Nonprofit Use of Intellectual Property: Copyright Infringement or Fair Use?
Many nonprofit organizations are interested in having a welcoming website with images, logos, and education resources. When deciding whether to use a particular graphic, it is important for nonprofit organizations to be aware of the difference between copyright infringement and fair use when they are using material they do not own.
It is a common misconception that nonprofits are not subject to copyright infringement because the materials they use are not for commercial or for-profit purposes. Although the non-commercial use of materials may weigh in favor of a nonprofit to not be subject to copyright infringement, that is not always the case. It is vital that nonprofits keep track of the material they use because there are penalties for copyright infringement that could greatly impact an organization. Below are some common questions a nonprofit might have regarding copyright infringement and fair use.
If you have questions about trademarks and non-profit organizations or would like to begin the process, call a knowledgeable attorney at Abelaj Law, P.C. at 212-328-9568.
An Intention to Commit Copyright Infringement is Not Required for Liability
An organization can be liable for copyright infringement even if it did not know the material was copyrighted or that, in order to use the material, they needed to gain permission from the owner. A nonprofit can be exposed to vicarious copyright infringement even when the organization itself or its employees do not know they are using copyrighted material. This means a nonprofit is responsible for any harmful actions its employee commits, which includes using copyrighted material they do not own.
Fair Use Doctrine Does Not Automatically Protect Nonprofits from Copyright Infringement
Fair use allows a person to use a portion of copyrighted work that they do not own without permission from the owner to use the material. Nonprofit status, on its own, does not give the organization permission to use copyrighted material without permission under the fair use doctrine. However, if the nonprofit is using the copyrighted material for non-commercial use, such as using an image to promote a program or event that the organization is hosting, may weigh in its favor in determining whether fair use is applicable.
Factors Considered to Determine if the Use is Fair Use or Copyright Infringement
Determining whether something is fair use is not a “one size fits all” test. Courts will look at each individual case to evaluate whether an organization committed copyright infringement or if it is fair use. Because each nonprofit is unique and uses materials differently, the courts will review each organization’s circumstances when making its determination.
There are four factors that courts use to evaluate whether something is fair use or not[1]:
- Purpose and Commercial Nature. The purpose and character of the copyrighted material. This includes whether the material was used to commercial nature or is for nonprofit educational purposes.
- Unique or Factual Nature of the Original Work. The nature of the copyrighted work. Here, the court will shift its focus onto the original work (the initial material that the nonprofit used) to see if it has a lot of creative expression, whether it has been published, and if the original work incorporates primarily factually information like a news story.
- Portion of Original Work Used by Nonprofit. The amount of the copyrighted portion the nonprofit used in relation to the original work as a whole. Here, the court will look at how the nonprofit used the material and ask: Did the nonprofit only take a portion of the material? How much of the original material did the nonprofit use? Did the nonprofit take the original material and incorporate it into some of its own material?
- Economic Damages to Original Work. Finally, the Court will consider the effect of the market value of the copyrighted work. Many nonprofits might not think this last factor would apply to them, but that is just a myth. When evaluating this final factor, the court might look whether any economic harm has been done to the copyright owner and if the material the nonprofit is using is a substitute for the original owner of the material’s marketplace. This might be more common for nonprofits that operate in the healthcare, education, or arts sectors because they may be publishing or distributing more informational materials on their website.
Using Small Portion of Copyrighted Work May be Allowed
If a nonprofit takes a small amount of copyrighted work, a court might rule in favor of the nonprofit by stating they had a de minimis taking. This means that the nonprofit took an insignificant amount of the copyrighted material, and that no harm was done, even if it was taken without permission from the owner.
Although using a small portion of a copyrighted work without permission may mean no penalty, it is not a best practice to do so. A nonprofit should not get into the habit of taking small portions of other people’s copyrighted materials without their permission from the owner. Securing permission from the owner, rather than relying on de minimis taking, is the safest option as it will protect the organization from copyright infringement penalties.
Penalties for Copyright Infringement are Steep
Penalties for copyright infringement can be significant to a nonprofit. A court may order a nonprofit to pay actual damages, such as any profits the owner lost, statutory damages between $750 – $30,000, or in the case of a nonprofit’s willful copyright infringement, it can be fined up to $150,000. Additionally, a nonprofit that is found to commit copyright infringement may also be subject to paying the owner of the copyright’s legal fees. In extreme cases, a court may issue an injunction, where they will stop the nonprofit’s use of the copyrighted material.
Seeking Permission to Use Copyrighted Material is Best Approach
A work may be copyrighted if a nonprofit uses an image that has already been registered with the United States Copyright Office or if someone has already made it known that they are the creator of a particular image. Although there are some circumstances where a nonprofit may not be liable for copyright infringement, it is best practice to get permission from the copyright owner. It is also important for a nonprofit to keep track of any material on their website, advertisements, pamphlets, cards or donation pages, etc., that they are currently using or have published.
A nonprofit should confirm that all the materials they are using are either something they own or have valid permission to use. Be sure to let anyone who has access to updating the nonprofit’s website, social media, or other digital communication double-check the image they are using before posting. If a nonprofit is not sure if something is copyrighted or if it is unsure about whether the organization has permission, do not post it and/or remove it from your website, donation page, social media or other public documents.
Call an Experienced Attorney About Protecting Your Nonprofit’s Copyrighted Today
For non-profit organizations, consistency in marketing and knowability are critical to maintain its favorable reputation and fundraising success. By knowing the laws of fair use, you can take action to protect your brand awareness if another organization attempts to use it. Federal registration of the business’s trademark is imperative for long-term goals and success. The law does not require that companies operating within the United States retain a lawyer for the trademark application process, however, the United States Patent Trademark Office encourages it. An attorney experienced with trademark law can help you through the complex process. They could ensure no avoidable delays or potentially losing rights to the trademark. To hear more about trademarks and non-profit organizations, call a seasoned lawyer at Abelaj Law, P.C. You can reach them at 212-328-9568.
How Individuals and Charities Can Benefit from Changes to Charitable Deductions Before and After OBBA
The One Big Beautiful Bill Act (“OBBA”) was signed into law on July 4, 2025, which includes many striking changes to charitable deductions that start on January 1, 2026. Donors and donees of charitable gifts must be aware of the new rules to maximize their philanthropic goals. Find out the impact the changes will have on donations and how donors and nonprofits can prepare and respond before and after the changes. If you have questions about charitable giving in New York, please consider scheduling a consultation with the experienced New York philanthropy attorneys at Abelaj Law, P.C. by calling 212-328-9568.
