Presented by:
Scott D. Harvey, Esq.

• Sources of Regulation:
– Federal Law
• Internal Revenue Code
• Other (e.g., Sarbanes-Oxley)
– State Law
• Michigan Nonprofit Corporation Act
• Michigan Attorney General
• Other state laws (e.g., Michigan Property Tax Act)
• Types of Nonprofits:
– Michigan nonprofit corporations
– 501(c)(3) or other 501(c) organizations

• State Law:
• Articles of Incorporation
• Bylaws
• Charitable Solicitation License
• Charitable Trust Registration
• Professional Fundraiser License
• Annual Information Reports
• Charitable Gaming
• Federal Law:
• 1023 Application (1024 Application for other 501(c) organizations)
• Policies:
– Conflict of Interest Policy (recommended)
– Whistleblower Policy
– Document Destruction and Retention Policy
• Annual Information Returns (IRS Form 990)
• Other
• Statement of Values/Code of Ethics (optional)
• Generally available, or must be made available, for public inspection

• Filed with the State of Michigan (can be filed via fax)
• Contents:
• Name
• Statement of Purpose
• Organizational basis (stock, membership or directorship)
• Registered office/agent (MI)
• Limitation of liability provisions
• Amendment provision
• IRS required provisions
– Dissolution clause
– Other
• Amendments
• Annual Reports

• Michigan Nonprofit Corporation Act
• Unique to the organization
• Not filed with the State, but filed with the initial exemption application
• Contents:
– Name/purpose of organization
– Members (if membership-based)
– Board of Directors (election, number, meetings, etc.)
– Officer (classifications, duties, etc.)
– Committees
– Indemnification provisions
– Fiscal/administrative provisions (fiscal year, check signing, etc.)
– Dissolution clause
– Amendments

• Michigan Charitable Organizations and Solicitations Act
• Provides information to potential donors and the AG’s office
• Provides AG’s office with criminal and civil enforcement powers

• Provisions
– Must obtain a Charitable Solicitation
License if:
• (i) the organization solicits or receives (or expects to solicit or receive) contributions in
Michigan in excess of $8,000; and/or
• (ii) the organization compensates any person for fund raising services, including employees or independent contractors (professional fundraisers)

• Process
– File an Initial Charitable Trust/Charitable
Solicitation Questionnaire
• Articles of Incorporation
• Bylaws
• IRS determination letter
• Recent financial statement (if any)
– If necessary, file an Application for License to
Solicit Donations
• Board
• Professional fundraiser (if any)
• Financial information (990) (if any)
• Solicitation materials (if any)
– Must be renewed annually (at least 30 days prior to expiration)

• Exemptions
– Solicit/receive < $8,000/year (gross)
– Educational institutions
– Veterans organizations
– Hospitals
– Organizations that do not solicit/receive contributions from the “public” (i.e., private foundations)
– Other
• Can file by mail or electronically
• Penalties for failure to file
– Misdemeanor
• Fine of up to $500 and/or imprisonment for up to 6 months
• Unified Registration Statement

• Michigan Supervision of Trustees for
Charitable Purposes Act
– Every “charitable trust” must register with the AG’s office
– “Charitable Trust” includes any person or legal entity which holds property for a charitable purpose
• Most charitable foundations (public and private)

• Process
– File Initial Charitable Trust/Charitable
Solicitation Questionnaire
– If necessary, file Charitable Trust
Registration Statement with AG’s office
• Inventory of assets
• Board
• Financial information
– Ongoing Requirements
• Copies of 990’s w/in 6 months of the end of each fiscal year

• Exemptions
– Religious organizations
– Educational institutions
– Hospitals
– Interests of charitable remainder beneficiaries are remote
– Organizations that are not “charitable”
• Penalties
– Enforcement action by AG’s office

• Michigan Charitable Organizations and Solicitations Act
• Must be licensed by AG
• Professional fundraiser
– Paid to manage a fundraising drive or campaign
– Independent contractor or employee
– Employees are exempt so long as compensation is not computed on the basis of the amount of funds raised

• Process
– File an Application for License of Professional
Fundraiser with AG’s office
– Obtain $10,000 bond
– File the Uniform Professional Fundraiser Surety
Bond Form
– File Professional Fundraiser Contract Summary
Sheet
• Renew yearly by May 31st
• Penalties
– Suspension of license
– Up to $500 fine and/or 6 months imprisonment

• IRS Form 1023 (501(c)(3) organizations) or Form 1024 (others)
– Certifies that the organization is exempt from federal income taxation (and provides donors with assurance that their donations are taxdeductible in the case of 501(c)(3) organizations)
– Must be filed with the IRS within 27 months of creation (the date the Articles of Incorporation were filed)
– Takes anywhere from 2 months to a year or more for determination
– IRS may have questions or require further information

– Major Requirements:
• Employer (taxpayer) Identification Number (EIN)
• List of directors
• Narrative description of activities
• Fundraising activities
• Financial information
• Filing fee (usually $750)
• Attachments:
– Articles of Incorporation
– Bylaws
– Conflict of Interest Policy
– Power of Attorney (Form 2848)
– Other

• Technically, not required
• Helps preempt even the perception that funds are being used for personal gain by the managers or board members
• Protects the organization when it is contemplating entering into a transaction or arrangement that might benefit the private interest of an officer or director of the
Corporation
• Provides guidelines for determining compensation
• Statement of Values/Code of Ethics
– Optional (“best practices”)
– Describes the ethical principles that an organization’s staff, board and volunteers agree to follow, and includes a statement of values articulating the principles it is committed to uphold

• The American Competitiveness and
Corporate Accountability Act of 2002
(Sarbanes-Oxley Act)
– Generally applicable to publicly-traded companies
• Two notable exceptions
– Whistleblower Policy
– Document Retention and Destruction Policy

• Whistleblower Policy
– Encourages and provides protection to any member of the Board or employee who becomes aware of a breach or threatened breach of a fiduciary duty
– Criminal penalties

• Designed to ensure compliance with federal and state laws and regulations, to eliminate accidental or innocent destruction of records, and to facilitate operations by promoting efficiency and freeing up valuable storage space
• Aimed at preventing destruction of incriminating documents, whether inadvertent or not
• Criminal penalties

• Filed annually with the IRS (w/in 5 mos. of end of fiscal year)
• Substantially revised for tax year 2008 (first time in 30 years)
– 11-part “core” form
– 16 schedules
– Governance
• Policies
•
Minutes
• Independence
– Accountability
– Compensation
– Transactions with “interested parties”
• Committee/board review
• Form 990-N (e-postcard) if gross receipts < $25,000

• State:
– Charitable Gaming Licenses (raffles, bingo, beer tent, etc.)
– Dissolution Questionnaire
– Sales/Use Tax Exemption (MI Form 3372)
• Form 990-T
– Used to report unrelated business income and pay unrelated business income tax (UBIT)
• Employment Tax Returns
– Payroll service
• Other

• Websites:
– www.irs.gov/charities
– www.independentsector.org
– www.michigan.gov/ag
– www.mnaonline.org
– www.michigannonprofit.org
– www.boardsource.org
– www.philanthropy.com
– www.guidestar.org