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”
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!!”
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”
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 If the tax-exempt status of an organization has been revoked, donors may no longer rely upon an IRS determination letter that the organization received prior to the revocation date.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”
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”
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”
A client recently brought to my attention a website article that said that churches should not be “501(c)(3) corporations.” It contained dire warnings about Big Brother muzzling the church if it becomes a 501(c)(3) organization. The article contained numerous factual errors and a considerable amount of confusion about the issues involved. I see these same misunderstandings surface from time to time, usually when a member of a congregation is trying to understand some of the legal work we are doing for a church and searches the Internet and finds these unreliable websites. In this article, I will address the most common misunderstandings in order to put the unfounded fears to rest. The comments addressed to “churches” in this article are applicable to other similar religious organizations including synagogues, temples, and the like. Continue reading “Should Churches Incorporate and Seek Confirmation of Tax Exempt Status from the IRS?”
Operators of resale shops should be aware of the Consumer Product Safety Improvement Act (CPSIA). The CPSIA, enacted in 2008, makes it illegal to sell any recalled product or any children’s product that contains lead or phthalates exceeding certain limits. Under CPSIA, a children’s product includes any consumer product designed or intended primarily for children aged 12 years of age or younger. Numerous products could fall within the scope of CPSIA, such as toys, furniture, clothing, jewelry, and books. Provisions of CPSIA lower allowable levels of lead and phthalates in children’s products in 2009 and 2010. In August 2011, the total allowable lead content of children’s products is scheduled to become even more stringent. This standard is subject to change every five years based upon available technology. Continue reading “Consumer Product Safety Improvement Act and Resale Shops”
It is a common misconception that online sales are not subject to state sales taxes. However, states may impose sales taxes on any sale, online or traditional, if the seller has nexus with the state. Nexus can be a difficult legal doctrine to apply, so sellers should obtain a legal opinion to determine if they are subject to a state’s sales taxes. Nexus usually entails a physical presence in the state, which can be as insignificant as sending independent sales representatives to the state. Continue reading “Sales Tax Liability and Voluntary Disclosures”
A pastor resigns his position at Old Church, a prominent church that ordained the pastor several years earlier. Shortly thereafter, the pastor founds New Church in a growing neighborhood of the community. The pastor is ordained by New Church and begins his pastoral duties. Several years elapse, and rumors begin to circulate in Old Church that the pastor has engaged in marital and financial misconduct. The elder board of Old Church sends the pastor a letter threatening to rescind his ordination. The letter requests that the pastor appear at a hearing before the elder board to defend himself. Continue reading “Avoiding Liability when Disciplining Pastors or Church Members”