession planning in preparing for unexpected absences of leadership.

Additional resources:

Resignation Comes at Sensitive Time for NPR – The New York Times

NPR’s Scandal Serves as Cautionary Tale for Fund Raisers – The Chronicle of Philanthropy

Two Questions NPR’s Board Should Ask – The Chronicle of Philanthropy

3. The Great East Japan Earthquake – On March 11, Japan experienced a 9.0 magnitude earthquake, the most powerful earthquake in Japan’s recorded history, which also caused a devastating tsunami along Japan’s coastline. The earthquake and tsunami caused widespread damage including explosions at three nuclear plants in Japan and resulted in 15,844 deaths, 5,890 injured persons, and 3,451 missing persons, according to the National Police Agency of Japan (current as of December 2011). It was estimated by The Chronicle of Philanthropy that $246.9 million was raised from donors in the United States in the first month following the disaster. What many hoped for in this situation was the benefit of hindsight and lessons learned from previous disaster relief efforts such as the Haitian earthquake relief efforts last year that generated tremendous criticism. Effective disaster relief can be difficult, particularly when it takes place abroad, and educating donors to give the right things to the right organizations is critical especially given the current technological age where we are instantly inundated with requests from a myriad organizations and individuals to help through social media posts, cell phone text messages, and online donations. Understandably, there will be more lessons learned from these relief efforts and as the efforts in Japan continue, it is an opportunity for both individuals and organizations to regularly evaluate how to give more effectively in such situations.

Additional Resources:

Japan Earthquake & Tsunami: Grantmaker Resources – Northern California Grantmakers

Lessons Learned from Haiti – Blackbaud (five-part webinar series)

The DOs and DON’Ts of Disaster Donations – Good Intentions

4. 275,000 organizations lose tax-exempt status – On June 8, the IRS announced that approximately 275,000 organizations (which accounted for 16 percent of nonprofit organizations nationwide) had automatically lost their exempt status for failing to file their legally required annual information return (Form 990, 990-N, or 990-EZ) with the IRS for three consecutive years, a requirement under the Pension Protection Act of 2006 (PPA). The sheer number of organizations that lost their exempt status was a jarring reality check to the sector. It highlighted a widespread deficit in the capacity of many organizations to meet their legal filing requirements. Despite the fact the PPA requirements had been in effect since 2007 and the IRS’s big push to get organizations in compliance before the applicable deadlines, many organizations that had their status revoked were simply not aware of the requirements. Now, such organizations must jump through administrative hoops to get back their exempt status. Other organizations, however, are likely no longer in operation or are already on their way to shutting their doors. As the Urban Institute reported in “Revoked: A Snapshot of Organizations That Lost Their Tax-Exempt Status,” 64 percent of all organizations founded before 1950 had their exempt status revoked for failure to file. This suggests that many of these organizations may have not properly dissolved before closing their doors. Accordingly, this event should serve as a reminder to all nonprofit organizations to inquire about their periodic and final filing requirements.

Additional Resources:

How Did 275,000 Nonprofits Lose Tax-Exempt Status? – Nonprofit Law Blog

Automatic Revocation Exemption List – IRS

The End of Small Nonprofits That Have Not Filed Form 990 – Nonprofit Law Blog

5. Mortensen and the ‘Three Cups of Tea’ Scandal – In April, a New York Times best-selling author, Greg Mortensen, and the nonprofit organization he founded, Central Asia Institute (CAI), were the center of a "60 Minutes" segment raising allegations such as private inurement to Mortensen from CAI in helping to fund Mortensen’s speaking engagements, fabricated stories in Mortensen’s best-selling book, and misleading representations by CAI about the use of its assets. It was a cautionary tale for all nonprofits about the heightened scrutiny nonprofits are currently facing and the increasing importance of the publicly available Form 990 as a marketing tool. Perhaps one of the most important lessons from this tale is public perception matters. Following the scandal, the media was abuzz with stories about the potential legal liability for CAI board members and Mortensen personally if wrongdoing is found in a court of law and two Montana residents even tried to bring a class action suit against Mortensen. To date, there have been no court rulings stemming from the events that led to the "60 Minutes" expose but, as evidenced by the continued backlash against Mortensen and CAI, legal standards do not necessarily temper the level of care and loyalty expected by the public from nonprofits and their leaders.

