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By: Gary M. Schuster, Esq.
The New YorkNonprofit
Revitalization Act of 2013
© 2014 Jacobowitz and Gubits, LLP
Biggest change since passage of the Not-for-Profit Corporation Law
1969
Previous: Membership Corporations Law 1909
Nonprofit Revitalization Act of 2013
Legislature passed it in June 2013
Signed by Governor Cuomo 12/18/13
Most of it takes effect 7/1/2014
Some is delayed until 1/1/2015
© 2014 Jacobowitz and Gubits, LLP
Nonprofit Revitalization Act of 2013
1. Make Life EasierFaster, Simpler, Less Expensive
Make NYS More Competitive
2. Increase Transparency and AccountabilityWatch the Money
Conflicts of Interest© 2014 Jacobowitz and Gubits, LLP
Nonprofit Revitalization Act of 2013
Two Primary Purposes
© 2014 Jacobowitz and Gubits, LLP
No More Typos
As of July 1, Department of State staff will be able to correct “any typographical, or similar non-material error” in papers by obtaining written authorization from the filer by fax or email
Nonprofit Revitalization Act of 2013
NPCL §105(a)
© 2014 Jacobowitz and Gubits, LLP
No More TypesNew York is the only state with "types” of nonprofits. Very troublesome, causing delays and confusion: “A” – civic, social, social, fraternal, business chambers and leagues “B” – charitable, educational, religious, scientific, cultural “C” – business purpose to achieve a public objective “D” - authorized by another New York law
Come July, there will only be “charitable” and “non-charitable”
As will become non-charitableBs and Cs will become charitable
Ds – case by case
Nonprofit Revitalization Act of 2013
NPCL §201
To Do: “Charitable” need not have members; consider amending bylaws
© 2014 Jacobowitz and Gubits, LLP
No More Activities
When forming a new non-profit, no longer necessary to specifically describe planned activities
Sufficient to state the tax-exempt purposes Shorter papers, less opportunity for rejection
Nonprofit Revitalization Act of 2013
NPCL §402(a)(2)
© 2014 Jacobowitz and Gubits, LLP
No More RegentsNow, any new corporation that might be chartered by the NYS Board of Regents must obtain their consent. Covers any entity planning to "educate," "teach" or have "classes.” Very burdensome.
Come July 1st only corporations with these purposes must obtain such approval:
Schools Colleges UniversitiesLibraries Historical Societies Museums
Other corporations that might be chartered will only need to send a certified copy of their certificate of incorporation.
Same as to changes of purpose, mergers, consolidations, dissolutions.
Nonprofit Revitalization Act of 2013
NPCL §404(d)To Do: Determine what you are.
© 2014 Jacobowitz and Gubits, LLP
Less Paper
Notices of member and board meetings can be sent by fax, email or other electronic means. NPCL §605(a), 711.
Unanimous votes can be electronic. NPCL §708(b).
Meetings can be held by video conference (Skype). NPCL §708(c).
Annual financial reports and other mandatory filings can be submitted electronically. Exec. Law §177, EPTL §8-1.4
Nonprofit Revitalization Act of 2013
To Do: Review/amend bylaws to permit the above.
© 2014 Jacobowitz and Gubits, LLP
Changes to CommitteesDistinction between Standing and Special committees is eliminated.
Now there are “Board committees” and “Corporation committees.”
“Board committees” are composed only of directors, at least 3. They have power to bind the corporation if so authorized. Certain actions prohibited.
“Corporation committees” may be created by the Board or by the members, and may have anyone as members. They never have power to bind the corporation.
Committee members are treated as officers for purposes of conflict of interest, related party transactions, and so on.
Nonprofit Revitalization Act of 2013
NPCL §712
To Do: Review/amend bylaws to comply.
© 2014 Jacobowitz and Gubits, LLP
Easier Real Property VotesNow, a 2/3 vote of the “entire board” is required to
purchase, sell, lease, exchange or mortgage real property. Come July:
Not All or Substantially All
All or Substantially All Assets
Majority vote of Board or an authorized committee of the Board
Board < 21: 2/3 of entire Board
Board of 21 or more: Majority of entire Board
Nonprofit Revitalization Act of 2013
NPCL §509(a), (b)
To Do: Review/amend bylaws to comply.
© 2014 Jacobowitz and Gubits, LLP
The "Entire" BoardNew definition:
The total number of directors entitled to vote which the corporation would have if there were no vacancies.
If the bylaws provide that the board shall consist of a fixed number of directors, then the "entire board" shall consist of that number of directors.
