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Advising California Nonprofit Corporations

Essential for both attorneys and nonprofits, this is a unique law and practice guide on forming, operating, and maintaining California nonprofit corporations, written and edited by an extraordinary group of well-known experts from across the state. It includes charts on charitable solicitation regulations and license requirements for all cities and counties in California.

Essential for both attorneys and nonprofits, this is a unique law and practice guide on forming, operating, and maintaining California nonprofit corporations, written and edited by an extraordinary group of well-known experts from across the state. It includes charts on charitable solicitation regulations and license requirements for all cities and counties in California.

  • Qualifying as a tax-exempt organization; property tax exemptions
  • Articles of incorporation and bylaws, with sample forms
  • Directors and officers: liabilities, rights, duties
  • Required tax filings, recordkeeping, reporting
  • Charitable giving; tax-exempt financing; managing endowments; donor-advised funds
  • Rules on lobbying, PACs, endorsing political candidates
  • Financial accounting
  • Suspension, forfeiture, restoration
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Essential for both attorneys and nonprofits, this is a unique law and practice guide on forming, operating, and maintaining California nonprofit corporations, written and edited by an extraordinary group of well-known experts from across the state. It includes charts on charitable solicitation regulations and license requirements for all cities and counties in California.

  • Qualifying as a tax-exempt organization; property tax exemptions
  • Articles of incorporation and bylaws, with sample forms
  • Directors and officers: liabilities, rights, duties
  • Required tax filings, recordkeeping, reporting
  • Charitable giving; tax-exempt financing; managing endowments; donor-advised funds
  • Rules on lobbying, PACs, endorsing political candidates
  • Financial accounting
  • Suspension, forfeiture, restoration

1

Attorney’s Role During Formation and Operation

Steven J. Chidester

Lani Meanley Collins

  • I.  SCOPE OF CHAPTER  1.1
  • II.  ROLE OF ATTORNEY DURING FORMATION OF NONPROFIT ORGANIZATION
    • A.  Fourteen Basic Questions That Need to Be Answered  1.2
      • 1.  Should the Attorney Accept the Matter?  1.3
      • 2.  Is a New Organization Necessary?  1.4
      • 3.  Is There a Sound Business Plan: Program, Financing, People?  1.5
      • 4.  Considering the Goals or Purposes of the Founders, Should the Organization Be a Nonprofit or Another Type of Organization?  1.6
      • 5.  Does Special Treatment Available to Certain Nonprofits Dictate the Organization Should Be a Nonprofit?  1.7
      • 6.  If Nonprofit, What Type of Entity Should It Be?  1.8
      • 7.  In What State or Country Should It Be Organized?  1.9
      • 8.  If the Entity Will Be a California Nonprofit Corporation, Should It Be Public Benefit, Mutual Benefit, or Religious?  1.10
      • 9.  If the Entity Will Be a California Nonprofit Corporation, Should It Have Voting Members?  1.11
      • 10.  Is Income Tax Exemption Appropriate and Desirable?  1.12
      • 11.  If Income Tax Exemption Is Desirable, Under What Sections of Internal Revenue Code and Revenue and Taxation Code?  1.13
      • 12.  If the Entity Will Be an IRC §501(c)(3) Organization, Can It Qualify as a Public Charity Under IRC §509(a)?  1.14
      • 13.  If the Entity Cannot Qualify as a Public Charity, Can It Accept the Restrictions Applicable to Private Foundations?  1.15
      • 14.  Is Exemption From Property Tax Appropriate or Desirable?  1.16
    • B.  Importance of Attorney Having Sufficient Expertise to Resolve Exempt Organization Classification and Property Tax Issues Before Drafting Documents  1.17
    • C.  Feasibility of Commencing Operations Before Obtaining Tax Exemption Determinations  1.18
    • D.  Attorney Tasks When Establishing New Nonprofit Organization  1.19
    • E.  Operating Manual
      • 1.  Components of Operating Manual for Exempt Organization  1.20
      • 2.  Form: Table of Contents for Operating Manual  1.21
  • III.  ROLE OF ATTORNEY IN REPRESENTING EXISTING TAX-EXEMPT ORGANIZATION
    • A.  Checklist: Areas Requiring Review  1.22
    • B.  Special Considerations for Clients Incorporated in Another State  1.23
  • IV.  ATTORNEY COMPENSATION
    • A.  The Pro Bono Issue  1.24
    • B.  Estimating Fees  1.25
    • C.  Getting Paid  1.26
  • V.  CONFLICTS AND ETHICAL ISSUES
    • A.  Attorney’s Duties Under Rules of Professional Conduct  1.27
    • B.  Who Is the Client When New Entity Is Being Formed?  1.28
    • C.  Form: Paragraph in Engagement Letter Confirming That Entity to Be Formed Will Be the Client  1.29
    • D.  Specific Conflict of Interest Situations
      • 1.  Conflict Between Founder and Organization  1.30
      • 2.  Form: Paragraph in Engagement Letter Confirming That Entity to Be Formed Will Be Separate Client  1.31
      • 3.  Form: Consent to Representation and Conflict Waiver Letter for Foundation Formed for Existing Client  1.32
      • 4.  Conflicts With Existing Clients  1.33
    • E.  Choices for Attorney in Potential Conflict Situation  1.34
    • F.  Duty to Practice Competently Requires Familiarity With Applicable Laws  1.35
      • 1.  Nonprofit Corporation Law  1.36
      • 2.  Trust Law  1.37
      • 3.  Tax Laws  1.38
      • 4.  Securities Laws  1.39
      • 5.  Miscellaneous Laws  1.40
      • 6.  “Charitable Trusts” Under the Jurisdiction of the Attorney General  1.41
  • VI.  ADVICE MEMORANDUM TO DIRECTORS AND OFFICERS  1.42
  • VII.  INTERACTIONS WITH OTHER PROFESSIONALS
    • A.  Accountants  1.43
    • B.  Fundraising and Marketing Consultants  1.44
    • C.  Compensation Consultants  1.45
    • D.  Investment Advisors  1.45A
  • VIII.  OPINION LETTERS, AUDIT STATEMENTS, AND CIRCULAR 230
    • A.  Opinion Letters  1.46
    • B.  Audit Letters  1.47
    • C.  Circular 230
      • 1.  What is Circular 230?  1.48
      • 2.  What Does “Practice Before the IRS” Entail?  1.49
      • 3.  The Attempt to Curb Abusive Tax Shelters/“IRS Circular 230 Notices”  1.50
      • 4.  Changes to Circular 230  1.51

