NPCC's Government Relations Committee meets monthly to consider, and where appropriate, comment on legislative and regulatory developments affecting New York's nonprofit sector. The Committee of approximately 100 individuals includes many of the most eminent lawyers in the field of nonprofit law. It interacts regularly with the Charities Bureau of the New York State Attorney General. In its work, the Committee seeks to promote trust in the sector by supporting proposals that foster accountability and transparency, and seeking, at the same time, to avoid the imposition of undue administrative burdens on nonprofits. The following are some of the Committee's recent activities.
America Gives More Act
We have the opportunity to ensure that nonprofits won’t have to ask Congress every year to extend charitable giving incentives that Congress has approved for the past decade. The U.S. House of Representatives passed the America Gives More Act in July by a strong, bi-partisan vote. The legislation promotes giving back to communities in several ways: it renews and makes permanent expired charitable giving incentives that promote donations of nutritious food to food banks, conservation of land, and contributions from individual retirement accounts directly to charitable nonprofits. The measure would simplify a foundation excise tax, making more funds available for good works. The bill also would permit taxpayers to claim charitable deductions from the previous year up through April 15.
When Congress returns to DC. in September, there are barely a dozen legislative days left before it adjourns for the November elections. This means that Senators must return to Washington in September committed to passing the America Gives More Act as quickly as possible. And they must make known to their Senate leaders their commitment to passing the bill that is important to their communities and constituents before leaving D.C. to campaign for re-election.
NPCC has sample language for a letter, phone call or text at www.npccny.org/info/AmericaGivesMoreAct.doc. Read more at www.councilofnonprofits.org/america-gives-more-act. (September 2014)
From the AG’s Office
The NYS Attorney General’s Charities Bureau continues to add guidance on the implementation of the Nonprofit Revitalization Act, including audit threshold and fee changes, dissolutions with assets or without assets, mergers and consolidations, and sales and other dispositions of assets. Go to www.charitiesnys.com/nonprofit_rev_act_guidance.jsp.
An updated CHAR500 is now available at www.charitiesnys.com/pdfs/CHAR500_2013_June2014.pdf. The update reflects the fee and CPA audit threshold changes that came into effect July 1. Organizations with an original or extended due date after July 1 should use the new CHAR500. All forms and instructions are at www.charitiesnys.com/charindex_new.jsp. (August 2014)
Nonprofit Revitalization Act Status as of
Legislative Year End
The following are the results of actions taken by the New York State Legislature on bills related to the Nonprofit Revitalization Act (NPRA) that NPCC's Government Relations Committee has been tracking. We will update you should other items arise or should these reported actions change.
1) S7341/A9600 failed to pass. The bill would have delayed the effective date of certain sections of the NPRA until March 31, 2015. This means NPRA will become effective July 1, 2014, as originally enacted.
2) S7340/A9599 passed both houses of the State Legislature. If signed into law by the Governor, this bill requires the State to develop procedures to ensure that any nonprofit that has already pre-qualified and registered under the Grants Gateway will not be disqualified from applying for or receiving State grants or contracts if it incorporates the requirements of the Nonprofit Revitalization Act in its application by January 1, 2015.
3) S7799A/A10027A passed both houses of the State Legislature. If signed into law by the Governor, this bill would delay until January 1, 2016, (instead of January 1, 2015) the provision of NPRA that prohibits employees of a nonprofit from serving as chair of the nonprofit's board.
4) S6482/A8964 passed both houses of the State Legislature. If signed into law by the Governor, this bill provides that nonprofits and public benefit corporations shall be entitled to all prompt contracting interest from the State agency within 30 days of the time of the first payment.
5) The several other bills that NPCC has been following that would have amended or impacted NPRA also failed to pass.
Members can download from NPCC's website a sample whistleblower policy (required of an organization with 20 or more employees and annual revenue exceeding $1 million in its previous fiscal year) and a checklist of items for consideration in review its by-laws. Lawyers Alliance for New York has a memo and FAQ on the NPRA. (June 2014)
New York State’s Nonprofit Revitalization Act Signed
NPCC is pleased to announce that on December 18, 2013, Governor Cuomo signed the Nonprofit Revitalization Act, (S5845/A8072) which was unanimously passed by the State Assembly and Senate on June 21, 2013.
