May 16, 2018 – Nonprofit organizations, like their for-profit counterparts, are subject to having their normal operations disrupted by new legislation and regulations.
Learn to identify key similarities and differences between nonprofit and for-profit entities with A Guide for Wisconsin Nonprofit Organizations (Guide) from State Bar of Wisconsin PINNACLE®.
Now in its revised fourth edition, the Guide helps lawyers analyze the effects of recent significant developments, including tax, employment, and lobbying law changes.
Nonprofit Doesn’t Equal No Taxes
You undoubtedly heard that the 2017 federal tax reform act (commonly known as the Tax Cuts and Jobs Act) limits the amount taxpayers can deduct for contributions to charitable organizations – a change with the potential to reduce nonprofits’ income.
But lawyers may be unaware of other changes wrought by the Tax Cuts and Jobs Act that affect nonprofits, perhaps because they are unaware of the effort required for nonprofits to achieve tax-exempt status.
Jason J. Kohout begins Chapter 2 of the Guide with the following crisp summation:
“A nonprofit organization cannot assume that it is automatically entitled to exemption from federal and state income tax. The determination whether a Wisconsin organization is ‘nonprofit’ depends on whether it meets the requirements of Wisconsin’s corporate and trust law; … the determination of whether the organization is ‘tax exempt’ depends on whether it meets the requirements of federal (and Wisconsin) tax law.”
Chapter 2 provides an overview of these requirements and highlights certain issues. Among them are these changes made by the Tax Cuts and Jobs Act:
reduction to 21 percent of the maximum corporate tax rate, which applies to unrelated business taxable income (UBTI) (see Section 2.85);
increases to UBTI for payments made or amounts incurred for certain fringe benefits (see Section 2.93); and
creation of new excise taxes on some college and university endowments and some types of “excess” compensation (see Section 2.100).
Nor Does Volunteer-driven Equal No Employees
Although it is common for nonprofit organizations to depend heavily on volunteers, many nonprofits also employ paid staff. State and federal employment laws for the most part apply the same to employees of for-profit and nonprofit entities.
Sarah Kissel, author of Chapter 5, thoroughly outlines employment law considerations for nonprofits. Among them are timely issues such as sexual orientation and gender identity as protected classes under federal antidiscrimination laws, the current legal status of overtime-pay regulations, discharges for substantial fault in the unemployment insurance context, and workplace sexual-harassment guidelines. Kissel calls out employment-law distinctions between nonprofit and for-profit entities in Notes throughout the chapter.
Nonprofit managers must not only ensure compliance with employment laws that apply to their paid staff but also preserve the distinction between employees and volunteers. The Fair Labor Standards Act (FLSA) restricts volunteers’ activities for enterprises. Section 5.64 discusses volunteers, including that they:
may not participate in “commercial activities run by a nonprofit organization such as a gift shop”;
must have no expectation of compensation or any remuneration received;
must not displace an employee or perform the work of an employee; and
are not otherwise paid employees of the organization providing the same type of services that they customarily provide as an employee.
Nonprofits’ Advocacy Is Not Unrestrained
Just as many nonprofits desire tax-exempt status, many consider “influencing the environment in which they carry out their primary missions” (Section 8.1), i.e., lobbying, to be vital to their continued existence. Nonprofits and for-profit entities alike must consider stakeholders’ interests when deciding whether to take public stands but nonprofits are also subject to governmental restrictions.
Chapter 8 author Adrienne J. (Adie) Olson says that the limitations on lobbying are particularly salient for tax-exempt organizations.
Federal government grants often restrict permissible use of the grant money, and a few of these restrictions are discussed in Chapter 8. For example, Head Start employees are barred from participating in “electioneering” activities, and recipients of funds from the Legal Services Corporation cannot use those funds, directly or indirectly, to lobby the executive or legislative branches of federal, state, or local governments (see Sections 8.49-8.52).
Revisions in Chapter 8 cover changes made to Wisconsin’s campaign finance and lobbying laws by 2015 Wis. Act 118, which abolished the Government Accountability Board and replaced it with the Ethics Commission and the Elections Commission.
Although restrictions generally have been loosened, the environment is definitely not “anything goes,” so lawyers should consult Chapter 8 before they advise nonprofit clients about permissible and nonpermissible political activities and related record-keeping and reporting requirements.
Learn the Basics and More about Nonprofits from Experienced Attorneys
In addition to the topics mentioned above, the Guide covers:
the organizational form,
directors’ and officers’ roles,
liability and insurance,
regulation of fundraising, and
merger, conversion, sale of assets, and dissolution.
Additional authors are Melissa Auchard Scholz, Jessica Y. Harrison, Thomas L. Frenn, Daniel J. Eastman, Paul J. Polaski, Sandy Swartzberg, Brian L. Anderson, and Daniel S. Welytok. The attorney-authors’ experience with nonprofit organizations spans decades.
The book includes sample documents and provisions, checklists, and guidelines, making it an ideal daily-practice resource.
How to Order
A Guide for Wisconsin Nonprofit Organizationsis available in print and online through Books Unbound®, the State Bar’s interactive online library. The print book costs $219 for members and $269 for nonmembers (both plus tax and shipping).
Online access to this resource through Books UnBound costs $159 for members and $199 for nonmembers (single-user prices; call for firm pricing). Subscribers to the State Bar’s automatic supplementation service will receive future updates at a discount off the regular price.
For more information or to place an order, visit WisBar’s Marketplace, or call the State Bar at (800) 728-7788 or (608) 257-3838.