If the bylaws provide that the board may consist of a range between a minimum and maximum number of directors, then the "entire board" shall consist of the number of directors within such range that were elected as of the most recently held election of directors.
Nonprofit Revitalization Act of 2013
NPCL §102(6-a)To Do: Review/amend bylaws to comply.
© 2014 Jacobowitz and Gubits, LLP
More Privacy
Nonprofits no longer have to disclose
the residence addresses of directors and officers.
Nonprofit Revitalization Act of 2013
NPCL §718
© 2014 Jacobowitz and Gubits, LLP
Less Court
Court approval is now required for dissolutions, mergers and substantial sales of assets.
Come July, only approval from the Attorney General will be required.
Court is still available if there is a dispute or the desire for an extra level of approval.
Nonprofit Revitalization Act of 2013
NPCL §907, 907-a, 907-b; 1001, 1002, 1002-a, 1003, 1007
© 2014 Jacobowitz and Gubits, LLP
Easier Mergers
Relaxed rules for mergers of
religious corporations and
educational corporations
Nonprofit Revitalization Act of 2013
RCL §208, 209; Educ. Law §216-a, 223
© 2014 Jacobowitz and Gubits, LLP
Less AuditingAll nonprofits formed, operating or soliciting in NY must register and
file annual financial statements with the Attorney General. In addition:
Today 7/1/14 7/1/17 7/1/21
No Review or Audit
< $100,000 < $250,000 < $250,000 < $250,000
Review by CPA
$100K - $250K
$250K - $500K
$250K - $750K
$250K - $1 M
Full Audit >$250,000 >$500,000 >$750,000 + > $1 M
Nonprofit Revitalization Act of 2013
Executive Law §172-b
Attorney General has power to require audit of anyone.
© 2014 Jacobowitz and Gubits, LLP
But More to Do With the Audit
Nonprofit Revitalization Act of 2013
The Board, or an Audit Committee of the Board, must
1. Engage or renew the auditor2. Review audit results and management letter with the auditor (and presumably address any deficiencies), and3. Oversee adoption and compliance with Conflict of Interest and Whistleblower policies
NPCL §712-a
© 2014 Jacobowitz and Gubits, LLP
Audit Committee
Nonprofit Revitalization Act of 2013
A separate Audit Committee is not required.
If there is no separate Audit Committee, the Board must perform the required functions.
An Audit Committee must be a Board Committee and must be composed only of Independent Directors.
NPCL §712-a
© 2014 Jacobowitz and Gubits, LLP
Independent Directors
Nonprofit Revitalization Act of 2013
• Is not and has not within 3 years been employed by the nonprofit
• Is not related to a key employee of the nonprofit
• Has not received more than $10,000 in compensation from the nonprofit, and is not related a person who has
• Is not an employee or principal of an entity doing business with the nonprofit exceeding the lesser of $25,000 or 2% of gross revenue
NPCL §102(21)
To Do: Review current bylaws, procedures.
© 2014 Jacobowitz and Gubits, LLP
$ 1 Million Nonprofits
Nonprofit Revitalization Act of 2013
• Prior to audit, review with auditor the scope and planning
of audit
• After audit, discuss with auditor
1. Any weaknesses in internal controls
2. Restriction on auditors activities or access to
information
3. Significant disagreements between auditor and
management
4. Adequacy of accounting and financial reporting
processes
• Every year, review performance and independence of
auditor
NPCL §712-aEffective Date 1/1/15
© 2014 Jacobowitz and Gubits, LLP
Conflict of Interest PolicyEvery nonprofit must adopt one having at least these
provisions:
Nonprofit Revitalization Act of 2013
NPCL §715(a)
1. Define Conflict of Interest
2. Establish procedure for disclosing Conflict of Interest to audit committee or Board if none
3. Prohibit person with alleged Conflict of Interest from attending deliberations or voting on conflict
4. Prohibit person with alleged conflict from attempting to influence deliberation or voting
5. Require documenting the existence and resolution of the conflict
6. Establish procedure for disclosing, dealing with and documenting Related Party Transactions
7. Require written Conflict of Interest statements before a director is elected and then annually
To Do: Adopt or amend conflict of interest policy.
© 2014 Jacobowitz and Gubits, LLP
Whistleblower Policy
Mandatory for nonprofits with
1. 20 or more employees, and
2. More than $1 million annual revenue
Nonprofits already having policies in compliance with other federal, state or local laws may be deemed in
compliance.