Foremost among the improvements are that gross revenue thresholds triggering CPA audits have been raised to $500,000 (and to $1 million by 2021) which will significantly reduce the number of audits required of nonprofits in the state. The Act also simplifies the procedures for forming, dissolving and merging nonprofits in New York; and allows for email and video conferencing for certain board matters that were previously not allowed.
The legislation is the first major reworking of the laws governing New York nonprofits in over forty years. NPCC and the members of our Government Relations Committee were extensively consulted about the legislation.
The signing of the Nonprofit Revitalization Act is a victory for the entire nonprofit community in New York. NPCC's Government Relations Committee, along with other nonprofit advocacy groups, has long sought to simplify and reduce many of the unnecessarily burdensome requirements that existing law placed on the incorporation process as well as on annual reports to the Attorney General's office required of New York nonprofits.
The legislation addresses the pressing need to reform an outdated nonprofit legal regime by adopting improvements that will make New York a more hospitable and efficient environment for nonprofits by easing administrative burdens, and fostering better governance standards, transparency and oversight, to not only enhance the public’s trust, but also to permit nonprofits to better and more efficiently fulfill their missions of bringing services to New Yorkers.
"We are grateful to Governor Andrew Cuomo, to Attorney General Eric Schneiderman and his Charities Bureau chief, Jason Lilien, and to Assemblyman James Brennan and Senator Mike Ranzenhofer for reaching out to the nonprofit community and listening to suggestions and feedback on this legislation," said NPCC President Michael Clark, "This Act measurably improves the partnership between nonprofits and state government."
The law is at http://open.nysenate.gov/legislation/bill/A8072-2013. The AG’s press release is at http://bit.ly/19he2oV. Lawyers Alliance for New York has a memo at http://bit.ly/1cQMreS and answers to frequently asked questions at http://bit.ly/1b6lYbd.
New York State Executive Order 38 Guidelines Now Available
On January 18, 2012, Governor Cuomo signed Executive Order 38 aimed at reining in excessive compensation at State-funded entities. The order became effective on July 1, 2013. For organizations covered by the Order, compensation paid to executives and reimbursed by State agencies is limited to $199,000, and reimbursed administrative overhead costs are limited to 25% of State funding, decreasing to 15% by 2015. Waivers are available.
The long-awaited guidelines and forms for complying with Executive Order 38 have just been released.
The State's EO 38 website includes a 147-page guide, waiver forms and other material, and is at http://executiveorder38.ny.gov.
Human Services Council has guidance at www.humanservicescouncil.org/documents/Practical%20Guidance%20on%20EO%2038.pdf.
Lawyers Alliance for New York also has guidance at www.lawyersalliance.org/pdfs/news_legal/Executive_Compensation_Legal_Alert_June_2013_final.pdf. (August 2013)
Sequestration Watch-Tell Us Your Story
The $85 billion across-the-board federal spending cuts, known as sequestration, went into effect March 1 after Congress and the President failed to reach agreement to delay the cuts or replace them with alternative deficit reduction measures. The cuts, mandated by the Budget Control Act of 2011 and originally scheduled to be implemented in January, were suspended for two months by the fiscal cliff agreement to allow lawmakers additional time to find a solution. Policymakers are expected to continue negotiations for a comprehensive deficit reduction agreement, but it is unclear how or when the impasse will be bridged.
Let NPCC know if and how these cuts impact your ability to provide services. Has your organization experienced or analyzed how a cut in government funding would affect your services? Down the road, what does it look like for your organization—and most importantly, your clients—if government funding is cut? Please give us numbers, faces, names and stories, if possible. Email us at SequesterWatch@npccny.org. All information sent will be shared with our colleagues at the National Council of Nonprofits, unless you tell us otherwise.
