Alert for Lawyers on Nonprofit Boards

Debra L. Bruce, JD, PCC.

Many lawyers get invited to serve on nonprofit boards. Of course, the organization hopes to get some free legal advice from you now and then, but they may also be seeking your general worldly wisdom and perspective. Serving on the board for a cause you care about gives you a chance to make a difference in your community, while also doing some much needed public relations work for the legal profession.

Most lawyers work with nonprofits for laudable and generous reasons, but even the curmudgeons among us have found that serving on a such boards can be good for their law practice. Nonprofits usually seek out business leaders and prominent citizens to serve on their boards, so board membership gives you a chance to get to know and interact regularly with quality potential clients and referral sources.

Whether you are already on a nonprofit board, or hope to get on one, there are some important new developments in IRS regulations to pay attention to. A recent article published by the Business Law Section of the ABA describes the regulations and their impact on board members. Because such IRS filings are often handled by accountants, even some nonprofit lawyers may not be aware that nonprofit organiztions have some significant new disclosure responsibilities.

New disclosure provisions respecting the governance and management of large nonprofits have been added to the annual filing on Form 990. In addition to describing what the organization has achieved in carrying out its exempt purposes, it now must disclose the process the board employed to review the filing. The organization has to disclose whether it has adopted policies on a number of governance issues such as conflicts of interest, document retention, and whistle blowers. Although such policies are not required, because Form 990 is a publicly available document, by implication the failure to have such policies may impact the organization’s fund-raising ability.

Small nonprofits also have new requirements. Those with revenues below $25,000 annually, used to be exempt from annual filing, but now must file an abbreviated Form 990-N. The FAQs about Form 990-N are located here. Churches are still exempt from filing Forms 990, 990-EZ and 990-N.

These new requirements may create a good bit of new work for nonprofit lawyers as they help organizations develop new policies and draft appropriate disclosures about them. All lawyers on large nonprofit boards are encouraged to take a look at the ABA article to see how complicated, wide-ranging and potentially troublesome the ramifications of these disclosure requirements can be.


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