Edited by J. Patrick Plunkett & Heidi Neff Christianson
This Deskbook is a compilation of both basic and in-depth resources for lawyers, and serves as a necessary and practical tool for both beginning lawyers and those who have practiced for years in this field. Additionally, nonprofit law is a practice area that lawyers commonly encounter through volunteer service to a nonprofit organization, often as a member of the organization’s governing board. Because nonprofit law involves a combination of both tax law and corporate law, it is often complex and the solutions to legal problems may involve looking for a needle in a haystack. This Deskbook was designed and written to make that search easier! Written and edited by renowned attorneys in the state who have been practicing nonprofit law for decades, this Deskbook shares the lessons learned and provides insight and comprehensive synopsis of this practice area. In addition to the 18 previously included chapters, the 2018 Second Edition also includes two brand new chapters: Ch. 19 – Mergers and Combinations: Mergers, Asset Transfers, Short-Form Mergers, and Conversions, and Ch. 20 – Nonprofit LLCs. The Minnesota Nonprofit Deskbook also includes many sample forms to help attorneys create the best documents possible for their clients, including a brand new Sample Nonprofit LLC Operating Agreement.
2023 UPDATE
The 2023 Update brings your Minnesota Nonprofit Deskbook fully up-to-date, including a fully updated Table of Authorities and the latest state and federal statutory changes and case law relevant to Minnesota practitioners.
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CHAPTER 1
Introduction
Introduction; Nonprofit Versus Tax-Exempt; Charitable/Educational Versus Mutual Benefit; Religious Organizations; Special Oversight of Nonprofit Organizations and Charitable Solicitations by the Minnesota Attorney General; IRS Oversight; Charitable Gambling
– J. Patrick Plunkett
CHAPTER 2
Forming a Nonprofit Corporation
Introduction – What Being Nonprofit Means; Benefits of Nonprofit Corporate Status; Nonprofit Corporation; Registering with the Office of the Attorney General; Obtaining Tax-Exempt Status; Operating in Other States; Liability of Directors; Appendix A – Sample Articles of Incorporation for a Private Foundation; Appendix B – Sample Bylaws for a Private Foundation; Appendix C – Sample Bylaws Provisions for a Membership Nonprofit Corporation
– Ann M. Novacheck
CHAPTER 3
Duties and Obligations of Nonprofit Directors
Responsibilities of Minnesota Nonprofit Directors; Limited Liability for Nonprofit Directors; Appendix A – Sample Bylaws Provisions
– Emmett Robertson
CHAPTER 4
Attorney General Oversight
Attorney General Oversight in Minnesota; Registration and Reporting Requirements of Soliciting Charitable Organizations; Charitable Solicitation Rules in Minnesota; Registration and Reporting Requirements for Charitable Trusts; Breach of Charitable Trust – Proceedings to Secure Compliance; Registration and Reporting of Professional Fundraisers; Fiduciary Duties of Directors and Trustees with Respect to Institutional Investment Funds; Required Notices Relating to the Minnesota Nonprofit Corporations Act; Investigatory and Enforcement Powers of the Attorney General
– Heidi Neff Christianson
CHAPTER 5
Classes of Federal Tax Exemption
Overview; Charitable, Religious, Educational, and Scientific Organizations (I.R.C. § 501(c)(3)); Title Holding Organizations – Sections 501(c)(2) and 501(c)(25) Organizations; Social Welfare Organizations – Section 501(c)(4) Organizations; Labor, Agricultural, and Horticultural Organizations – Section 501(c)(5) Organizations; Business Leagues and Chambers of Commerce – Section 501(c)(6) Organizations; Social and Recreation Clubs – Section 501(c)(7) Organizations; Application for Exemption: IRS Form 1023 – Section 501(c)(3) Organizations; Group Exemption Rulings; Other Types of Exempt Organizations (IRS Form 1024); Procedural Issues; Appendix A – Organization Reference Chart
– Brianna M. Mooty
CHAPTER 6
Private Foundations and Donor Advised Funds
Introduction; History of Private Foundation Classification; Private Foundation Excise Taxes; Use of Intermediaries; Termination and Reclassification; IRS Form 990-PF; Private Operating Foundations; History of the Donor Advised Fund Concept; Donor Advised Fund Definitions; Prohibited Distributions by Donor Advised Funds; Investment of Donor Advised Funds
– Angela T. Fogt
CHAPTER 7
Executive Compensation and Internal Revenue Code Section 4958
