Earlier this week, I had the privilege of guest lecturing for Professor Louise Carroll‘s Nonprofit Strategic Governance class at the University of San Francisco. As a former graduate and adjunct faculty member of the Master of Nonprofit Administration (MNA) program, which may have been the first in the country, I’m always honored by an invitation to return. Here are some selected excerpts from my notes and slides:

Common Compliance Issues

• Failure to timely register, file information returns
• Fundraising misrepresentations
• Conduit for donors
• Preferential treatment to insiders
• Compensation issues, incl. for past performance
• Political campaign intervention
• Failure to identify and pay tax on unrelated business taxable income

501(c)(3) vs. 501(c)(4)

	501(c)(3)	501(c)(4)
Purpose	Religious, charitable, scientific, testing for public safety, literary, or educational purposes, or to foster national or international amateur sports competition (but only if no part of its activities involve the provision of athletic facilities or equipment), or for the prevention of cruelty to children or animals	Social welfare
Lobbying	Insubstantial amounts (but generous limits for 501(h)-electing public charities)	Unlimited (in furtherance of purpose)
Political campaign intervention	Prohibited	Limited (so long as it’s not the primary purpose)
Deductibility of contributions	Deductible (for itemized filers)	Generally, not deductible
Excess benefit transactions	Yes	Yes

501(c)(3) Operational Test

• Benefit a charitable class
• No private benefit – except incidental to furthering the organization’s exempt purpose
• No private inurement
• Public Charities – no excess benefit transactions
• Private Foundations – no self-dealing

501(c)(3) and Lobbying

• Limitations on substantial lobbying – but generous under 501(h) if elected (which most charities should)
• Grants to an affiliated 501(c)(4) organization used by the grantee for lobbying may need to be counted as lobbying by the public charity grantor
• Lobbying and other forms of permissible advocacy may be the most effective and underutilized way of advancing a mission that seeks to make a broader social change – they are essential tools that board members should consider

NRA and the NRA Foundation

• Why New York is suing the NRA: 4 questions answered (Brian Mittendorf, The Conversation)
• Should the NRA fear losing its ‘nonprofit status’? (Phillip Hackney, The Conversation)
• Is the NRA an educational organization? A lobby group? A nonprofit? A media outlet? Yes (Samuel Brunson, The Conversation)

Bylaws

• Purpose Statement – optional, but can serve as guidance for the proper governance of the organization, including with respect to anchoring equity and other core values
• Membership – including statement if no voting members
• Directors
  • Number: Fixed or Range – “A board should be large enough to get the board’s work done, yet small enough to work as a single team to communicate, deliberate, and function as a single body.” – Michael Wyland
  • Restriction on Interested Directors
  • Selection – election, designation (appointment), ex officio
  • Terms
  • Removal – with or without cause
• Board Meetings
  • Annual, Regular, Special
  • Notice
  • Quorum
  • Voting (not by e-mail)
  • Unanimous Written Consent
• Committees
  • Board Committees
  • Audit Committee (Nonprofit Integrity Act)
  • Other Committees
• Officers
  • Required: President and/or Chair, Secretary and Treasurer and/or CFO
  • Election
  • Duties
  • Terms
• Indemnification – default protection or maximum protection of directors, officers, employees, and other agents