If you need background, read more at the National Council: www.givevoice.org; and Independent Sector: http://independentsector.org/sequestration. Also see The Nonprofit Times: http://bit.ly/Yd22iP; Chronicle of Philanthropy: http://bit.ly/WXKd6x; New York Times: http://nyti.ms/WpQwQ3; and, Center for Effective Government: http://bit.ly/W5IXwD. (April 2013)
Curbing Excessive Executive Compensation: EO 38
On July 18, 2012, NPCC hosted a webinar with the Governor’s special counsel, Jeremy Creelan to discuss draft regulations and answer members’ questions about Governor Cuomo’s Executive Order 38, issued in January 2012. EO 38 is designed to limit executive compensation and administrative expenses at nonprofit as well as for-profit entities that receive State funds or State-authorized payments. Go to www.npccny.org/info/CurbingExcessiveCompensation.htm to read the full article. (August 2012)
Revitalizing New York’s Nonprofit Sector
New York State Attorney General Eric Schneiderman has announced a plan to revitalize and reform the state’s nonprofit sector. The plan, “Revitalizing Nonprofits: Renewing New York,” is a result of the Attorney General’s convening of a leadership committee for nonprofits in 2011 which he charged with developing proposals that would reduce regulatory burdens on nonprofits, while strengthening governance and accountability. The leadership committee met regularly for over six months and put forth 38 proposals to help achieve the goals.
The centerpiece of AG Schneiderman’s resulting plan is a Nonprofit Revitalization Act, which will offer legislation and reform initiatives to eliminate outdated and costly burdens on nonprofits, strengthen oversight and accountability, and reaffirm his office’s commitment to policing fraud and abuse. Two initiatives are also proposed, including, “New York on BOARD” and “Directors U,” designed to improve nonprofit governance by promoting strong and diverse boards and to expand board director education. The Attorney General’s Charities Bureau, led by bureau chief Jason Lilien, will assist in the development and promotion of these initiatives. Among the 38 suggestions submitted by the leadership committee were proposals to fix late payments for contracts, capitalizing a cash flow loan fund, and updating outdated filing requirements.
NPCC president and member of the leadership committee, Michael Clark, said, “We commend Attorney General Schneiderman for focusing attention on how New York can strengthen its nonprofit sector. This report is a blueprint for modernizing a critical sector of our state’s economy.” The report is at www.ag.ny.gov/sites/default/files/press-releases/2012/NP%20Leadership%20Committee%20Report%20(2-16-12).pdf. The AG’s press release is at www.ag.ny.gov/press-release/ag-schneiderman-announces-bold-plan-revitalize-and-reform-new-yorks-nonprofit-sector. (March 2012)
Excessive Compensation Statement
In early February 2012, NPCC and the Human Services Council, Lawyers Alliance for New York, UJA-Federation of New York and United Way of New York City submitted a joint statement regarding compensation of nonprofit executives to a New York State Senate Committee holding a hearing on the topic. It described the existing reporting requirements most nonprofits must follow and asked the legislature to carefully consider these controls instead of creating new or unnecessary reporting procedures. It urged the legislature to follow the federal rules and procedures for determining whether compensation is excessive. Read the testimony at www.npccny.org/info/NFPComp.pdf. (March 2012)
Excessive Compensation at State-funded Agencies
On January 18, 2012, Governor Cuomo signed Executive Order 38 (EO 38) aimed at reining in what he described as “excessive compensation” at State-funded service provider agencies.
The order calls for compensation paid to executives and reimbursed by State agencies to be capped at $199,000. It also states that a minimum of 75 percent of New York State payments to service providers “shall be directed to provide direct care or services rather than to support administrative costs, as these terms are defined by the applicable state agency in implementing these requirements. This percentage shall increase by five percent each year until it shall, no later than April 1, 2015, remain at no less than eighty-five percent thereafter.”
The order also calls for the commissioner of each state agency that provides financial assistance or payments to service providers to develop their own regulations relating to the executive order within 90 days. It mandates that “Each agency’s regulations shall provide that, under appropriate circumstances and upon a showing of good cause, a provider may be granted a waiver from compliance with these or other related requirements in whole or in part subject to the approval of the applicable state agency and the director of the budget.” Clarifications of the executive order are anticipated.
The Governor’s executive order is at www.governor.ny.gov/press/1182011EO.