Good: Boost in Charitable Deductions
1) Individual taxpayers who take the standard deduction are allowed an additional charitable deduction of up to $1000 for single filers or up to $2000 for joint filers.
Recipient limitations: Donations to Donor Advised Funds (“DAF”), supporting organizations, or non-operating private foundations are not eligible for the standard charitable deduction.
2) Donations to charities that provide scholarships to K-12 students.
Deduction: Starting in 2027, nonrefundable credit of up to $1700 for gift of cash or marketable securities. Available to both standard and itemized filers, the credit will reduce the other charitable deductions allowed to the taxpayer.
Bad: Reduction in Charitable Deductions
1 – Taxpayers who itemize deductions will only be allowed to deduct charitable contributions exceeding of 0.5% of taxpayer’s AGI.
- For example, if a donor’s AGI is $500,000, they will be allowed to take a charitable deduction on the excess over $2,500. Donations must be to a 501(c)(3) organizations and deductions for gifts to DAFs, private foundations or supporting organizations are allowed.
2 – Corporations will only be allowed to deduct charitable gifts exceeding of 1% of taxable income up to a maximum of 10%.
- Impact to Matching Gifts Programs. Corporations either reduce or increase the number of available charities that may receive a matching gift. It will be a year or two until we see the outcome.
Take Action: Maximizing the Rules for Your Benefit
1) Standard Filers. Consider whether waiting until 2026 to make a charitable contribution will significantly improve your taxable income or if the result would be nominal as compared to the charity’s loss. Keep in mind that your favorite charities rely on your donations, and they may be more negatively impacted than you can imagine. If you skip the 2025 contribution, increase it in 2026.
2) Itemized Filers. Make your charitable contributions NOW before 12-31-2025 in order to receive the maximum charitable deduction. For 2026, make a larger contribution in one year to front-load the gifts that would have been made over several years (sometimes called “bunching gifts”). Bunching will allow you to receive a charitable deduction while providing the cumulative gift to the charity “in advance.”
3) Charities. Contact donors now to make contributions before 12-31-2025, expressing the benefits of receiving a full charitable deduction this year without being subject to the floor. Coordinate with your fundraising team to identify and segment donors who might fit into the standard deduction filing or the itemized filing.
- Identify donors who make smaller, annual gifts and tailor a fundraising message to highlight the benefit of charitable contributions starting in 2026 that were not previously available.
- For large recurring donors or those at the borderline of the 0.5% floor, communicate with them NOW Before 12-31-2025 and share the benefits of making a charitable contribution before December 31, 2025. For 2026, tailor fundraising messaging to the benefits of “bunching gifts” in one year.
4) Supporting Organizations and Private Foundations. Focus your fundraising efforts on itemized filers who can receive a charitable deduction when making large donations or bunching gifts. If you have a website, consider updating the donation page to provide information and direct the donor to discuss with their tax adviser.
Additional Limitations
- Deduction for cash donations to public charities is capped at 60% of AGI (30% of AGI for appreciated assets). OBBA made the 60% cap permanent.
- Carry-forward for 5 years is still allowed, subject to the same limitations.
Consult with a Philanthropy and Charity Attorney Today
Being aware of the tax changes is critical when making charitable gifts. Whether you are a donor or a donee; an individual giver or a charitable recipient, the new laws will impact your strategy to maximize tax benefits. Discussing the tax changes with a philanthropy attorney may ensure that you take steps to fit your philanthropic goals. If you want to learn more about philanthropy planning in New York, please consider scheduling a consultation with the Abelaj Law, P.C. by calling 212-328-9568 to discuss how we can assist you in this process, including developing policies and procedures to receive large donations in order to avoid jeopardizing tax-exempt status.
Common Risks for Nonprofit Organizations and How to Prevent Them
Nonprofit organizations are essential to the well-being of our communities, delivering critical services to support those in need. While their charitable missions empower them to engage in unique, mission-driven activities, they are not immune to risk. In fact, as tax-exempt entities, nonprofits must navigate an added layer of regulations that for-profit businesses often don’t face. Proactively identifying and managing these risks is crucial for long-term sustainability and mission impact. In this post, we’ll examine some of the most common risks nonprofit organizations encounter and how to prepare for them effectively.
1. Conflicts of Interest Must be Disclosed and Addressed
Unlike for-profit entities, board members, officers, or other key persons involved at a nonprofit organization must disclose when they have conflict of interest or potential conflict of interests when making decisions that can impact the organization. When a conflict of interest or potential conflict of interest is identified, it is best practice for that person to remove themselves from the decision-making process.
If an organization engages in a related-party transaction where a conflict of interest exists, it can be at-risk of violating IRS rules that impose a significant tax and possibly jeopardize its tax-exempt status. This is particularly the case for private foundation, where self-dealing, when a key person benefits from a transaction to the organization’s detriment, can result in a hefty excise tax.
Although the IRS does not require a Conflict of Interest Policy, many States, such as New York, require that the organization have one in place to guide them through the decision-making process.
2. Governance and Compliance Risks from Internal and External Sources
Governance and Compliance risks cover a host of issues that nonprofit organizations may face. It is critical that board members, officers, and other key persons at an organization be familiar with the organization’s internal policies and aware of external laws. This includes complying with state, local, and federal tax rules to ensure the organization is only engaging in activities that carry out its charitable purpose in order to maintain its tax-exempt status.
A nonprofit organization must ensure that it is complying with its internal policies (Bylaws, Conflict of Interest Policy, Grant Policy, OFAC Policy, etc.) in order to maintain seamless and reliable operations. It is recommended to review internal policies every 3-5 years and ensure new board members get familiar with the organization’s governing documents before joining the organization.
Organizations must ensure compliance with external laws and requirements. This includes changes to nonprofit corporation laws, tax laws that impact the organization and applicable agency laws. By having ongoing communications with its general counsel, an organization can be nimble in responding to sudden changes in the law in order to avoid jeopardizing its legal standing.
3. Communication Risks to External Parties May Harm Organization’s Reputation
A nonprofit organization must be mindful of its communications. This includes social media posts, emails, and when members of the organization speak in public settings.