The Compensation Challenge; Minnesota Nonprofit Corporation Act; The Prohibition on Private Inurement; Intermediate Sanctions; Excise Tax on Exempt Organization Compensation; IRS Guidance Regarding Executive Compensation; Compensation Disclosure to the IRS; Compensation Disclosure to Minnesota Attorney General’s Office; Appendix A – Sample Executive Compensation Policy and Procedures
– Heidi Neff Christianson
CHAPTER 8
Lobbying and Political Activities
Overview; Political Activities; Minnesota Campaign Finance Rules; Lobbying
– Sarah Duniway
CHAPTER 9
Form 990, Exempt Organizations Annual Information Return
Introduction: Purpose of Form 990 and Import of the Form’s Disclosures as of the Form’s 2008 Redesign; One of the Chief Arenas of the Form Requires the Input of the Names of All Governors (Board Members and Officers) and Certain Employees, Along with Reporting Remuneration Provided to Those Individuals by Both the Filer and its “Related Organizations”; New (as of 2008) Governance Part (Form 990 Part VI) Reports on Multiple Arenas of Board Oversight, Augmented by Later Part XI’s Questions Related to Oversight of Financial Statement Issuance; Regulatory Interest in Exempt Sectors’ Intersection with Affiliated Entities Has Fueled Expanded Disclosures on Disregarded Entities and Related Organizations (Schedule R); Focus on Conflict of Interest Management has Fueled Expanded Disclosures on Transactions with “Interested Persons” (Schedule L); Arenas of Revamped or Expanded Scheduling; Remainder of Return
– Eve Rose Borenstein
CHAPTER 10
Unrelated Business Income Tax
Introduction; For-Profit Activities; Required Conditions; Exceptions; Unrelated Business Taxable Income; Unrelated Debt-Financed Income; Use of For-Profit Subsidiaries and Affiliates; Taxation of For-Profit Partnerships and Joint Ventures; Sponsorship Payments; Resources
– J. Patrick Plunkett
CHAPTER 11
Minnesota Sales and Property Tax Exemptions
Introduction; Income Tax Exemption; Property Tax Exemption; Sales Tax Exemption
– Catie Bitzan Amundsen & Wade S. Hauser
CHAPTER 12
Key Internal Policies
Introduction; Nonprofit and Tax-Exempt Organization Governance and Compliance; Key Internal Policies; Conclusion
– Claire H. Topp & Mackenzie McNaughton
CHAPTER 13
Charitable Contributions
Allowance of Charitable Contribution Deduction; Percentage Limitations for Corporations; Percentage Limitations for Individuals; No Deduction Allowed; Year of Deductibility; Valuation of Non-Cash Contributions; Substantiation and Record-Keeping Requirements; Disclosure Requirements; Oversight of Charitable Contributions – Minnesota Law; Charitable Remainder Trusts, Pooled Income Funds, and Charitable Gift Annuities; Enforcement of Charitable Pledges; Clawbacks and Lack of Capacity to Make a Charitable Contribution
– J. Patrick Plunkett
CHAPTER 14
Planned Giving
Overview of Planned Giving; Will or Revocable Trust; Retirement Plans; Life Insurance Policies; Charitable Trusts; Pooled Income Funds; Charitable Gift Annuities; Private Foundations; Donor-Advised Funds; Estate Tax Charitable Deduction; Charitable Gift Tax Deduction; Glossary
– Tara D. Mattessich
CHAPTER 15
Membership Organizations
Introduction; Eligibility for Membership; Denial of Membership; Transfers of a Membership; Expulsion of a Member; Membership Lists; Member Action; Minutes of Board, Committee, and Member Meetings; Equitable Remedies; Deductions of Membership Dues
– J. Patrick Plunkett
CHAPTER 16
Collaborations and Affiliations: Joint Ventures, Subsidiary Relationships, and Collaborations
Overview; Joint Ventures; Tax-Exempt Parents and Taxable Subsidiaries
– Catie Bitzan Amundsen & Wade Hauser
CHAPTER 17
Independent Support and Review Organizations
Introduction; Minnesota Council of Nonprofits; Minnesota Council on Foundations; Charities Review Council; Propel Nonprofits; Appendix A – Principles and Practices for Nonprofit Excellence
– Kris Kewitsh, John Wurm & Kate Barr
CHAPTER 18
Religious Organizations
Introduction; Organizational Structure; Federal Tax-Exempt Status; Minnesota Exemptions; Ordained Ministers
– J. Patrick Plunkett
CHAPTER 19
Mergers and Combinations: Mergers, Asset Transfers, Short-Form Mergers, and Conversions
Introduction; Mergers and Asset Combinations; Short Form Merger for LLC Subsidiaries; Conversions/”Domestications”
– Catie Bitzan Amundsen & Wade Hauser
CHAPTER 20
Nonprofit LLCs
Requirements of Minnesota Law; Tax Treatment; Factors to Consider in Choosing a Nonprofit LLC; Appendix A – Sample Nonprofit LLC Articles of Organization; Appendix B – Sample Nonprofit LLC Operating Agreement
– J. Patrick Plunkett
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