August 2020

Nonprofit Organizations Digest

5 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, available for your use in tackling the difficult legal challenges facing your organization.

Notable Articles and Publications

UBIT: The Tax Consequences of Revenue Generating Activities for Your Nonprofit

Revenue generated by nonprofits is generally tax-exempt, but income generated from activities inconsistent with an organization's tax-exempt purpose may give rise to tax obligations. In a recent webinar, attorneys from Venable's Nonprofit Organizations Practice Group presented an overview on how various revenue-generating activities by nonprofits can trigger unrelated business income tax (UBIT) obligations. During the program, George Constantine and Anne Gerson offered ways to minimize that risk and outlined the typical sources of taxable income for nonprofits, along with common pitfalls and questions.

To Reopen or Not to Reopen? How COVID-19 Impacts Nonprofits' Decision to Return to the Office

In a recent webinar, attorneys from Venable's Nonprofit, Labor and Employment, and Employee Benefits and Executive Compensation Practice Groups addressed the practical and legal considerations for those nonprofits deciding whether to reopen their physical office spaces in the time of COVID-19. The panel addressed the step-by-step processes to determine if reopening is feasible and, if so, how to safely address the universe of issues related to the preservation of employee health and safety.

COVID-19 and Event Cancellation Insurance: Update on Best Practices

It's been several months since COVID-19 began spreading rapidly in the United States, forcing widespread cancellation of events such as concerts, sports events, and conventions. If your organization purchased event cancellation insurance (including the rider for communicable disease coverage), then you may have the opportunity to avoid a major hit to your revenue that would otherwise result from cancellation, postponement, or reduced attendance. Many in this position have already provided notice to their insurance carrier and are well under way in the claim adjusting process. But many are just getting started, now that it appears government and corporate restrictions related to COVID-19 will impact events for the remainder of 2020 and potentially into 2021.

Proposed Regulations on Nonprofit Compensation Excise Tax Provide Clarity for Company Foundations and Other Nonprofits

On June 5, 2020, the Internal Revenue Service issued proposed regulations providing extensive guidance on a recently enacted excise tax imposed on nonprofits and their related entities that pay compensation in excess of $1 million to "covered employees." These proposed regulations offer much-awaited clarity on how the excise tax is likely to apply to companies and their related foundations. The proposed regulations also provide rules for determining: a nonprofit's covered employees; what gets counted in compensation potentially subject to the excise tax; what constitutes a related entity; and the allocation of liability for the excise tax among related organizations.

OMB Renews Some but Not All COVID-19-Related Flexibilities for Recipients of Federal Awards

On June 18, 2020, OMB issued M-20-26, Extension of Administrative Relief for Recipients and Applicants of Federal Financial Assistance Directly Impacted by the Novel Coronavirus (COVID-19) due to Loss of Operations, to extend certain flexibilities outlined in a previous OMB memorandum, M-20-17. That memorandum, along with two related memoranda, which Venable previously reported on here and here, provided short-term flexibilities for administrative, financial, and audit requirements under the Uniform Guidance.

Nonprofit Enforcement in the Time of COVID

In a recent webinar, three of the nation's most active state charity regulators – including the current president of the National Association of State Charity Officials (NASCO) – discussed recent trends in enforcement activity in the nonprofit sector. The panelists addressed lessons learned from NASCO's recently issued annual report, as well as an update on enforcement against public charities, fundraisers, and foundations in the era of COVID-19.

Maximizing the Value of Brands and Creative Works in Challenging Times

The coronavirus pandemic continues to highlight the importance of online brand protection. In a recent webinar, Venable attorneys Andrew Price and Meaghan Kent, along with Jennifer Homer, vice president at the Association of Talent Development, discussed strategies nonprofits should consider when working to maximize brand value, conduct a successful rebrand, or monitor the use of copyrighted materials.

Virtual Trade Shows in the Time of COVID-19: Tax Considerations for Nonprofits

COVID-19 has required many nonprofit organizations to change their planned in-person events into virtual events, including their trade shows. However, guidance published by the Internal Revenue Service (IRS) in 2004 suggests that income received from these virtual trade shows may be taxable to the nonprofit organizations that host them. Associations and other nonprofits seeking to lessen their exposure to unrelated business income tax (UBIT) should plan carefully when moving events to fully virtual.

Postal Service Is Hottest Issue on the Hill

Following widespread media coverage of operational changes at the U.S. Postal Service (USPS) resulting in delivery delays, the U.S. House of Representatives plans to return from August recess for a vote Saturday, August 22 on legislation to address USPS operations and funding. The Senate and House committees with jurisdiction over the USPS have also announced plans to hold hearings on service, financial, and mail-in voting issues on Friday, August 21 and Monday, August 24, respectively. Although Postmaster General Louis DeJoy announced on Tuesday that he would suspend any operational changes until after the election, the hearings and the House vote are expected to proceed.