A nonprofit should have a procedure in place to review its communications prior to publication to confirm they accurately describe its charitable mission in a transparent manner. If a nonprofit organization does not, it may be at risk misrepresenting itself in contract negotiations, grant applications, or donor engagements. The result may be catastrophic if funding is lost or the resulting reputational harm is irreversible.
When advocating for or informing the public about its charitable goals, nonprofits must avoid engaging in partisan political activity and must not have a substantial part of their activities be lobbying. Organizations are allowed to advocate for supporting their charitable causes, but they cannot engage in prohibited political activity as there is a high risk of potentially losing 501(c)(3) tax-exempt status.
Adopting a policy and process for external communications will help create parameters on the type of language that can be used, the authorized platforms, and the individual responsible for reviewing the final products.
4. Financial Responsibility Cannot Be Abdicated
Nonprofit organizations rely on donations, grants, and fundraising events to support its operations and activities. It is the Board’s responsibility, both collectively and individually, to oversee the financial health of the organization.
The organization’s financials must be handled in a transparent manner and ensure the majority of funds are used to carry out the organization’s charitable mission.
The organization should reiterate to its Board that financial compliance and responsibility remains with the Board at all times and is not a responsibility that can be transferred to someone else, whether a committee, CPA, attorney, or outside consultant. There should be checks and balances in place to ensure that filings are submitted to the IRS on a timely basis and that the finances are properly invested to meet the organization’s overall goals. Failure to do so may result in loss of tax-exempt status, which requires significant cost and time to regain from the IRS.
5. Reputational Risks May Result from Internal or External Events
Reputational risks usually refer to the potential loss of public trust and credibility due to actions, behaviors, or external perceptions of an organization. A “bad reputation” can cause a ripple effect through the organization and impact its internal structure and external partners. This is because nonprofits rely on their reputation in order to receive donations, grants, and enter into contracts. Reputational risks can cause internal disruption and cause a stagnant Board not be able to make important decisions for the organization. It can also cause community backlash, loss of funding and opportunities, and may even prompt an investigation from the Attorney General.
Contact Our Experienced Nonprofit Lawyer Today
Risk is an inevitable part of running an organization, but it doesn’t have to hinder a nonprofit organization’s activities. Recognizing risk is the first step to resolving it. By taking proactive approach to risk management, board members, officers, and other key persons can help set up the organization for long-term success to make a lasting difference in their communities.
At Abelaj Law, P.C., we understand the various risks nonprofit organizations face and work with them to mitigate and resolve current or potential issues. Our work is about giving the tools and resources an organization needs in order to succeed. To hear more about our services, call a seasoned lawyer at Abelaj Law, P.C. You can reach them at 212-328-9568.
Also, check out or Board Member Training: How to prevent Disruptions Before They Occur https://www.abelajlaw.com/elevate-your-nonprofit-governance/
Naming Rights for Charitable Endowments: Legacy, Leverage, and Legal Precision
In the world of philanthropy, recognition is often as enduring as the gifts themselves. For many donors, attaching their name—or that of a loved one—to a charitable cause is not merely about prestige; it’s about expressing values, shaping legacy, and ensuring the memory of one’s contribution endures through time. Naming rights, particularly those attached to charitable endowments, offer a compelling intersection between generosity and identity. Yet as simple as it may seem to see one’s name on a building or scholarship, the legal and tax frameworks underlying these rights are far from straightforward.
At Abelaj Law PC, we have worked closely with both donors and nonprofit institutions to structure charitable gift agreements that reflect intention, promote trust, and withstand the passage of time. This article explores the deeper dynamics at play when naming rights accompany charitable endowments, and the considerations—practical, legal, and emotional—that must be navigated with care. If you have questions about planned giving, naming rights and gift agreement or would like to begin the process, call a knowledgeable attorney at Abelaj Law, P.C. at 212-328-9568.
The Endowment as a Vehicle of Permanence
A charitable endowment is, by design, a long-term commitment. The principal gift is preserved, invested, and only a portion of the returns are used annually to support a cause or organization. For the donor, this structure represents a form of permanence: a commitment that outlives them and continues to express their values for generations.
Establishing such an endowment can be achieved through various giving vehicles. Some donors prefer outright cash donations during life; others may contribute appreciated securities for favorable tax treatment. More complex instruments like charitable remainder trusts or pooled income funds offer the donor an income stream during life, with the remainder ultimately benefiting the nonprofit. Endowments can also be created at death through bequests, often tied to an estate plan designed to achieve both philanthropic and tax-saving goals.
Regardless of the vehicle, what binds all successful endowments is a well-drafted agreement—one that does more than document the gift amount. It must articulate purpose, address contingencies, and—when naming rights are involved—reconcile recognition with accountability.
Recognition in Exchange for Generosity
Naming rights are a form of recognition that straddle a legal and emotional line. For charities, they are a valuable tool to inspire generosity. For donors, they symbolize trust in the institution and a desire to be visibly linked to a cause. The challenge is ensuring that the recognition is appropriate, enduring, and governed by clear expectations.
From a legal perspective, naming rights are typically conferred via a charitable gift agreement. This agreement must detail not only the timing and scope of recognition—such as when signage goes up, or which portion of a building will bear the donor’s name—but also the conditions under which those rights might change or even be revoked.
For instance, a donor might provide a gift to fund a medical research center, with the understanding that a particular laboratory will carry their name. But what happens if, decades later, that lab is closed or repurposed? Does the donor’s name transfer to another facility? Is it removed altogether? Should naming rights expire after a set number of years, or continue in perpetuity? These are not merely procedural questions; they strike at the heart of donor intent and institutional integrity.
Balancing Donor Control with Institutional Autonomy
Donors, particularly those contributing significant sums, often wish to maintain some form of control over how their gift is used. They want assurances that their intentions will be honored—not just at the time of the gift, but long into the future. However, the law generally treats completed gifts as irrevocable, with ownership and control passing fully to the nonprofit.
That said, thoughtful drafting can give donors a measure of ongoing influence. For example, gift agreements may include reporting obligations, requiring the nonprofit to provide annual updates on how funds are invested or disbursed. Some donors choose to appoint a family member or representative to receive these reports and serve as a watchdog over the gift’s implementation.
