Tax-exempt Status & the New IRS 1023-EZ on Dec 2!

 

          For very small organizations, applying for tax-exempt status has been a daunting task, between the lengthy forms and requirements, to the waiting period for the all-important determination. But that changed recently with the unveiling of IRS’s new Form 1023-EZ. Only 2 ½ pages long, the new application is a streamlined approach to tax-exempt status; however, organizations must meet certain criteria to use it.

          The new 1023-EZ, as well as the longer original 1023, will be discussed at the next program presented on Tuesday, December 2 at 6:00 pm, by the Legal Center for Nonprofits at its office inside the Inter-Church Council House, 412 County Street, New Bedford. Admission is $10, and preregistration is recommended.

          To register or for more information, contact Attorney Linnea Michel at (508) 264-5996 or email

Linnea@LegalCenterforNonprofits.org.

Do you fundraise? Learn more tomorrow!

Is your organization registered with the Massachusetts Attorney General’s Office (AGO)?  If your organization is a charity that solicits gifts from the public–private donations, grants, etc. — then your organization should be registered with the MA AGO.  Other organizations that are not 501(c)(3) charities must also register in certain circumstances.  Learn more about this important filing requirement at our next program, “Is it a Charity?” on November 18, at 6:00 pm, at our office inside the Inter-Church Council House.  We’ll also discuss registering outside of Massachusetts and when that may be necessary.

 

 

What Do Nonprofit Boards Do?

The first questions nonprofit founders often ask are, “Why do I need a board of directors? What does a board do?” In fact, the nonprofit board of directors is a critical element in the success of a new—or any—nonprofit organization.

The next session of the Legal Center for Nonprofits’ Nonprofit Start-up Series, on Tuesday, October 28 at 6:00 pm, will provide an overview of what nonprofit boards of directors do, the key role the board plays in the nonprofit organization as it oversees the nonprofit’s programs and activities, and the board’s fiduciary duties to the nonprofit. We will also consider what happens if boards fail to carry out these duties and responsibilities. Call (508) 264-5996 or email Linnea@LegalCenterforNonprofits.org for more information or to register. The admission fee is $10 per person.

This is the third session in the Nonprofit Start-up Series. Future sessions will consider tax-exempt status—what it means and how to get it. Start-up Series sessions are presented bi-weekly on Tuesdays; future sessions will be held on November 18, and December 2. All series sessions are at 6:00 pm at the Legal Center for Nonprofits office inside the Inter-Church Council house, 412 County Street, New Bedford, MA.  Admission fees apply unless otherwise indicated.

The Legal Center for Nonprofits, Inc., is a Massachusetts nonprofit corporation with a mission to provide educational programming for the nonprofit community. Visit www.LegalCenterforNonprofits.org for more information about our programs.

Learn About Incorporation & Bylaws!

Incorporation is often the first concrete step on the path to creating a nonprofit, tax-exempt organization. But is it the right step for your organization? Do you even need to incorporate? Can you afford to skip this step?

Incorporation is more than just filling out an online form. Nonprofit founders must understand what the answers to the form’s questions mean and how they might affect the nonprofit’s future and its ability to become tax-exempt. And what about bylaws? Find out about these important documents at the next program from the Legal Center for Nonprofits, on Tuesday, October 14, at 6:00 pm, at the Legal Center for Nonprofits, 412 County Street, New Bedford (inside the Inter-Church Council house). Admission for this program is $10, payable at the door. Space is limited. Pre-registration is recommended. To register, contact Attorney Linnea Michel at (508) 264-5996 or email Linnea@LegalCenterforNonprofits.org.

This is the second session in the Nonprofit Start-up Series. Future sessions will cover the role of the board of directors, and how to seek tax-exempt status for your organization. Start-up Series sessions are presented bi-weekly on Tuesdays; future sessions will be held on October 28, November 18, and December 2. All series sessions are at 6:00 pm.

 

Changed Dates for Start-up Series!

The Nonprofit Start-up Series will get underway on Tuesday, September 30!  Please note that we’re returning on Tuesday nights!  This schedule change has been necessitated by a scheduling conflict.

Nonprofit Start-up Series Gets Underway September 17

The imminent arrival of Fall means back to school, and back to learning about nonprofit organizations!

Join us on Wednesday, September 17, for the first in our series, “Before You Begin”.  You’ll learn what it takes to start a nonprofit.

Following sessions will take you through the entire formation process.

Hope to see you in September!

 

Robert’s Rules Not Needed

From time to time when working through bylaws with a client, someone will say, “Shouldn’t we put something in about Robert’s Rules? Don’t we need to use them?”  To which I will usually reply, “No.”

Robert’s Rules of Order was written by Brigadier General Henry Martyn Robert in 1876, right here in New Bedford, at the First Baptist Church on William Street.  Gen. Robert felt compelled to write the Rules allegedly because he had failed miserably in leading a meeting at the church.

