Our Insights

Social Enterprise Part 1: Understand UBIT

Posted on under Articles, Nonprofits.

Alliance for Children and Families, June 15, 2012

Embarking on Social Enterprise:
Part One

Introductory guide for understanding unrelated business income tax

Given the current reality of dwindling government resources, many nonprofit organizations are exploring new revenue streams. Opportunities for generating earned income from social enterprises are as varied as nonprofits themselves.

Earned income can be derived from any activity that results in revenue generation; however, in the context of social enterprise, we’re talking about forprofit activities that may be significantly different from the day-to-day programs and services that define tax-exempt organizations like members of the Alliance for Children and Families. Continue reading “Social Enterprise Part 1: Understand UBIT” →

Conflicts of Interest: Safeguard Your Organization

Posted on under Articles, Nonprofits.

Don’t Get Hoodwinked
Safeguard your agency with vigilance around conflicts of interest

Any board, whether it is complacent or compliant, can be hoodwinked into approving transactions that are obviously conflicted, not recognizing that the board member sitting across the table is taking unfair advantage of the organization. Continue reading “Conflicts of Interest: Safeguard Your Organization” →

Pay Employee Taxes!!

Posted on under Articles, Employment, Nonprofits.

Where Not to Look for Short-Term Cash Flow Needs
Dipping into employee taxes may lead to personal responsibility for directors, officers

There is an urban legend in the Illinois nonprofit world about a Chicago-based nonprofit organization that was notified by the state department of revenue of a withholding tax delinquency. The executive director and board chair drove to the capitol city of Springfield to look into the matter. However, the interview did not go as they had expected. As the story goes, the state impounded the car they came in and they were forced to return home by train. Continue reading “Pay Employee Taxes!!” →

Trademark “Junk Mail” Can Deceive Applicants

Posted on under Articles, Copyright and Trademark.

Federal trademark applicants should exercise care to protect themselves from purchasing unnecessary or useless trademark-related services.  The addresses of all U.S. trademark applicants are a matter of public record.  Shortly after applying for federal trademark registration most applicants receive unsolicited junk mail, which usually offers “trademark protection” services, domain name registration services, or international trademark registration.  Some of these solicitations offer legitimate services that could be useful to trademark owners.  However, other solicitations are deceptive and are designed to look like they are from the United States Patent and Trademark Office (USPTO).  These solicitations may include logos and terminology that resemble those of the USPTO or other governmental agencies.  In one of the worst examples we have encountered, a piece of junk mail contained the heading “Patent Trademark Register” and claimed to be the “Register of International Patents and Trademarks.”  The junk mail appeared to be an invoice and requested the recipient to pay thousands of dollars in fees within 8 days.  Fortunately, our client sent this piece of junk mail to us and did not pay the amount requested. Continue reading “Trademark “Junk Mail” Can Deceive Applicants” →

Voting Procedures Between Board Meetings

Posted on under Articles, Churches and Religious Organizations, Nonprofits.

Alliance for Children and Families, September 15, 2011

Boards can make decisions between Board meetings if they do it properly. This is a primer for Board voting procedures without a meeting.

Get Out the Vote
A primer for board voting procedures without a meeting

Because the Internet has become an integral part of daily life, it’s not surprising that it has changed the way nonprofit boards function. Email and web portals are increasingly popular for sharing meeting materials, distributing updates, and coordinating meeting times and locations. Continue reading “Voting Procedures Between Board Meetings” →

IRS Revokes Tax-Exempt Status of 275,000 Organizations

Posted on under Articles, Nonprofits.

On June 8, 2011, the IRS announced that it revoked the tax-exempt status of approximately 275,000 organizations that failed to file information returns for three consecutive years.  Beginning in 2007, the Pension Protection Act (Act) obligated most organizations to file annual information returns with the IRS.  The penalty for failing to file information returns for three consecutive years is automatic revocation of tax-exempt status.  If the tax-exempt status of an organization has been revoked, donors may no longer rely upon an IRS determination letter that the organization received prior to the revocation date. Continue reading “IRS Revokes Tax-Exempt Status of 275,000 Organizations” →

Tax-exempt Organizations Must be Aware of Complicated Tax Issues

Posted on under Articles, Nonprofits.

For organizations that theoretically pay no tax, tax-exempt organizations have remarkably complicated tax issues.  The term “tax-exempt organization” simply means that the organization is exempt from federal income  taxes.  Tax-exempt organizations remain subject to state and federal tax issues that can involve great complexity.  To maintain tax-exempt status, many organizations must file an annual information return known as form 990.  Even though no tax is due, form 990 is a complicated form that requires disclosure of financial information, governance policies, and other matters. Continue reading “Tax-exempt Organizations Must be Aware of Complicated Tax Issues” →

Look Before You Click: Why You Should Read Open Source Software Licenses

Posted on under Articles, Computer & Internet.

The proliferation of open source software has significantly changed the legal framework of the software development field.  Software developers who use open source software in their products should be aware of these issues and ensure that they comply with the requirements of open source licenses.  Inattention to open source licenses could cause developers to disclose their proprietary source code to the public or expose them to liability for copyright infringement.  Complying with open source licenses has become an important issue because courts will likely enforce the terms of the licenses.  In a landmark case for open source software licenses, the U.S. Court of Appeals for the Federal Circuit held that an open source software license was enforceable.  Jacobsen v. Katzer, 535 F.3d 1373, 1381-2 (Fed. Cir. 2008).  The court further held that violation of an open source license could constitute copyright infringement.  During the early years of open source software licensing, it was unclear if the licenses would be legally enforceable.  The Jacobsen case resolves this doubt.  In response to Jacobsen, software developers should exercise great care in using and complying with open source licenses. Continue reading “Look Before You Click: Why You Should Read Open Source Software Licenses” →

Review Endowment Fund Policies for Legal Compliance

Posted on under Articles, Nonprofits.

Organizations with endowment funds commonly set forth standards for managing, investing, and appropriating these funds in their bylaws or other policies.  Unless an organization actively monitors developments in this area of the law, it is possible that its policies or bylaws do not accurately reflect current legal standards.  In Illinois, the Uniform Prudent Management of Institutional Funds Act (UPMIFA) governs the management, investment, and expenditure of endowment funds.  UPMIFA changed the legal standards governing endowment funds from the more rigid standards of prior law.  It would be prudent for organizations with endowment funds to review their policies and bylaws to ensure that these documents provide the appropriate legal standards for endowment funds. Continue reading “Review Endowment Fund Policies for Legal Compliance” →

Antitrust Concerns in Publishing

Posted on under Articles, Publishing & Entertainment.

The popularity of online retailers threatens the profitability of traditional retailers.  This is because traditional retailers generally have greater overhead than online retailers.  To compensate for this competitive disadvantage, traditional retailers may be pressured to implement measures that assure them of higher profit margins.  Publishing is a good example of an industry that has been profoundly affected by online retailing.  Online retailing has significantly increased the number of competitors in the publishing industry.  Traditional retail channels in the publishing industry consist of book stores and big-box retailers.  Online retailing has created several other channels for consumers to purchase books.  Most publishers sell directly to consumers through their websites.  Publishers also sell wholesale to other online retailers.  Online retailing even enables consumers to be competitors by selling their used books.   The increase in competition presented by online retailing has made it difficult for traditional retailers to remain competitive, as illustrated by the bankruptcy of Borders.  In religious publishing, “brick and mortar” Christian bookstores have almost disappeared. Continue reading “Antitrust Concerns in Publishing” →