Legal standing is another important concern. Traditionally, donors did not have the right to sue a charity for failing to uphold the terms of a gift. That authority rested solely with the state attorney general, acting in the public interest. But the law is evolving. More recent cases have acknowledged the legitimacy of donor standing—particularly when the gift agreement explicitly confers that right. Donors seeking such enforcement authority should ensure that the agreement grants them, their heirs, or their designated agents the ability to pursue legal remedies if the gift terms are breached.
The Charity’s Perspective: Naming Rights with Guardrails
While recognition can incentivize philanthropy, it also exposes nonprofits to reputational and operational risks. Charities must consider what happens if a donor’s reputation is later tarnished. We’ve seen an example of this backlash against institutions bearing the Sackler family name after the Oxycodone crisis. In such cases, the ability to remove or alter naming rights becomes crucial. A carefully crafted agreement can include “morals clauses” or reputation-based revocation provisions, preserving the charity’s discretion to dissociate when necessary.
Similarly, institutions should be wary of gifts that come with overly restrictive conditions or impractical requirements. While it is reasonable for a donor to earmark funds for scholarships in a specific field or for research into a particular disease, attempts to influence operational decisions—such as admissions, faculty hiring, or curriculum—can encroach on academic or organizational autonomy and may even threaten a nonprofit’s tax-exempt status.
To avoid these issues, charities should ensure that gift agreements clearly state that the nonprofit retains ultimate control over the use of funds. The IRS has long held that for a gift to be deductible, the recipient organization must have full discretion over its application. Language such as “this contribution is made with the understanding that the donee has complete control and administration over the use of the donated funds” helps ensure the gift qualifies as a charitable contribution.
Naming Rights and Tax Deductibility
Recognition through naming is considered an incidental benefit by the Internal Revenue Service, meaning it generally does not reduce or eliminate a donor’s tax deduction. However, if naming rights are tied to performance conditions or reversion clauses—such as the donor regaining ownership if certain criteria aren’t met—the gift may be deemed incomplete or non-deductible.
For instance, a gift that reverts back to the donor’s estate if a building isn’t completed, or if matching funds aren’t raised, may not qualify for a deduction unless the conditions are considered “so remote as to be negligible.” Tax compliance is especially critical when dealing with large or complex gifts, and both parties should work with experienced counsel to structure agreements accordingly.
Vehicles for Setting Up Endowments
Donors can establish endowments through various giving vehicles, including:
- Direct cash gifts to a public charity, donor-advised fund (DAF), or community foundation.
- Gifts of appreciated securities, which may offer favorable tax treatment.
- Charitable remainder trusts (CRATs/CRUTs) or pooled income funds, which provide income to the donor or others during life with the remainder going to charity.
- Bequests and other planned giving arrangements at death, which can yield estate tax benefits.
Each structure has unique tax implications under IRC §170. For example, cash gifts to public charities are deductible up to 60% of adjusted gross income (AGI), while gifts of appreciated securities may be limited to 30%.
A Thoughtful Partnership
At its best, a naming rights arrangement is not a transaction—it is a relationship. One built on mutual respect, shared vision, and a commitment to honoring both donor legacy and institutional mission. But like any enduring relationship, it requires clarity, communication, and sometimes, the humility to plan for the unexpected.
At Abelaj Law PC, we understand the legal and human dimensions of charitable giving. Our work is not just about drafting agreements—it’s about helping donors express their values and helping organizations steward those values with integrity. Whether you are considering a major philanthropic gift or managing one, we are here to ensure that the generosity behind it is protected, honored, and made lasting.
Call an Experienced Attorney About Naming Rights in Charitable Agreements Today
For individuals or non-profit organizations who are considering naming rights as part of a charitable gift agreement, complying with tax laws while providing protection and reasonable control to both the givers and getters is necessary. By considering the rights and restrictions in naming a charitable asset in recognition of a generous donor, the parties can focus on the details that are most relevant in achieving the gift’s goals. An attorney experienced with planned giving and relevant laws applicable to endowment agreements can help you through the detailed and rewarding process. They could ensure that you do not include a provision in the gift agreement that might jeopardize your taxable deductions. To hear more about naming rights in endowment agreements, call a seasoned lawyer at Abelaj Law, P.C. You can reach them at 212-328-9568.
Unilateral Silencing of Charities Deemed to be Terrorist Organizations: Pending Legislation
Although it has not made much news, a proposed Bill titled Stop Terror-Financing and Tax Penalties on American Hostages has been making its way through Congress. As of November 21, 2024, the Bill was approved in a vote of 219-184 and received support from all Republicans except for one and by 15 Democrats.
As of December 2, 2024, the Bill was received by the Senate. If approved, it would only take approval by the President for this Bill to become law and potentially silence nonprofits that a presidential administration deems to be involved in terrorist activity.
Nonprofits Are Already Prohibited from Supporting Terrorist Activity
The Internal Revenue Code already provides a mechanism for a nonprofit to lose its tax-exempt status if it is deemed to be engaging in terrorist activity. The definition of terrorist activity, the process of revocation and the rights of the accused charity are outlined in paragraphs (1) through (7) of Section 501(p) the Code.
A terrorist organization whose tax-exempt status may be revoked is defined in paragraph (2). Terrorist classification is determined by other Federal acts and departments, including the Immigration Nationality Act (INA), an Executive Order related to terrorism under the authority of the International Emergency Economic Powers Act, or an Executive Order issued under the authority of any Federal law related to INA or as it pertains to subnational groups. In other words, it’s a method of checks and balances where the Treasury Department relies on the expertise and knowledge of other Federal departments to identify and designate a terrorist organization.
Key Points of the Bill that May Silence Nonprofits
The Bill proposes adding a new paragraph (8), which would vest the Secretary of Treasury with unilateral authority to designate a nonprofit as meeting the definition of a terrorist organization as defined in paragraph (2). The Secretary of Treasury is a Presidential appointment.
Although it appears that the Secretary would be limited to the definition of a terrorist organization based on an outside agency or Act, there is a vulnerability to organizations which may be deemed as a subnational group, which is one that advocates for a certain point of view or policy which may not be supported by the Federal government.
In addition, if the Secretary identifies a nonprofit as a terrorist organization, the organization has only 90 days from the date of the notice to provide a response or certification that it did not support the alleged terrorist activity. This leaves the nonprofit very little time to understand the allegations and prepare a satisfactory response.