A couple of principles underlie Robert’s Rules.

First is the idea of control.  The Rules are intended to allow the Chair to control a meeting, to lead it.  We’ve all been in meetings that have devolved into free-for-alls with everyone talking at once.  The Rules allow the Chair to conduct the meeting much as an orchestra conductor does the orchestra, mellowing the louder strident voices, bringing forward the softer notes.

Another key idea is that of deliberation. The Rules are intended to enable a Board–a “deliberative assembly”– to conduct an efficient meeting; the idea is to allow for evaluation of information and opinion, while ensuring that all pertinent views are heard; the result is that decisions on matters simple to complex can be made efficiently.   The law values this deliberation highly–this is why boards must meet and act together, and why all directors must be able to hear each other in a meeting. The Chair must foster this deliberation through his or her control of the meeting, ensuring that all those who have something to say pertinent to the decision at hand may speak and be heard.

Robert’s Rules are just that–rules.  The book is over 600 pages long.  Robert set out to provide a few rules by which to conduct an efficient meeting, but the project soon took on a life of its own, as questions arose and were answered. Today, a number of shorter versions are available–”cheat sheets” and quick reference sheets, along with the official Robert’s Rules of Order Newly Revised In Brief, which itself runs to about 200 pages.

And that is the problem.  The Rules are complex, and they must be thoroughly understood to be effective.  Unless your organization has someone willing to serve as Parliamentarian and to master the minutiae, the Rules are likely to be more burdensome to your organization than helpful, more time-consuming than time-efficient.

The typical nonprofit board of directors with its 7 to 15 directors does not need Robert’s Rules.  Instead, I propose the following points:

  • Choose a Chair who can maintain firm control of a meeting; that is, someone who is willing and able to ask the long-winded directors to stop speaking so the more reticent can get a word in edgewise, as well as to methodically invite those reticent souls to speak to the issue.
  • Lay down basic values: that participation is required, that all comments on topic are valued, that each director must respect the rights of the other directors to have their opinions and to voice them, that meetings will be civil and courteous. Your board will likely find a few key values of its own.  Put them in writing and adopt them, or ask all board members to sign off on them as part of their orientation to the board.
  • Develop a simple protocol that works for your board: No one speaks unless recognized by the Chair; everyone with a pertinent comment on the issue will be allowed to speak; no one will speak for more than 3 minutes at any one time (or however long is appropriate to your board, depending on its size, time allotted for meetings, and the like); etc.  Again, adopt it and include it in orientation materials.
  • Require that motions be stated as simply and precisely as possible, and that they are repeated as needed, to facilitate discussion and for the Secretary to accurately capture them.
  • Eliminate lengthy reports; provide them instead in writing to directors prior to the meeting.  If everyone has read the reports prior to the meeting, the board can cut to the chase and discuss the issues that need action.
  • Set expectations. That everyone comes to the meeting, and comes prepared –to speak, listen, debate, and decide.

This is not to say that your organization will never need Robert’s Rules–it might.  If your organization finds itself continuing to update, revise, and tweak its self-created protocol because none of its rules covers quite every situation, if meetings still get out of hand such that decision-making suffers, it may be time to try Robert’s Rules.  Study them.  Test them at several meetings.  But don’t add them to your bylaws until your organization is willing and ready to commit to them.

Latest News from IRS on Tax-exempt Status Applications

I just returned from Washington DC where I attended Representing & Managing Tax-exempt Organizations, the annual nonprofit law conference presented by Georgetown University Law School.  This conference is always interesting as it brings together many nonprofit law luminaries, but it is also eagerly looked forward to because the IRS Exempt Organizations Director always presents the first session on the first day, offering news about IRS activities relating to tax-exempt organizations.

Tamera Ripperda was introduced as the new Director of IRS’s Exempt Organizations Division—she has been in the job just since January this year.  She began by acknowledging the lengthy wait time for determination letters, but then offered context for the wait.  On average, IRS receives 60,000 applications per year for exempt status.  This has been compounded by automatic revocation—organizations that have been automatically revoked must reapply for recognition as tax-exempt, and as a result, in the period 2011-2013, applications have been averaging 80,000 per year.  At the moment, IRS has 10,000 applications for reinstatement in hand.  Of the applications “in inventory” right now, 15% are over a year old.  Receipt of applications outpaces closure of cases.

Ripperda, however, brought some good news, stating that IRS is focusing on closing out the old applications ahead of the new, and expects that all of the old applications will receive a determination by this summer.  The goal is to achieve a 9-month turnaround for all applications—a vast improvement from the current 12 to 18-month wait, but still a far cry from the good ole days when the turnaround was 4 months.

Ripperda also discussed the new IRS Form 1023-EZ, that is expected to help ease the determination crunch by providing a much simplified process  for smaller nonprofits meeting specific criteria. Planned to be fully operational this summer, Ripperda said she anticipates 70% of applicants should be able to use it,  and it will significantly reduce the burden on smaller organizations.  At the same time, however, she alluded to a “back-end review process” IRS will use to look at compliance of those organizations using the 1023-EZ.