Additional resources:

Questions over Greg Mortenson's stories – 60 Minutes

'Three Cups of Tea' Scandal Offers Lessons for Charities and Trustees – The Chronicle of Philanthropy

“Three Cups of Tea” posts – Good Intentions

6. 501(c)(4) gift tax examinations halted – It was reported in May that the IRS had sent letters to five taxpayers regarding a thirty year-old, rarely enforced rule that imposes a gift tax on certain contributions to 501(c)(4) organizations. Many suspected this was a politically motivated move on behalf of the IRS or at the direction of the White House as a result of the Citizens United v. Federal Election Commission decision by the U.S. Supreme Court in 2010 which opened the door to certain political campaign expenditures by corporations. The IRS responded to these concerns in late May, stating these were not politically motivated letters and in July, the IRS announced it would no longer pursue 501(c)(4) donors for gift tax. Although the controversial investigations have been halted for now, it indicates that regulatory concerns about our post-Citizens United world and the accompanying increased scrutiny on the tax-exempt organizations affected by the Citizens United ruling are still apparent.

Additional resources:

I.R.S. Moves to Tax Gifts to Groups Active in Politics – The New York Times

Senators question IRS crackdown – Politico

I.R.S. Halts Gift Tax Enforcement for Contributions to Political Nonprofits – The New York Times

7. Occupy Wall Street – On September 17, protesters gathered in Zuccotti Park in New York City’s financial district to protest against the growing inequality between America’s wealthiest 1% and the remaining 99% of the country in a movement called “Occupy Wall Street.” Inspired by the Arab Spring protests, this initial gathering was organized by Adbusters, an anti-commercialism nonprofit based in Vancouver, British Columbia. Within a month, it was reported that other Occupy demonstrations were taking place in 951 cities and 82 countries. With so many decentralized demonstrations occurring throughout the country and otherwise, the Occupy movement has been criticized for a lack of agenda and clear objective unifying the movement. This criticism has not however deterred the large domestic support for the U.S. Occupy movements both in manpower and monetary contributions. Some Occupy groups were reported to have formed nonprofit corporations as well as applied for 501(c)(3) tax-exempt status while other groups seeking maximum tax benefits may be pursuing avenues such as fiscal sponsorship. Although the height of the U.S. demonstrations have passed for the moment, discussions about current inequalities, next steps for the Occupy movement, and what will come from the Occupy demonstrations of late-2011 continue to carry on into 2012.

Additional resources:

Occupy Wall Street: From A Blog Post To A Movement – NPR

With So Many Voices, Will Occupy Still Be Heard? – NPR

Tax Planning for the Occupy Wall Street Movement – TaxProf Blog

8. Steve Jobs dies – When Steve Jobs passed away on October 5, many reflected on the legacy left by one of the most iconic figures of current times. While none could argue his impact on the technological world, debate stirred about his impact on the philanthropic world. In recent years, we have seen public acts from some of our nation’s wealthiest such as the Giving Pledge effort started by Bill Gates and Warren Buffett, Buffett’s call in The New York Times to tax the super-rich, and Mark Zuckerberg’s first major philanthropic move in a $100-million pledge to improve the public schools in Newark, New Jersey. Not much is known of any philanthropic efforts by Jobs along the more traditional and public routes of giving. Some have argued that Jobs created philanthropy, but in a different way, for example, by enriching lives and reinvigorating industries with innovative Apple products and creating employment for thousands of people. Others have argued this is not enough and much more should be demanded of our most powerful and wealthiest individuals in society. Jobs is not the first nor will he be the last iconic figure to raise these age-old questions about what it means to be "a philanthropist" and what society expects from the super-rich.

