On November 21, 2022, Governor Kathy Hochul signed into law new legislation, which amends certain provisions of the New York Not-For-Profit Corporation Law (the “N-PCL”). The legislation, described in detail below, “modernizes provisions of law relating to members, directors and officers to align with current practices, streamline procedures and eliminate unnecessary regulatory burdens”[1]
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U.S. District Court Finds Mayo Clinic Qualifies as an “Educational Organization”; Awards $11.5M UBTI Refund
Introduction
Tax-exempt organizations, while not generally subject to tax, are subject to tax on their “unrelated business taxable income” (“UBTI”). One category of UBTI is debt-financed income; that is, a tax-exempt organization that borrows money directly or through a partnership and uses that money to make an investment is generally subject to tax on a…
IRS Releases Guidance on Requirements for Limited Liability Companies to Qualify as Tax-Exempt Entities
On October 21, 2021, the Internal Revenue Service (the “IRS”) released Notice 2021-56 (the “Notice”), which sets forth the additional requirements a limited liability company (“LLC”) must satisfy to obtain a determination letter recognizing its tax-exempt status under sections 501(a) and 501(c)(3) of the Internal Revenue Code.[1]
The Notice also requests public comments by…
Proskauer’s 26th Annual Trick or Treat Seminar
Proskauer’s 26th Annual Trick or Treat Seminar was held virtually on Friday, October 29th and discussed timely topics and best practices specifically tailored to the not-for-profit community.
The seminar discussed:
- Workplace challenges: Mandatory vaccinations, HERO act and other considerations
- Tax proposals impacting nonprofit organizations
- Employee benefits update
Amanda Nussbaum welcomed everyone and introduced the presenters.…
The Impact of Americans for Prosperity Foundation v. Bonta on Donor Disclosure Laws
On July 1, 2021, the Supreme Court struck down a California donor-disclosure law as facially unconstitutional in its decision in Americans for Prosperity Foundation v. Bonta.[1] The law required nonprofits operating or soliciting contributions in California to disclose to the Attorney General of California information about all of its donors who contribute more…
New Streamlined IRS Online Search Tool Makes it Easier to Find Information about Tax-Exempt Organizations, Including Whether an Organization Has Ever Been Subject to Automatic Revocation of its Tax-Exempt Status
The IRS recently unveiled its new streamlined online search tool, Exempt Organizations Select Check (“EO Select Check”), which provides one place where taxpayers can go to find out: (1) whether an organization is eligible to receive tax-deductible contributions; (2) whether the organization has ever been subject to automatic revocation of its tax-exempt status for failing…
NonProfits Must Comply With the New Massachusetts Data Security Breach Law
The Massachusetts data security breach law and proposed regulations have triggered extensive discussions and debate over the past year. The issues and concerns raised resulted in extension of the compliance dates for the law. However, although significant modifications have recently been made under the leadership of the new Undersecretary for Consumer Affairs, Barbara Anthony, substantial…
User Fee Increase for Exemption Applications
The IRS has reported that user fees will increase for all applications for exemption (Forms 1023, 1024, and 1028) postmarked after January 3, 2010:
- $400 for organizations whose gross receipts are $10,000 or less annually over a 4-year period (Currently $300)
- $850 for organizations whose gross receipts exceed $10,000 annually over a 4-year period (Currently $750)
- $3,000
…
NY Endowment Funds: Fiduciary Obligations & The Prudence Standard
With the plethora of news articles about charitable endowment losses as a result of investments with Bernie Madoff, it is incumbent on fiduciaries to review some fundamental laws on endowment. These laws differ in each state. This article will briefly review the rules applicable to endowments in New York.
An endowment fund is created when…
The Possibilities of the L3C
People have been whispering among themselves about the L3C, an emerging low-profit limited liability company structure that aspires to link business methods with charitable purposes and give socially oriented businesses greater access to investor capital. The structure was created by Robert M. Lang, Jr., CEO of the Mary Elizabeth & Gordon B. Mannweiler Foundation. Conceptually, the L3C is a hybrid not-for-profit/for-profit entity: like a…