New York Non-Profit Revitalization Act of 2013
The Act is designed to reduce burdens on the nonprofit sector while strengthening governance and accountability. Some highlights of the Act include:
Elimination of Corporate “Letter” Types
The Act eliminates the requirement to select among corporate types A, B, C, or D, depending on the purpose of the corporation, which reportedly caused widespread confusion. The old categorization is replaced with two types of nonprofit corporations, charitable and non-charitable. Existing organizations will be deemed to fall in one of these categories.
Mandatory Conflicts of Interest Policies
All nonprofits must adopt a conflicts of interest policy to ensure that its directors, officers, and key employees act in the corporation’s best interest. At a minimum, the following provisions must be included:
A definition of the circumstances that constitute a conflict of interest;
Procedures for disclosing a conflict of interest;
A requirement that the conflicted individual not be present or participate in the decision;
A prohibition against the conflicted person’s attempting to improperly influence the discussion/voting;
A requirement that the existence and resolution of the conflict be documented; and
Procedures for disclosing, addressing and documenting conflict of interest situations.
Mandatory Whistleblower Policies
Nonprofits with 20 or more employees and annual revenue exceeding $1 million must adopt a whistleblower policy to protect those who report suspected improper conduct from retaliation. The whistleblower policy must include the following provisions:
Procedures for reporting violations and preserving confidentiality;
The designation of a person to administer and report on the policy; and
A requirement that the policy be distributed to directors, officers, employees and volunteers providing services.
Related Party Transactions Safeguards
Nonprofits are prohibited from entering into related party transactions unless fair, reasonable, and in the corporation’s best interests. A “related party transaction” is defined as any transaction in which a related party has a financial interest and in which the corporation or any affiliate is a participant. A “related party” includes any director, officer or key employee of the corporation, any relative of theirs, or an entity in which any of those individuals has a 35% or greater ownership interest. Directors, officers and key employees must disclose to the board in good faith the material facts concerning their interest. Prior to approving a related party transaction, a charitable nonprofit must:
Approve the transaction by majority vote; and
Contemporaneously document the basis for the approval, including consideration of alternatives.
Increased Gross Revenue Threshold to Trigger Filing Requirements
In an effort to reduce unnecessary burdens, the proposal also raises the gross revenue thresholds that trigger certain filing requirements, as follows:
• Independent CPA review: Raised to $250,000 on July 1, 2014
• Independent CPA audit: Raised to $500,000 on July 1, 2014, and increasing to $750,000 on July 1, 2017 and $1 million on July 1, 2021.
For more information, contact NRE Treasurer, William Skody, CPA for nonprofits