Legal
Nonprofit and Philanthropic Organizations, an in-depth, semester-long course is offered each fall term at the University of Iowa College of Law that provides an overview of nonprofit legal issues. The course is taught by Professors Willard Boyd and Richard Koontz.
XIII. A. Principle – Compliance Responsibility
Charitable nonprofit organizations are chartered and granted tax exempt status by government to serve the public. With this public privilege comes the obligation of accountability. This accountability takes a variety of forms: good management practices, legal mandates, and ethical conduct. The obligations of charitable nonprofit organizations are defined both by government laws and regulations and by self-regulation through policies adopted by organizational peers and by the organization itself.
Practices
The concept of charitable immunity from lawsuits has been eliminated. Therefore, directors and officers are liable for organizational torts and breaches of contract where they are negligent and third parties have been injured.
Starting and Managing a Nonprofit Organization: A Legal Guide by Bruce Hopkins (2009).
Frequently Asked Questions about Legal
Yes. The Iowa Principles and Practices for Charitable Nonprofit Excellence provide that "Bylaws should be composed and adopted by the board which provide for regulating and managing the affairs of the charitable nonprofit entity." (II.C.1) Bylaws describe the process by which a board of directors meets and takes action for the nonprofit. There are provisions in bylaws concerning the board size, how often it meets, what committees and officers it has, etc. It is important for board members to be familiar with the terms of the bylaws and for amendments to be made to the bylaws as appropriate to reflect changing processes and activities. As an internal document there is no required filing and disclosure. However the bylaws must be attached to the initial application for federal exemption Form 1023 and if the Form 990 is filed with the IRS changes to bylaws must be included. (See core Form 990Part VI.A line 4)
A nonprofit corporation in Iowa must file a biennial report with the Iowa Secretary of State. The biennial report is an electronic filing done in odd-numbered years. Early in the year during which the report is due nonprofits receive a letter from the Secretary of State's office with a login number. The number gives the nonprofit access to the biennial report filing portion of the Web site. (See 2016 Biennial Report Filing). The biennial report form asks for the name of the registered agent the registered address of the corporation and the names of officers of the board. If the nonprofit corporation does not file the biennial report within the required time it will be administratively dissolved. This is done under Iowa Code 504.1421.
The Iowa Principles and Practices for Charitable Nonprofit Excellence says, "A charitable nonprofit organization can be organized in Iowa as a corporation, a trust, a limited liability company, or an unincorporated association. While partnerships and sole proprietorships are legal entities in Iowa, the Internal Revenue Service will not give 501(c)(3) status to such entities." (II.A.1.)
A donor may only take a contribution deduction to the extent that the donor's contribution exceeds the fair market value of the goods or services the donor receives in return for the contribution. This means that recipient organizations must provide written disclosure statements to donors who make a payment exceeding $75 when that payment is partly for contribution and partly for goods and services provided by the recipient organization. This type of contribution by a donor in exchange for goods or services is known as a quid pro quo contribution.
Iowa Code §13C.2 requires that professional fundraisers register with the attorney general. Iowa Code §13C.2(1)(a). The Iowa Code also requires that professional fundraisers disclose contributions received and payments made to the client charities. This disclosure can be done at the time of registration with the Iowa Attorney General's office or by filing a statement agreeing to provide disclosure information to a government entity or a person within one day of a request. Iowa Code §13C.2(1)(b),(c). Additionally, charitable organizations are required to provide financial disclosure information to requesting parties within five days of a request. Iowa Code §13C.2(2). If either the professional fundraiser or the charitable organization fails to provide financial disclosure information when requested, the attorney general may seek an injunction prohibiting further fundraising until such disclosure information is provided. Iowa Code §13C.3(b). See this article on in-state fundraising for a more complete answer.