Members of NPCC’s Government Relations Committee including NPCC president Michael Clark and senior consultant Jon Small have been participating in meetings to discuss the additional burdens that this may place on service providers. NPCC is coordinating with other nonprofits to determine the best response to this effort. NPCC members are welcome to send any thoughts they have to Michael Clark at firstname.lastname@example.org or call him at 212-502-4191. (February 2012)
Governor’s Task Force Examining Excessive Compensation at Certain Nonprofits
As many have read in the news, Governor Cuomo has appointed a task force to look at the issue of excessive compensation being paid to nonprofit executives and board members. The task force will examine executive compensation at “taxpayer supported not-for-profits.”
It seems unclear at this point whether the task force is focused at all on the burdens it may be imposing on nonprofits in its requests for information. NPCC’s Government Relations Committee’s hope is that the process will root out and remediate excessive compensation while imposing the lightest burden on nonprofits needed to accomplish that goal, and will discuss possible actions we might take toward mitigating burdens.
The Governor’s press release is at www.governor.ny.gov/ press/08032011TaxpayerSupportedNOT-For-Profits. New York Nonprofit Press has an article at www.nynp.biz/index.php/this-months-feature/7438-executive-compensation-governor-appoints-task-force. The New York Times has a piece at www.nytimes.com/ 2011/08/26/nyregion/state-seeks-data-on-pay-of-leaders-at-nonprofits.html. (October 2011)
NPCC On AG Task Force
NPCC Joins Effort to Reduce Regulatory Burdens on Nonprofits and Strengthen Accountability
New York State Attorney General Eric T. Schneiderman has announced the formation of a Leadership Committee for Nonprofit Revitalization. Composed of 32 nonprofit sector leaders from across New York State, it is charged with presenting a series of recommendations to the Attorney General to reduce regulatory burdens and costs for nonprofits while strengthening nonprofit accountability. NPCC president Michael Clark is a member of the Committee.
At an April 2011 meeting of the Association for a Better New York, the Attorney General, whose office oversees nonprofits operating in New York State, announced that he would work with the state’s nonprofit, business and labor communities to help eliminate unnecessary bureaucracy that has long plagued nonprofits, such as redundant audits, overlapping reporting requirements, and delays in processing and payment of contracts.
The Committee will focus on making recommendations through three subcommittees on: (1) reducing regulatory burdens and more effectively addressing regulatory concerns; (2) modernizing New York’s nonprofit laws to eliminate outdated requirements and unnecessary burdens while strengthening accountability; and, (3) enhancing board governance and effectiveness, including recruiting and training nonprofit board members.
Staffed by the Attorney General’s Charities Bureau Chief, Jason Lilien, it is expected to complete its work by the end of the year. “This is an important and serious initiative by the AG’s office, reflecting real leadership by Mr. Schneiderman,” NPCC’s Michael Clark says. “If NPCC members have any issues or suggestions that they would like to raise around these topics, I would welcome their ideas at email@example.com.”
The AG’s press release is at www.ag.ny.gov/media_center/ 2011/jun/jun27a_11.html; also see www.ag.ny.gov/media_center/media_center.html for additional committee members added during July. (August 2011)
Streamlining New York State
Governor Cuomo has established a group called the Spending and Government Efficiency Commission — the SAGE Commission — to try to streamline New York State government and operations.
The Commission is conducting a comprehensive review of state government, including its structures, operations and processes, with the ultimate goal of saving taxpayers’ money, increasing accountability and improving the delivery of government services. The Commission’s final recommendations to the Governor will be delivered by June 1, 2012.
The public is invited to participate in the process of modernizing and right-sizing state government, improving performance, increasing accountability and saving taxpayers’ money by submitting suggestions online at www.governor.ny.gov/sage. The executive order is at www.governor.ny.gov/executiveorder/4. (June 2011)
State Laws Affecting Nonprofits
At an Association for a Better New York meeting on April 26, 2011, New York State Attorney General Eric Schneiderman announced a new initiative by his office to revamp the New York State laws affecting nonprofits to make regulations less burdensome. Schneiderman noted, “If a New York not-for-profit receives funding from six different city or state agencies, it can be subject to six separate audits and sets of reporting requirements.” He also noted that audit thresholds are lower in New York than many other states, and that during hard economic times, nonprofits cannot afford to spend 15-20 percent of their resources on compliance costs.
