August 2019

Nonprofit Organizations Digest

4 min

Venable's Nonprofit Organizations practice is pleased to share recent articles, presentations, and video-recorded webinars by our attorneys. This digest brings together some of our most interesting and useful materials, which you can use to tackle the difficult legal challenges facing your organization.

Donor Disclosure Rules for Nonprofit Tax Returns Overturned by Federal Court

A federal judge on July 30, 2019 overturned an IRS ruling, issued almost exactly a year ago, that allowed many nonprofits to stop disclosing their donors on their annual tax returns.

In Revenue Procedure 2018-38 (July 16, 2018), the IRS allowed social welfare organizations under section 501(c)(4), professional and trade associations under section 501(c)(6), and many other types of organizations required to file a Form 990 series return, to cease disclosing their large donors ($5,000 or more) on Schedule B of the Form 990. The major exceptions were section 501(c)(3) organizations and section 527 political organizations, both of which are subject to statutory requirements for donor disclosure that the IRS could not waive. Those IRS rules are described in more detail here.

Charity Abroad: U.S. Donors' Options for International Philanthropy

Under the Internal Revenue Code, only U.S. charities are eligible to receive tax-deductible charitable contributions from individual U.S. taxpayers. Thus, U.S. taxpayers cannot take charitable deductions for contributions made to foreign charities. Nonetheless, U.S. taxpayers have various options for supporting international philanthropy and receiving tax benefits, as discussed below.

New York State Beefs up Anti-Harassment and Anti-Discrimination Laws: What New York Nonprofit Employers Need to Know

New York State is about to give another boost to its anti-harassment and anti-discrimination laws. On June 19, 2019, the state legislature passed a bill (S. 6577/A. 8421) that, once signed by the Governor Cuomo, will substantially change state law standards and obligations for harassment and discrimination issues in the workplace. New York State employers—including nonprofit organizations with at least one employee performing work in the state—should review their employment practices and procedures to ensure compliance with these new requirements.

IRS Reform Law Expands Mandatory Electronic Filing of Nonprofit Tax Returns

The Taxpayer First Act (H.R. 3151), signed into law on July 1, 2019, extends the requirement for nonprofits to electronically file IRS annual information returns (Forms 990, 990 PF, 990-EZ, and 990-T) to all tax-exempt organizations who must file returns. It also extends mandatory e-filing to the periodic contribution and expenditure reports (Form 8872) filed by Section 527 political organizations.

New Jersey Pushes Back against IRS Rollback of Donor Disclosure Requirements for Nonprofit Organizations

The New Jersey Division of Consumer Affairs has announced that certain nonprofit organizations must disclose donors who have contributed $5,000 or more in a tax year, as part of annual reports due to the state. Although styled as "charitable" registration requirements, the law also applies to social welfare organizations that are no longer required to provide donor information to the IRS.

Claiming What’s Yours: States’ Abandoned Property Records May Yield Unexpected Gifts for Your Nonprofit

Nonprofits have a menu of options when it comes to fundraising. These range from the tried-and-true methods of direct mail and email marketing, to up-and-coming approaches like live-streamed events. But sometimes funds are there, yours, and simply waiting to be claimed, no donor solicitation required.

New Excise Tax on Nonprofit Compensation Casts Wide Net

The sweeping 2017 federal tax law known as the Tax Cuts and Jobs Act added a number of nonprofit-organization-specific provisions to the tax code, including a new 21% excise tax on certain compensation paid by nonprofit organizations. While this provision is focused on nonprofit executive compensation of more than $1 million, its scope is much broader than may first appear.

DOL Publishes New Guidance on Requirements for Optional Employee Volunteer Programs

The Department of Labor recently released an opinion letter clarifying how employers (including nonprofits) may establish an optional employee volunteer program without having to pay overtime to participating employees under the Fair Labor Standards Act (FLSA). Nonprofits that incentivize or otherwise encourage their employees to participate in volunteer work run the risk that such activities might be considered "hours worked" under the FLSA, and therefore subject to its overtime and minimum wage requirements. The DOL's recent Opinion Letter FLSA2019-2 outlines some of the key guidelines to protect nonprofits against such employee wage and hour claims.