Nonprofit Revitalization Act of 2013
NPCL §715-b
To Do: Adopt or amend whistleblower policy.
© 2014 Jacobowitz and Gubits, LLP
Related Party Transactions
Nonprofit Revitalization Act of 2013
NPCL §715(a)
No corporation shall enter into any related party transaction unless the transaction is determined by the board to be fair, reasonable and in the corporation's best interest at the time of such determination.
Any director, officer or key employee who has an interest in a related party transaction shall disclose … the material facts concerning such interest.
© 2014 Jacobowitz and Gubits, LLP
Related Party Transactions
Nonprofit Revitalization Act of 2013
NPCL §102(24)
“Related party transaction" means any transaction,
agreement or any other arrangement in which a related
party has a financial interest and in which the
corporation or any affiliate of the corporation is a
participant.
© 2014 Jacobowitz and Gubits, LLP
Related Party"Related party" means
1. Any director, officer or key employee of the corporation or any affiliate of the corporation;
2. Any relative of any director, officer or key employee of the corporation or any affiliate of the corporation; or
3. Any entity in which any individual described in (1) and (2) above has a 35% or greater interest or, in the case of a partnership or professional corporation, a direct or indirect ownership interest in excess of 5%.
Nonprofit Revitalization Act of 2013
NPCL §102(23)
© 2014 Jacobowitz and Gubits, LLP
“Relative”
Nonprofit Revitalization Act of 2013
NPCL §102(22)
Spouse
Ancestors
Siblings (whether whole or half blood)
Children (whether natural or adopted)
Grandchildren and great-grandchildren
Spouses of siblings, children, grandchildren, and great-grandchildren
Domestic partner
© 2014 Jacobowitz and Gubits, LLP
“Key Employee”
Nonprofit Revitalization Act of 2013
NPCL §102(25)
Any person who is in a position to exercise substantial influence over the affairs of the corporation.
About the same as the IRS definition.
To Do: Adopt or amend bylaws or policy to comply.
© 2014 Jacobowitz and Gubits, LLP
Related Party Transactions
Involving Charitable Corporations
Nonprofit Revitalization Act of 2013
NPCL §715(b)
Prior to entering into the transaction, the Board shall
1. Consider alternative transactions to the extent available;
2. Approve the transaction by majority vote; and
3. Include in the meeting minutes the basis for the board's approval, including consideration of alternatives.
To Do: Adopt or amend bylaws to comply.
© 2014 Jacobowitz and Gubits, LLP
No More Employee-Chairs
The Board may elect a Chair or President or both. NPCL §713(a).
No employee may serve as Chair/President by whatever title.
NPCL §713(e).
Effective Date 1/1/15
Nonprofit Revitalization Act of 2013
To Do: Modify current practice if necessary.
© 2014 Jacobowitz and Gubits, LLP
No More Voting on Your Own
CompensationPeople who may be paid by the nonprofit can no longer participate in the deliberations or votes on such compensation. They can make a presentation but must then leave.
Nonprofit Revitalization Act of 2013
NPCL §515(b)
To Do: Adopt or amend bylaws or policy to comply.
NYS Attorney General’s website
www.charitiesnys.com
New York Council of Nonprofits (NYCON)
www.nycon.org
© 2014 Jacobowitz and Gubits, LLP
Nonprofit Revitalization Act of 2013
Further Information
© 2014 Jacobowitz and Gubits, LLP
Save Money in Orange County
1. Piggyback on County’s contracts with its Vendors
High Volume Low Prices
FurnitureOffice Supplies
Office EquipmentEquipment Leases
Cell PhonesUniforms
And much more… Ask for what you want
© 2014 Jacobowitz and Gubits, LLP
Save Money in Orange County
2. County uses procurement card of PFM Bank
No interest or penaltiesDiscount for early payment
Dispute chargesAnnual rebates up to 3.5%
More spending bigger rebateRebates apportioned pro-rata based on spending
© 2014 Jacobowitz and Gubits, LLP
Save Money in Orange County
Who is Eligible?
501(c)(3) nonprofits501(c)(6) nonprofits
Other nonprofits should ask about eligibility
Governmental units: Towns, villages, fire, police, schools, EMT, etc.
© 2014 Jacobowitz and Gubits, LLP
Save Money in Orange County
Contact:
James BurpoeOrange County Commissioner of General
Services
(845) 291-2792
158 Orange AvenueWalden, New York 12586
(845) 778-2121
Gary M. Schuster, Esq.
© 2014 Jacobowitz and Gubits, LLP