An eligibility worksheet will help nonprofits determine whether they  can usethe 1023-EZ.  The form itself will include self-attestations as to annual gross receipts, organizational structure, nature of activities, and the like. It can only be filed electronically, and will be automatically rejected if it is incomplete or the user fee is incorrect—this by itself will save IRS an enormous amount of time.

I will have more to say about the rest of the two-day conference, as well as a first take on 1023-EZ.  Stay tuned!

More snow! Program cancelled!

Since we are under a Winter Storm Watch for tomorrow evening into Wednesday, and the snow is expected to start some time between 4:00 and 8:00 pm, our program for tomorrow evening (3/25), “Is it a Charity?” is cancelled.

Plan to join us for one of our upcoming programs:

April 8 – Getting Tax-exempt, 6:00 pm here; all about the Form 1023. ($5 pp)

April 10–Nonprofit Board Roles & Responsibilities, with the Community Foundation of Southeastern MA;  go here for details.

April 16–Nonprofit Start-up Group, 6:00 pm here; our free drop-in networking & info-sharing group. ($5 pp)

April 17–Nonprofit Annual Filings: What to File & When; 8:30 am. ($5 pp)

 

Getting the Right People for the First Board of Directors

When you begin to think about forming a nonprofit organization, one of the first things to consider is the people you will need to help you, and most importantly, the people who will work with you from the beginning, who most likely will evolve into your board of directors.

Nonprofit organizations are required by law to have boards of directors, who are charged with fiduciary duties of care and loyalty to the organization, and who have oversight over the entire operation of the nonprofit.

For most small start-ups, the first board of directors may not meet the textbook ideal.  Your first board may consist of you and a couple of friends and maybe a work colleague or two, if you’re lucky enough to have that many people at the outset.  Many boards start off with a husband and wife and a friend or another couple.  And while this initial group may be passionate and committed to the work of the organization, board development must not stop here.  More minds and hands will be needed, analytical thinkers, able—and willing—to ask the hard questions as the nonprofit grows and develops.

As you think about your nonprofit, you might begin by thinking, “Who do I know with deep pockets?”  But that isn’t the best place to start. Instead, think about the skills and abilities the nonprofit’s formation and operation will demand.  For example (and this is certainly not an exhaustive list):

  • Persistence, detail-orientation, zeal
  • “People skills”, entrepreneurship
  • Math skills, financial, bookkeeping, Excel
  • Time management, project management, organizational, planning
  • Persuasion, fundraising, sales
  • Supervisory, personnel/human resource management
  • Verbal, writing, communication
  • Technical, computers, email, word processing, spreadsheets, social media
  • Subject matter expertise

Do you have all these skills, personally?  Probably not; none of us have all of them.  But the Board of Directors—as a whole— needs to have all of them.

The question I am asked most often (after “Do you do grant-writing?”) is “How do I get board members?”  How do you find people with the skills you need?

Talk to people.  Board recruitment, at its most basic, starts with talking to everyone you know.  Notice those for whom your idea seems to click.  Don’t invite these people onto your board immediately.  Instead, start a list, noting the skills you believe they would bring to your organization.  Then follow up with them, invite them to coffee “for an update” or “to tell you more about what I’m thinking”.

Of course, much more must be done to recruit—and keep on recruiting—good board members, and indeed, entire books have been written on the topic.

One way to find both board members and volunteers is through posting your organization’s needs online.  For example, here in SouthCoast, through the region’s United Way agencies, you can post both your organizations volunteer needs and your activities.  Check out Volunteer SouthCoast here.

Once you’ve connected with people who might be good board members, you—or your present board, if it exists yet—should develop a process, rather like a job recruitment process, to get to know prospective board members better; this is especially important if neither you nor your current board members know the person well.  This might include a formal meeting, asking for a resume, maybe a questionnaire; it also might include having the prospective board member join a committee or help with a project, both good ways to assess a person’s fit with your organization. Only when you’re satisfied that the person will be a good addition to your board should you (or your board) invite him or her to join you.

While the need for board members may be critical, it’s important to move slowly, to ensure good fit and commitment—after all, this is someone you hope to be working with for a long time!

If you would like to learn more about boards of directors, I will be talking about nonprofit board governance at following upcoming programs :

  • Tuesday, March 18, at the Fall River Boys & Girls Club, 6:00 pm
  • Thursday, April 10, at the Waypoint Event Center, New Bedford, with Craig Dutra of the Community Foundation of Southeastern Massachusetts, 5:30 pm. Click here for more info.
  • Tuesday, April 22, at the Legal Center for Nonprofits, New Bedford, part of the Nonprofit Start-up Series, 6:00 pm. Click here for more info.