April 2023

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.

Upcoming Events

Playing the Long Game: Everything You Need to Know About Restricted Grants and Endowments

April 19, 2023 | Webinar

Restricted gifts and endowments play an important role in enabling nonprofits to address specific needs and provide for their short- and long-term financial health and stability. In this session, learn about key legal concepts, strategic decisions, and practical advice related to the procurement, use, and management of restricted and endowed funds. The discussion will include real examples of ways in which nonprofits have been aided and, in some cases, limited by the terms governing restricted funds, and how you can best position your organization to reap the benefits of these forms of charitable support.

Corporate Sponsorship in the Age of Social Media

June 9, 2023 | TEGE Exempt Organizations Update

On June 9, 2023, at the Joint TE/GE Council Meeting, Cristina Vessels will explore corporate sponsorship matters combined with social media challenges and risks compared to the potential benefits.

Because many nonprofits and their corporate sponsors are active on a variety of social media platforms to engage in outreach and increase visibility, among other reasons, this session covers new challenges and risks for both tax-exempt organizations themselves and in their engagement with corporate sponsors. Join Cristina and other panelists will share examples and discuss evolving best practices.

Notable Articles and Publications

IRS Announces Filing Changes for Form 8940 for Miscellaneous Determination Requests

As part of an ongoing effort to modernize its operations and reduce administrative burdens, the Internal Revenue Service (IRS) has revised and updated the Form 8940 for tax-exempt organizations, charities, and nonexempt charitable trusts seeking certain kinds of approvals or determination from the IRS, and mandated the form be submitted electronically via Pay.gov. The move, announced in Revenue Procedure 2023-12, is expected to standardize the format and presentation of miscellaneous determination requests, streamline review of these requests by the IRS, and reduce the possibility for errors that commonly arose in the preparation and processing of the paper versions of the form.

Nonprofit Organization Data Privacy and Security

The regulatory landscape governing how your nonprofit must protect its data and what it needs to do in the event of a breach is constantly shifting. With new privacy laws in multiple states—including most notably Colorado—and greater focus on privacy at the federal level, nonprofits need to develop policies and procedures to meet these emerging privacy obligations. Data security also remains a top compliance priority, and nonprofits must continue to ensure that their members' and donors' information is safeguarded. Our panelists will address new developments with regard to data protection and discuss best practices for addressing data breaches when they do occur.

DOJ Withdraws Past Guidance Including "Safety Zone" for Information Exchanges

On February 3, 2023, the Antitrust Division of the Department of Justice (DOJ) withdrew its nearly 30-year-old guidance on information exchanges in the healthcare industry, including the "safety zone" for benchmarking that the antitrust agencies had suggested also applied to participants in other industries. Up until the withdrawal, the DOJ guidance, jointly issued with the Federal Trade Commission (FTC), provided a "safety zone" for information exchanges that followed certain guidelines, such as using third parties to collect data, limiting the exchange to information that was at least three months old, and aggregating data so that it would not be identifiable by participant. Over the years, many trade associations, professional societies, and businesses have structured their industry data programs in a manner consistent with this guidance in order to minimize antitrust risk.

Corporate Governance Made Easier for New York Nonprofits

The New York Not-for-Profit Corporation Law (N-PCL) has been amended again, and this time, the amendments make decision-making easier for New York nonprofits. The new legislation, enacted in November 2022, (1) accommodates increased use by nonprofits of electronic portal technology for unanimous consent actions outside of Board and membership meetings; (2) allows a replacement Board member who is elected by the Board to serve for the full length of the unexpired term rather than the prior requirement of temporarily serving only until the next annual meeting; and (3) clarifies that conflicted Board members who leave a nonprofit's Board meeting can still be counted as present for maintaining quorum despite their recusal.

Comments and Challenges Welcome: FTC Proposes New Rule to Ban Non-Compete Agreements with Employees, Independent Contractors, and Volunteers

On January 5, 2023, the Federal Trade Commission (FTC)—the federal agency tasked with protecting consumers from unfair and deceptive business practices and enforcing antitrust laws—proposed a rule that, if enacted, will prohibit the use of non-compete clauses in agreements by employers with their employees, independent contractors, or volunteers in almost all circumstances. This rule would apply to numerous, but not all, nonprofit organizations.

The Federal Trade Commission Is Taking Aim at Employer Non-Competition Agreements

Non-compete agreements are under attack yet again. On January 5, 2023, the Federal Trade Commission (FTC)—the federal agency tasked with protecting consumers from unfair and deceptive business practices—announced a new proposed rule that, if enacted, will prohibit the use of non-compete agreements by employers in almost all circumstances. According to the FTC, the proposed rule is needed to combat allegedly unfair methods of competition that violate the Federal Trade Commission Act (FTCA). The FTC also contends that the rule will increase American workers' earnings by as much as $300 million.

California Issues Changes to Regulations for Charitable Fundraising Platforms and Platform Charities, Delaying Implementation to 2024

On November 21, 2022, the California Department of Justice published a notice delaying implementation of highly anticipated fundraising regulations applicable to nonprofits and businesses. The notice of modifications signals that California needs additional time to revise regulations in response to public comments received on the initial notice of proposed rulemaking issued earlier this year.

Evaluating the Cybersecurity Risk of Your Mailing and Publishing Partners

Cybersecurity is a growing concern for all nonprofit organizations, especially those that store, process, and transmit sensitive data. While it is common to think of the cyber issue as relevant to digital communications and networks, the rules and the issues apply with equal force to plain old hard-copy content that is delivered by the Postal Service, such as subscriber information, marketing mail, and nonprofit fundraising solicitations.