To read a report from Reuters, go to www.reuters.com/article/2011/04/26/newyork-philanthropy-idUSN2626397820110426.
NPCC’s Government Relations Committee welcomes the Attorney General’s endeavor, and looks forward to working with the AG’s Office on helping reduce overly-burdensome requirements. (May 2011)
NYPMIFA: New York Adopts New Prudent Investing Standards for Nonprofits
On September 17, 2010, New York State enacted the New York Prudent Management of Institutional Funds Act (NYPMIFA), which adjusts spending rules for managing endowments. The law, a modified version of the Uniform Prudent Management of Institutional Funds Act, makes significant changes to the rules governing how New York nonprofit organizations may manage, invest and spend their endowment funds. It is designed to allow organizations to cope more easily withfluctuations in the value of their endowments and to afford greater access to funds needed to support their programs and services in difficult financial times. This should provide some relief to organizations that, due to the recent economic downturn, have found themselves with underwater endowments. It also expands the options available to organizations seeking relief from donor restrictions on funds that have become obsolete, impracticable or wasteful. NYPMIFA applies to New York not-for-profit, education and religious corporations, associations organized and operated exclusively for charitable purposes, and certain trusts.
New York State Attorney General Eric T. Schneiderman issued A Practical Guide to the New York Prudent Management of Institutional Funds Act that can be accessed at www.charitiesnys.com/nypmifa_new.jsp.
Lawyers Alliance for New York has a memo at www.lawyersalliance.org/pdfs/news_legal/October_2010_Alert_New_York_Prudent_Management_Institutional_Funds_Act.pdf.
Skadden, Arps, Slate, Meagher & Flom, LLP & Affiliates has a memo at www.skadden.com/Index.cfm?contentID=51&itemID=2224.
Patterson, Belknap Webb & Tyler, LLP has a memo at www.pbwt.com/docs/images/alerts_newsletters/EO_NL_NY_Version_of_UPMIFA_Sept2010.pdf.
Simpson Thatcher & Bartlett LLP has a memo at www.simpsonthacher.com/content/publications/pub1062.pdf.
Stroock & Stroock & Lavan LLP has a special bulletin at www.stroock.com/SiteFiles/Pub1014.PDF.
NPCC has three sample Investment Policy templates
The development of this legislation has been closely monitored by NPCC’s Government Relations Committee. The Committee will continue to carefully watch, and comment as appropriate, on future developments as the law is implemented.
Retired CPAs on Boards
The New York State Board of Regents had been considering a rule which, among other things, would have required retired CPAs serving on finance-related committees of nonprofit boards, such as audit and finance committees, to take continuing education courses and maintain registration as CPAs.
Jon Small and NPCC’s Government Relations Committee weighed in on the issue, urging the Regents not to implement such requirements, noting that it might deter retired CPAs from board service. The Committee noted that board member service on finance-related committees is an oversight role and that a retired CPA is not functioning in an auditor’s role.
We are delighted to report that an interpretation of the statute governing accountants was recently made by the Board of Regents stating that a retired CPA serving on a nonprofit board does not have to maintain his CPA registration or take continuing education. Inactive CPAs must disclose to the board, and to any third parties with whom they communicate on behalf of the board, that they are not actively registered as CPAs or required to take continuing education courses.
The interpretation can be found at www.op.nysed.gov/prof/cpa/cpa-retired.htm. (January 2010)
Proposed Lobbying Changes
In conjunction with Lawyers Alliance for New York and the Human Service Council, NPCC submitted comments on amendments to the New York State Lobbying Law proposed by the staff of the Lobbying Commission.