Additional resources:

Steve Jobs, World’s Greatest Philanthropist – Harvard Business Review

Record thin on Steve Jobs’s philanthropy – The Washington Post

The Mystery of Steve Jobs’s Public Giving – The New York Times

9. Corporate Flexibility Act of 2011 signed into law in California – Although the concept of social enterprise originated with nonprofits, attention to social enterprise has garnered heightened attention over the past three years due to new for-profit legal structures commonly referred to as “hybrid legal structures” that combine mission and financial bottom lines. The first hybrid legal structure was enacted in 2008 when Vermont allowed for the creation of a Low-profit Limited Liability Company (L3C). Another structure came onto the scene in 2010 when Maryland allowed for the creation of a Benefit Corporation. A third structure was introduced last October when California became the first state to allow for the creation of a Flexible Purpose Corporation by enacting the Corporate Flexibility Act of 2011 (SB 201) in addition to becoming the sixth state to allow for the creation of a Benefit Corporation (AB 361). Such structures have been introduced with much excitement as well as hesitation and skepticism. For every discussion promoting the utility of hybrid legal structures pursuing double- or triple-bottom lines, there is likely a discussion about whether such structures are only a fad and their potential competition with nonprofits. With more states currently considering whether to adopt one or more of these three legal hybrid structures and the potential for new structures (such as the "social purpose corporation" being proposed in Washington), there is no sign that the interest in hybrid legal structures on a public or legislative level is dying anytime soon regardless of which side of the conversation one falls.

Additional resources:

Everything You Ever Wanted to Know About the Flexible Purpose Corporation (And Then Some) – Business for Good Blog

Defining Social Good: Nonprofits Worry About Calif. Bill – The Chronicle of Philanthropy

SB 201 Bill Analysis (Senate Floor; Assembly Floor) and AB 361 Bill Analysis (Senate Floor; Assembly Floor) – California State Legislature

10. Super committee and the charitable deduction – The challenge of finding new sources of income to solve America’s debt crisis put the charitable deduction at risk for much of 2011. Early in the year, President Obama announced his proposed plan which included reducing itemized tax deductions for tax payers in the highest tax bracket. Then, in August, President Obama signed into law the Budget Control Act of 2011 (S. 365), which called for a federal-deficit reduction of more than $2 trillion. $1.5 trillion of such cuts were to be identified by a 12-person bipartisan committee, also known as the super committee, igniting concerns that nonprofits would be on the super committee chopping block. In response to the uncertain future of the charitable deduction and government funding, nonprofits were being called on throughout the year to ramp up their advocacy efforts. Now that the super committee has announced its failure to reach an agreement by its November 23 deadline, discussions about nonprofit advocacy and federal tax policies continue to be a major concern heading into the new year.

Additional resources:

Changing the Charitable Deduction Could Discourage the Most-Generous Donors – The Chronicle of Philanthropy

Nonprofits, Tell Congress: “Help, or at Least Do No Harm” – The Nonprofit Quarterly

With 'Super Committee’ Failure, Charities Brace for Budget Fights – The Chronicle of Philanthropy

Last year's post on the Top 10 Events of 2010 can be read here.

Nonprofit Tweets of the Week - January 6, 2012

2012-01-06T00:35:19-08:00

Here are some of my favorite posts of the week in the areas of nonprofit organizations, corporate governance, philanthropy, and social enterprises:

Nonprofit Quarterly: As the year turns see what we are watching closely in 2012: 10 Trends We Are Watching at NPQ http://owl.li/8i08K

GTak: 2012 Resolutions for the nonprofit world http://ow.ly/8e3O4 via @Philanthropy // Added mine in the comments (invest in corpgov)

Nell Edgington: The Next Generation of Philanthropy: An Interview with Jessamyn Lau of the Peery Foundation http://ow.ly/8jdly

Lucy Berhnolz: A whole site of social media infographics http://bit.ly/41OBiA

B Corps: Firms with Benefits (via The Economist). http://fb.me/18ZL181ih

LawForChange: On the first day that a company can file as a CA benefit corporation, Patagonia is first in line http://law4.ch/y6sHO0

Stanford Social Innovation: SSIR's newly redesigned website includes a blog channel just for people new to social innovation: http://ow.ly/8jKlj

GTak: I comment on "Legal Issues for the Social Entrepreneur" on @socialedge http://www.socialedge.org/... // surprised little talk about governance

For more interesting tweets, follow me and Emily on Twitter.