Take Action to Improve Internal Controls
Nonprofits support charitable causes throughout the world and advocate for improved human rights with the United States. It is important to maintain updated policies and expenditure responsibility.
This may include the following:
- Reviewing your OFAC Policy to comply with anti-money laundering laws
- Auditing your expenditure responsibility reports and
- Updating your grant agreement policies.
On a regular basis, review your Bylaws and Committee Procedures to determine if they reflect the latest laws and best governance practices.
In addition, maintaining timely and detailed minutes is important for all organizations as they reflect the decisions made and the underlying reasons.
Finally, prepare a team of professionals to support your organization, including an accountant, attorney and other advisors who understand your organization before a need arises. At Abelaj Law, PC, we are committed to assisting nonprofits with their governance needs. Contact our experienced legal team today at 212-328-9568 for an introductory call to learn more.
Tax-Exempt Organizations and Political Activity
As the 2024 election nears, now is a good time for your tax-exempt organization to review the rules and regulations regarding political activity.
A 501(c)(3) tax-exempt organization can engage in limited amounts of political activity so long as it remains nonpartisan, and it may also engage in legislative lobbying provided it is not a substantial amount of activity. These limitations also extend to grantee organizations that receive grant money from a 501(c)(3) organization, including 501(c)(4) organizations and fiscal sponsors.
501(c)(3) Grants and Fiscal Sponsors
When a 501(c)(3) makes grants or fiscally sponsors another organization, the funds dispersed are restricted for use to exclusively engage in the specific charitable, education, or other permissible activities under Section 501(c)(3) of the Internal Revenue Code (the “Code”.) Once the 501(c)(3) disburses any funds, it must receive reports or other documentation showing that this requirement has been honored so it does not jeopardize its tax-exempt status.
Political Activity
Under section 501(c)(3) of the Code, a tax-exempt organization must NOT participate in or intervene in any political campaign on behalf of (or in opposition to) a candidate for public office, nor publishing or distributing statements of the kind. A 501(c)(3) organization may, however, take positions on public policy issues, which include issues that divide candidates, so long as the organization avoids any advocacy issues that function as a political campaign intervention. Any “political” agitation either director or indirect is enough to revoke an organization’s tax-exempt status because that would cause the organization’s activity to fall outside it’s exclusively charitable purposes.
It is important that a 501(c)(3) organization take extra caution in their communication because even if a statement does not expressly tell an audience to vote for or against a specific candidate, a tax-exempt organization delivering the statement is at risk of violating political campaign intervention prohibited activity if there is any message factoring a candidate.
A 501(c)(3) organization can participate in specific voter education political activity so long as it remains neutral and nonpartisan.
If an organization posts something on its website that favors or opposes a candid for public office, the organization will be treated the same as if it is distributing printed materials or oral statements. A tax-exempt organization is responsible for the links that are on its website. When an organization establishes a link to another website, the organization is responsible for the consequences of establishing and maintaining that link, even if that organization does not have control over the content of the linked site. Be mindful of any links on your website that may may lead to prohibited political activity.
Lobbying Activity
A 501(c)(3) may engage in lobbying, which includes carrying out propaganda or otherwise attempting to influence legislation, so long as it does not constitute a substantial amount of the organization’s activity. Despite this limitation, the following activities are allowed and not counted toward the organization’s lobbying limits:
- making available the results of a nonpartisan analysis,
- providing technical advice or assistance to a governmental body, appearances before, or communication to a legislative body with respect to a possible decision which might affect the existence of the organization,
- communication between tax-exempt organization and its bona fide members with respect to legislation or proposed legislation, and
- any communication with a government official or employees other than the attempt to influence legislation.
There are two types of lobbying recognized by the law: direct lobbying and grassroots lobbying. Direct lobbying is an attempt to influence legislation by communicating directly with government officials, and grassroots lobbying is an attempt to influence legislation by communicating with the general public. If an organization engages in grassroots lobbying, it is limited to twenty-five percent (25%) of the organization’s total lobbying allowance.
Learn How an Experienced Attorney Can Assist with Any Questions Regarding Political Activity or Lobbying for a Tax-Exempt Organization
Ensuring that your organization is complying with the rules and regulations regarding political activity or lobbying is essential to maintaining its tax-exempt status. Even if it’s not an election year, a tax-exempt organization must still adhere to the rules and restrictions. At Abelaj Law, PC, we are committed to assisting tax-exempt organizations with all of their legal needs so they can focus on achieving their mission and purpose. Contact our experienced legal team today at 212-328-9568 to learn more.
The Importance Of Nonprofit Employee Handbooks
If you are starting up a nonprofit organization, you may be considering preparing a nonprofit employee handbook that communicates expectations for future workers. However, you may wonder if you really need a nonprofit employee handbook. Why an employee handbook is important and what to include in the employee handbook will vary by organization. If you are ready to discuss your organization’s unique needs and hear recommendations based on your situation, consider contacting a knowledgeable nonprofit lawyer from the Jennifer V. Abelaj Law Firm by calling 212-328-9568 to schedule a confidential consultation.
What Is a Nonprofit?
A nonprofit is an organization that exists for a social mission, not to earn a profit like a typical business. Most nonprofits are 501(c)(3) organizations, which refers to the portion of the United States Internal Revenue Code that provides for tax exemption for nonprofits that undertake specific social causes, according to the Internal Revenue Service (IRS). These causes can include research of a medical condition or protection of animals or children.
What Is a Nonprofit Employee Handbook?
Like employee handbooks for other companies, a nonprofit employee handbook communicates the expectations and policies of the workplace. The most significant difference is that the employees work for a nonprofit organization. Therefore, a greater need for confidentiality regarding the organization’s practices and donors may exist. An effective nonprofit employee handbook outlines the terms and conditions of employment and gives all workers a set of rules and a framework to follow.
Why Are Nonprofit Employee Handbooks Important?
Employee handbooks can help to protect a nonprofit organization from frivolous claims by helping the nonprofit set clear expectations for its employees. Employee handbooks list the established rules of the workplace to avoid confusion or ambiguity. Having a handbook for nonprofit employees also ensures that everyone is operating under the same set of rules and procedures. Additionally, employee handbooks may be necessary to obtain directors and officers liability (D&O) and employment practices liability insurances.