Of particular note is the issue of raising the reporting and registration threshold which the Lobbying Commission has proposed raising from $5,000 to $10,000. Our group supported this recommendation, but also suggested that a threshold of $25,000 would be preferable as the reporting threshold for nonprofits. In addition, we opposed several other proposals including one to change the definition of “lobbying” which we felt makes less clear the concept of and activities involved in lobbying, and a proposal to remove all exceptions from the definition of “gift” which the group opposed as imposing unnecessary burdens on nonprofits, given that many nonprofit organizations are not registered as lobbyists and would be required to seek approval from the Commission before distributing nominal value items (food, beverage, awards, etc.) to elected officials or other state agency officials.
To read the comments submitted by NPCC, Lawyers Alliance and Human Services Council, go to www.npccny.org/info/LobbyingComments090309.pdf. (November 2009)
New York State: Prompt Contracting
The “Prompt Contracting” bill designed to strengthen the rights of nonprofits to timely contract payments as well as several other issues related to state contracts has been signed into law by Governor Eliot Spitzer. It is expected to solve longstanding problems with the state contracting process that have plagued nonprofits for many years. The legislation, S2616-B-A6018-A, closes loopholes in existing law passed 15 years ago to ensure that New York State agencies contract and fund nonprofit organizations in a timely manner. The new law will help ensure that State contracts are paid on time; improve the processing of contracts; and ensure that nonprofits are adequately notified when a State agency does not intend to renew a contract.
Now, state agencies will be required to process contract renewals within 90 days before the expiration of the contract. While the previous law also required advance notification, there were no meaningful penalties when state agencies failed to comply. Now, if an agency fails to notify contractors of their intent not to renew an existing contract in a timely manner, the contract will remain in effect for a full 90-day period beyond the actual date of notification, regardless of the formal end date of the contract period. The legislation also prohibits state agencies from requiring that a nonprofit waive interest and penalties for a late contract renewal in order to receive the renewal, unless there are unusual circumstances.
Previous iterations of the Prompt Contracting bill were vetoed several times by then Governor Pataki. The version signed into law by Governor Spitzer had NPCC’s full support. (See A6018/S2616—Chap. 292 of Laws of 2007 or www.assembly.state.ny.us/leg/?bn= S02616&sh=t.)
The law was supported by a coalition of organizations led by United Way of New York State that included UJA-Federation, Catholic Conference, Federation of Protestant Welfare Agencies, Human Services Council, Commission on Independent Colleges and Universities, Hospital Association of New York State, the YMCA, and NPCC.
As NPCC’s senior consultant for government relations, Jon Small, reported to New York Nonprofit Press, “This law has been sorely needed. It should save nonprofits millions in administrative expenses – the indirect costs of dealing with contract uncertainty – and enable them to use that money in carrying out their missions.” (August 2007)
Immediate Real Property Tax Exemption Law Enacted for New York City
NPCC is delighted to report that a bill we had sought for many years that permits nonprofits to get an immediate real property tax exemption when they buy real property in New York City from a for-profit has been passed by the legislature and signed into law by Governor Spitzer. (A8578 S5764.) Getting such a bill passed and signed has been a longstanding hope of NPCC and NPCC’s Government Relations Committee worked on it, literally, for many years. Under the old law, the waiting period for an exemption to begin after such a purchase has been as long as 18 months. The tax hit has often come as a rude surprise to a purchasing nonprofit. The new law is effective immediately. Mayor Bloomberg supported the bill. (September 2007)
NYS: Bill Imposing Real Property Transfer Tax On Nonprofits Not Passed
A bill that would have imposed real property transfer tax on sales of real estate by a nonprofit to a for-profit went nowhere (A2028, no Senate counterpart). This bill would also have required the nonprofit to “reimburse the state and/or a municipality for any capital funding, grants or financing received through a state or municipal agency or public benefit corporation within the ten years preceding such sale,” and to pay back any real property tax abatements the nonprofit received. NPCC’s Government Relations Committee was opposed to the legislation. (September 2007)
Pension Protection Act Provisions & Nonprofits
The Pension Reform Act (H.R. 4) signed into law in 2006 includes numerous changes in the way nonprofits and foundations conduct business. The Act is long and complex. A summary of those provisions that will affect many NPCC members can be found at www.npccny.org/info/gov_rel_10-06.htm.
Members of the Government Relations Committee have provided comments to the IRS's request for comments on Donor Advised Funds and Type III Supporting Organizations.