Many associations are welcoming the modernization of nonprofit law in the Empire State, but some groups have a lot of catching up to do as several implementation deadlines loom.
Changes are coming to the nonprofit landscape in New York.
The Nonprofit Revitalization Act introduces the first major overhaul of New York’s nonprofit laws in nearly half a century. Most of its provisions go into effect July 1.
The act modernizes many aspects of the state’s nonprofit laws—including allowing for electronic voting and virtual board meetings and requiring that groups adopt formal whistleblower and conflict-of-interest policies—but other changes might not come as easily for some groups.
“There are some significant provisions that will be difficult for [some] organizations to implement,” said Kristalyn Loson, an associate at the Venable law firm. “It’s going to involve some looking at their bylaws and articles, looking at their different committee structures and their organizational leadership, and it may require a shift in governance—all of which can involve a lot of costs.”
Loson said the most complicated provisions involve a new requirement that prohibits employees from serving as chair on a board of directors—which means no more board chairs who also serve as chief staff executive and receive compensation from the organization—and new auditing procedures.
“The audit procedures go beyond any other state statute I’ve seen in that they apply to organizations that are soliciting contributions in New York but that aren’t necessarily incorporated in New York. They will now be required to file pretty extensive auditing reports,” said Loson.
How in-depth those reports must go will depend on the size of the organization, but the act allows the attorney general, at his or her discretion, to require a nonprofit to file an independent audit report. “That can be an expensive and lengthy process, especially for the smaller nonprofits,” Loson said.
Her advice for groups that face a laundry list of changes: Get started early.
“Governance procedures usually involve getting a committee together, having the committee produce recommendations, having it go before the board, getting legal counsel involved—it really can’t happen in a couple of weeks,” she said. “You only want to do your reconsiderations and your reorganizing once. You don’t want to have to go back again, so it’s important to understand the details and really take a look at the specific definitions.”
“Early” to the New York Society of Association Executives meant holding an event to discuss the changes in October, after the measure passed both houses of the state legislature but before Gov. Andrew Cuomo signed it into law. Loson and several of her Venable colleagues were on hand for the discussion.
“The attendees there had very good questions and wanted to know more details on the different reports that you have to submit,” she said.“We ran over [the allotted time] significantly and had a lot of people with additional questions after the meeting. More sessions like that, especially to help smaller nonprofits who can’t afford in-house counsel, are really important.”