What To Include in a Nonprofit Employee Handbook
Each nonprofit organization and workplace is different. Therefore, policies that are appropriate for one organization may not be appropriate for another. Different policies may need to be in place to account for the employee makeup of an organization or its mission. An experienced nonprofit lawyer from the Jennifer V. Abelaj Law Firm may be able to help determine your organization’s needs. Depending on the circumstances, a lawyer may recommend including some of the following policies and provisions.
At-Will Employment Statement
Many employee handbooks begin with a statement that the existence of an employee handbook does not create an employment contract. This is because many states, including New York, have found that such publications can create an impression that employees can only be dismissed for cause, according to the Nonprofit Risk Management Center. An at-will statement clarifies that the employment relationship is at will and can, therefore, be severed at any time by either the employee or the employer.
General Work Policies
General work policies may include information about the daily minutiae of working at the organization. These policies may be related to:
- Work hours
- Tardy and absence policies
- Policies for requesting time off
- Dress code
- Overtime policy
- Policies against workplace harassment and discrimination
- Discipline policy
Confidentiality Agreement
Given the potential sensitivity of the information an organization may collect and store, a confidentiality agreement may be included in the employee handbook. This portion of the handbook can require employees to sign a statement agreeing that they will not disclose confidential information to anyone outside the organization or, in some cases, outside their department.
Benefits
A nonprofit employee handbook may also include the benefits provided to employees along with eligibility information. Depending on the organization, benefits may include:
- Medical insurance
- Dental and vision insurance
- Disability insurance
- Life insurance
- Flex time
- Retirement benefits
- Paid time off (PTO), sick time, and vacation time
- Annuity plans
- Referral incentives
Communication Policy
Many people use their personal devices for work purposes. A nonprofit may choose to allow this but protect the business by requiring employees to agree to use their devices in a safe manner. This can include virus protection and protection from hacking. Alternatively, an organization may provide devices to the employees, which would come with those protections installed, to use solely for work purposes.
Formal Performance Review Policy
An employee handbook may also describe the current roles for employees in the business and their job descriptions. Additionally, it can contain the procedure that will be used to formally review employees’ performance. This performance review may determine whether the employee remains employed with the company, is referred for remedial action, or receives a pay raise or promotion.
A formal performance review may include a standardized form and framework to review all employees in a consistent process. Depending on the organization, the review may consist of analyzing the following information:
- The employee’s attendance
- How the employee is helping to achieve the nonprofit’s mission
- The employee’s ability to work well with others
- The quality of the employee’s work
- The employee’s ability to meet deadlines and goals
- The employee’s communication skills
- How much in donations the employee has brought into the organization, if applicable
Personnel Records
A nonprofit employer may be in possession of sensitive information about its employees, including their identifying information and protected health information. An employee handbook may include clear policies about how the organization protects this information. Generally, health information must be kept secured separately from other personnel records. Additionally, sensitive documents, such as wage garnishment or other court orders, generally should not be included in an employee’s personnel record.
Documents that a nonprofit organization may be keeping as part of its personnel records may include:
- Applications, resumes, and cover letters
- Signed forms stating that the employee received the employee handbook
- Payment information
- Training and achievement records
- Records of time off requests and vacation leave
Contact a Nonprofit Lawyer for Help Today
If your nonprofit organization has or will have employees, knowing how to create a unique handbook is important. You will need to determine your organization’s unique needs and prepare a handbook that meets your nonprofit’s objectives. For answers to your questions about the importance of nonprofit employee handbooks, consider calling a knowledgeable nonprofit lawyer from the Jennifer V. Abelaj Law Firm at 212-328-9568 to schedule a confidential consultation today.
Nonprofit Bylaws – What to Include & Common Mistakes
Nonprofit organizations exist to meet the needs of the public and address critical issues in our society. While every nonprofit has its own unique mission, all nonprofits need a comprehensive set of bylaws to guide how their organization is governed. Not only do nonprofit bylaws serve to meet legal and regulatory requirements, but they also promote accountability and transparency in the organization, thereby establishing trust with donors and the public. If you need assistance with creating nonprofit bylaws or have any questions relating to your nonprofit, contact the Jennifer V. Abelaj Law Firm at 212-328-9568 to learn how an experienced attorney can help you.
What Are Nonprofit Bylaws?
Nonprofit bylaws are the main governing document for a nonprofit corporation. They are created when the organization is established to guide the decisions and actions of the board of directors. They can also help the organization avoid issues and resolve conflicts by clearly defining rules related to authority and governance. Furthermore, bylaws are a means for holding board members accountable for their actions. Board members that fail to follow a nonprofit’s bylaws are in breach of their duty to the organization and may be held liable for their actions.
In addition to being used internally, nonprofit bylaws are used by third parties to the organization, such as investors, landlords, and financial institutions. By reviewing a nonprofit’s bylaws, third parties can assess how responsibly the organization is being managed and whether or not they are willing to do business with them.
Nonprofit Bylaws –State and Federal Requirements
Nonprofit organizations are governed by state law. A nonprofit organization’s bylaws should be created as a supplement to the rules defined under its state’s corporation code. When a nonprofit’s bylaws do not address a specific issue, it is assumed that the nonprofit follows the applicable rules of the state.
Federal law does not require specific provisions or language to be included in nonprofit bylaws. A nonprofit organization applying for 501(c)(3) tax-exempt status is required to submit its bylaws for review to the IRS, however, as part of the application process.
A skilled nonprofit attorney can assist you in creating your nonprofit bylaws in compliance with all applicable state laws. They can also help you address specific provisions in your bylaws to improve your chances of being granted 501(c)(3) tax-exempt status by the IRS. Contact The Jennifer V. Abelaj Law Firm to discuss your needs with an experienced nonprofit attorney today.
What Do Nonprofit Bylaws Include?
The specific details of a nonprofit’s bylaws are determined by the organization’s unique mission and purpose. In general, however, nonprofit bylaws include:
- Name of the organization
- Location of the organization’s principal office
- Mission and purpose of the organization
- Details about the board of directors, including the number of members, their roles, and compensation
- Rules and procedures relating to electing board members as well as their term lengths and limits
- Details about board meetings, including frequency and procedures
- Quorum requirements, including the number of votes needed to make a decision
- Policies related to maintaining corporate records
- Policies relating to conflicts of interest among board members
- Limitations on the activities of the nonprofit
- Rules and procedures for amending bylaws
Updating Nonprofit Bylaws
Nonprofit bylaws should be updated if the organization goes through any major change, such as merging with another organization or making changes to the management structure. The rules related to amending bylaws, as defined in the existing bylaws, must be followed before any changes can be made. Nonprofit bylaws should also be reviewed at least once per year by the board of directors to ensure they are up-to-date, and all procedures are being followed correctly.
As outlined in the Compliance Guide for 501(c)(3) organizations, bylaw amendments must be reported to the IRS. Some states also require that bylaw amendments are reported.
Common Mistakes Related to Nonprofit Bylaws
Common mistakes with bylaws that nonprofit organizations make are related to:
Operational Policies and Procedures
Bylaws exist to provide an overview of how an organization is governed. Specific details related to day-to-day operations can change frequently and, therefore, should be included in a policy manual written for management purposes.
Provisions for Making Amendments
Many nonprofits make the mistake of including stringent rules around making amendments to existing bylaws, such as requiring an unattainable number of votes to make a change. The needs and realities of a nonprofit organization can change over time. If it is difficult for the board of directors to make changes to the organization’s governance rules and management structure in line with the current needs of the organization, the bylaws will likely become outdated and the organization may develop a culture that is resistant to change.
Reviewing Bylaws
Many nonprofits fail to review their bylaws regularly. By reviewing its bylaws at least annually, a nonprofit and its board members can protect themselves from making mistakes and being held liable for their actions. All board members should review their organization’s bylaws at least once a year to ensure their decisions and actions are aligned with all of its provisions. New board members should be provided with the organization’s bylaws as soon as they are appointed to their position and should be required to familiarize themselves with all of its provisions.
Learn How an Experienced Attorney Can Assist with Your Nonprofit Bylaws
Nonprofit bylaws are an essential component of an organization’s success. Creating provisions that serve to enhance the effectiveness of your organization requires an in-depth understanding of nonprofit organization governance. State-specific nonprofit bylaw requirements, as well as federal requirements relating to 501(c)(3) organizations, must also be considered. At Jennifer V. Abelaj Law Firm, we are committed to assisting nonprofit organizations with all of their legal needs so they can focus on achieving their mission and purpose. Contact our experienced legal team today for a free consultation to learn more.
Non-Profit Employee Handbook
Non-profit organizations are subject to the same employment laws as any other employer, from paying withholding taxes on employee wages to termination and unemployment compensation. Therefore, it is a good idea to have a non-profit employee handbook that outlines that organization’s policies, employee responsibilities and benefits, and other information that a new or existing employee would need to know about working there. At the same time, a non-profit organization may have unique policies and procedures that a for-profit employer may not have. Creating a comprehensive and effective employee handbook requires significant planning as well as understanding state and federal employment laws and other rules and regulations. Jennifer V. Abelaj Law Firm may be able to help you create your non-profit employee handbook. Speak with one of their experienced attorneys at 212-328-9568 to find out more.
What Should You Include in Your Non-Profit Employee Handbook?
One mistake that some employers make when creating an employee handbook is trying to create a policy for every possible thing that could ever happen. This creates an overly complicated, unwieldy, and enormous handbook that employees do not read. If they do not read it, there is a much greater chance they will unknowingly violate a policy or not follow a procedure, creating more work for management unnecessarily.
Instead, non-profits should include the basics that are common to most places of employment. Examples of what employers should consider including are:
- Notice & Disclaimer/Acknowledgement of Receipt
- Policy about employment at-will
- A statement regarding equal opportunity and anti-harassment
- Work authorization
- Employment classification policy
- Policy on unemployment compensation
- Overtime
- Leaves of absence, including parental leave
- Workplace violence/safety
- Conflict of interest
- Code of conduct
- Holidays and other time off
- Health, welfare, insurance benefits, payroll deductions, direct deposit,
- Programs for employee assistance
These are basic sections for an employee handbook. Some of them may not apply to every non-profit and some organizations may need other sections that are not mentioned here.
What Should You Not Include in a Non-Profit Employee Handbook?
When attempting to be comprehensive, employers can unintentionally include phrases, words, or concepts that can later become a problem. While non-profit employers should try to be thorough, there are some things they should not include in a non-profit employee handbook. A few examples include:
- Language that implies if the employee gets through an introductory period, they are less likely to be fired or that there are any other circumstances that make them less likely to be fired.
- The words “permanent employee.” The use of the word permanent would be language implying an employee cannot be fired. Instead, use terms such as “regular employee” to differentiate from temporary staff members and volunteers.
- Burying the disclaimer about at-will employment. This should be prominently placed at the beginning of the handbook to ensure it is seen, read, and understood.
- A narrowly defined list of reasons for termination or statements that imply or specifically state that termination can only be for cause.
- A list of disciplinary actions that can be interpreted as requiring that all or some steps must be followed before termination can occur. While you may need a list of disciplinary actions, it should be clear that offenses are handled individually and may or may not require the use of all disciplinary actions before termination.
This is not a full list. When creating your handbook, the experienced nonprofit attorneys at Jennifer V. Abelaj Law Firm may be able to help you determine which things to include and which to avoid so your handbook is comprehensive yet effective.
Why You Cannot Find and Use a Template As-Is
It is easy to search online and find many templates for employee handbooks. However, while a template can be a good starting point, it is not enough as it is. One reason not to use a template as it is, is that it may not be up to date. In addition, it may also:
- Not consider the non-profit’s state and local laws or use laws from another state that do not apply.
- Not be specific to the organization’s specific needs and therefore, be too general to be effective.
- May use overly complicated legal language that confuses employees instead of clarifying policies.
Non-profits can use a template to save themselves some time and work. This sample employee handbook from the National Council of Nonprofits may be a good beginning. Employers should go through the template they choose carefully and make sure to tailor the sections to their specific needs. They should also consider consulting with a lawyer to ensure they are including all the information they should and not including anything that may cause a problem in the future.
Tips to Ensure Your Handbook’s Effectiveness
Once employers have created a finished non-profit employee handbook, the work is not done. There are a few more things to do that will ensure the handbook’s effectiveness. Consider implementing the following:
- Have employees sign an acknowledgement of receipt and reading upon hire and each update.
- Review the handbook every 1-3 years and update when needed.
- Have standing personnel or a committee to review and revise so updates are consistent.
- Compare current practices to handbook policies and determine which should change. For example, if your dress code is business casual in the handbook, but everyone dresses casually, decide if you need to enforce the dress code or revise it to reflect the way everyone dresses.
- Remove or do not include irrelevant or rare policies that will not be used often. There may be issues that arise only once or twice in the lifetime of the organization if ever and therefore, do not need to be addressed in the handbook.
- Make sure it is not overly verbose or complicated.
- Do not combine policies for different groups. Give regular employees, independent contractors, and volunteers each their own handbooks.
- Offer training or team meetings to go over new and updated policies so employees have a chance to ask questions and gain a better understanding.
Is Your Non-Profit Employee Handbook Effective and Legally Compliant?
Whether you have an existing non-profit employee handbook that you would like to update or need to create one from scratch, an updated and clear handbook is a crucial component of a stable, productive work environment. If you need guidance to create or update your handbook, or you would simply like an experienced attorney to look it over for any legal issues that may arise, consider contacting the Jennifer V. Abelaj Law Firm at 212-328-9568 to find out how one of our experienced attorneys may be able to help.
How To Dissolve A Nonprofit Organization
Whether the plan is to merge with another organization or shut its doors permanently, dissolving a nonprofit organization can be an emotionally charged process. The legal process of terminating a nonprofit and distributing its assets can also be complex. Nonprofits must go through a process with the Internal Revenue Service (IRS) to dissolve legally according to the agency’s rules that govern how to dissolve a nonprofit organization. To learn more about how to dissolve a 501c3, consider reaching out to the Jennifer V. Abelaj Law Firm at 212-328-9568.
Reasons Why Nonprofits Dissolve
Nonprofit organizations dissolve for many reasons, but mergers are one of the most common reasons why nonprofits dissolve. When an individual 501c3 organization becomes part of another organization, it must dissolve. Nonprofits also dissolve when the organization no longer functions or when the Board of Directors votes to end the operation. According to the National Council of Nonprofits, an increase in dissolutions of small and mid-sized nonprofits occurred in recent years because of the coronavirus pandemic. Regardless of what causes the end of a nonprofit, dissolving a 501c3 organization is a significant decision, and the organization’s leaders should understand how to dissolve a nonprofit legally.
How To Dissolve a 501c3
When a nonprofit has performed its mission or would better serve its purposes by merging with another organization, the Board of Directors can decide to dissolve the organization. The Board must take an official vote. However, in cases where no voting members remain, the Board may dissolve the charity corporation on its own motion. That only begins the process. Nonprofit leaders must first make a plan of dissolution, which covers how to take care of the charity’s outstanding liabilities and assets. Then, the organization must resolve the remaining debts, distribute the organization’s assets, and file the appropriate forms with the IRS.
What Happens to the Money When a Nonprofit Dissolves?
In many cases, when a nonprofit terminates, the organization has assets. When a nonprofit terminates, the organization must first take care of its liabilities and pay off its debts. If there is money or other assets left over after paying the debts, the organization must distribute those assets legally. Board members and nonprofit leaders cannot distribute the organization’s money to themselves, their family members, or others. The only legal way to transfer a charity’s assets is to move them to other tax-exempt organizations.
How Will Nonprofit Assets Be Distributed if It Dissolves?
When a nonprofit dissolves, there are two options. The organization can distribute its assets to other nonprofits, or it can sell its assets. The nonprofit cannot give its assets away or transfer them to the leaders in the organization because of the nonprofit’s tax-exempt status.
Transferring Assets
In many cases, it may be desirable to transfer assets. If one organization terminates in order to merge with another organization, it may transfer its assets to the organization with which it intends to merge. When a charity closes without merging, however, it can choose another tax-exempt organization to which to donate its assets. In many cases, organizations elect to give their assets to organizations with similar themes, missions, or objectives. Tax-exempt organizations that are dissolving can choose to donate their funds to any tax-exempt organization, regardless of the existence of similar objectives.
Transferring Trademarks
Many organizations approaching dissolution will have trademarks. As trademarks are valuable assets, charities can transfer them to other tax-exempt groups. Often, nonprofit organizations may choose a recipient organization with a like mission that can benefit from owning existing trademark. When merging one nonprofit organization into another, the registered trademarks will generally transfer to the new organization.
Selling Assets
Although many organizations may see transferring assets as the more desirable choice, selling assets is another legal way to distribute assets when a 501c3 organization closes its doors. When a tax-exempt organization chooses to sell its assets, it must receive fair market value from the buyer. This rule exists to prevent organization leaders from circumventing the rule prohibiting personal asset transfers.
If the Board of Directors of a nonprofit votes to shut down an operation that owns many valuable assets, the temptation may be to suggest selling the assets at a loss to family and friends. However, selling assets at a loss would violate the law, as those assets would be considered gifts. A nonprofit’s tax-exempt status prevents it from being able to distribute assets as gifts. However, selling the assets at fair market value is permissible if transferring to another organization is not the best option.
How To Sell Assets
When an organization chooses to sell—rather than transfer—its assets, there are several steps to remember, including:
- Having assets appraised to ensure that the organization sells the assets for fair market value.
- Keeping a record of all the sales as physical assets become financial assets and must be distributed accordingly
IRS Forms
Terminating a nonprofit organization requires filing the appropriate forms with the IRS to officially end the organization. These forms include:
- Form 990—the form that tells the IRS that the organization is no longer operational. Three versions of Form 990 exist—the general form, 990-N, and 990-EZ—and the organization must choose the correct form based on its gross receipts
- Articles of dissolution or merger
- Plans to end or merge the nonprofit
If a charity fails to submit this paperwork correctly, it may run into problems. A lawyer experienced in non-profit dissolution can help an organization’s leaders avoid some of these issues when dissolving a nonprofit.
State-Specific Rules
In addition to complying with federal law, the dissolution of a nonprofit must also comply with state law. If you have nonprofit dissolution questions specific to New York and New Jersey, the experienced attorney at the Jennifer V. Abelaj Law Firm may be able to help.
Contact a Nonprofit Attorney for Help with Understanding How to Dissolve a Nonprofit
Navigating the end of an established nonprofit organization, whether for merger or other reasons, can be complex. If you are ready to end or merge a nonprofit organization and would like help from a knowledgeable nonprofit attorney, consider contacting the Jennifer V. Abelaj Law Firm by calling 212-328-9568 to schedule a consultation today and learn more about how to dissolve a nonprofit.