2

Choice of Entity Considerations

Cherie L. Evans

Barbara A. Rosen

Patrick B. Sternal

  • I.  SCOPE OF CHAPTER  2.1
  • II.  DECIDING WHETHER TO START A NONPROFIT ENTERPRISE  2.2
  • III.  BASIC FORMS OF NONPROFIT ENTERPRISES  2.3
    • A.  Unincorporated Associations  2.4
      • 1.  Governing Law  2.5
        • a.  Statutory Mandatory and Default Provisions  2.6
          • (1)  Member Voting  2.7
          • (2)  Termination of Membership  2.8
          • (3)  Merger and Dissolution  2.9
        • b.  Liability of Members, Directors, Officers, and Agents  2.10
        • c.  Registering Name With Secretary of State; Recording Interest in Property  2.11
      • 2.  Changing to a Nonprofit Corporation  2.12
      • 3.  Drafting Governing Documents  2.13
      • 4.  Advantages  2.14
      • 5.  Disadvantages  2.15
        • a.  Remaining Uncertainty in Governing Law  2.16
        • b.  Uncertainty Concerning Liability in SLAPP Suits  2.17
        • c.  Possible Attorney General Supervision  2.18
    • B.  Nonprofit Limited Liability Companies  2.19
    • C.  Charitable Trusts
      • 1.  Definition and Governing Law  2.20
      • 2.  Standard of Care  2.21
      • 3.  Limits on Trusts That Are Private Foundations  2.22
      • 4.  Advantages  2.23
      • 5.  Disadvantages  2.24
      • 6.  Disadvantages of Charitable Trusts or Unincorporated Associations That Will Operate Outside United States  2.25
    • D.  Nonprofit Corporations  2.26
      • 1.  Advantages  2.27
      • 2.  Disadvantages  2.28
  • IV.  CHOOSING THE RIGHT TYPE OF NONPROFIT CORPORATION
    • A.  Public Benefit, Mutual Benefit, and Religious Corporations
      • 1.  Basis for Classification  2.29
      • 2.  Table: Comparison of Some Aspects of Public Benefit, Mutual Benefit, and Religious Corporations  2.30
    • B.  Other Types of Nonprofit Corporations  2.31
      • 1.  Cooperative Corporations  2.32
      • 2.  Corporations Sole  2.33
      • 3.  Other Special Purpose Corporations  2.34
      • 4.  Foreign Nonprofit Corporations  2.35
    • C.  Benefit Corporations, Social Purpose Corporations, and Low-Profit Limited Liability Company (L3C) Alternative  2.36
      • 1.  Benefit Corporations
        • a.  Organizational Requirements  2.37
        • b.  Third-Party Standard  2.38
        • c.  Director Duties  2.39
        • d.  Officer Duties  2.40
        • e.  Annual Benefit Report  2.41
        • f.  Benefit Enforcement Proceeding  2.42
        • g.  Attorney General Supervision  2.43
        • h.  Conversion  2.44
      • 2.  Social Purpose Corporations  2.45
        • a.  Organizational Requirements  2.46
        • b.  Director Duties  2.47
        • c.  Annual and Current Reports  2.48
        • d.  Derivative Actions  2.49
        • e.  Corporate Changes  2.50
      • 3.  Low-Profit Limited Liability Company (L3C) Alternative  2.51
      • 4.  Table: Purpose and Tax-Exempt Status of Four Forms of Corporate Entities  2.52
      • 5.  Chart: Attributes of Corporations, Social Purpose Corporations, and Benefit Corporations  2.53

3

Planning for, Obtaining, and Maintaining Tax-Exempt Status

Robert A. Wexler

Stephanie L. Petit

  • I.  SCOPE  3.1
  • II.  FEDERAL TAX ISSUES
    • A.  Tax-Exempt Organizations
      • 1.  Advantages and Disadvantages of Tax-Exempt Status  3.2
      • 2.  Table: Federal and State Tax Exemptions  3.3
      • 3.  State and Political Subdivision Exemption  3.4
    • B.  Qualifying for and Maintaining Status as Tax-Exempt Organization Under IRC §501(c)(3)  3.5
      • 1.  Organizational Test  3.6
      • 2.  Operational Test  3.7
        • a.  Operated Exclusively for Exempt Purposes  3.8
        • b.  May Private Interests Benefit From Charity?  3.9
        • c.  What Activities Further Exempt Purposes?  3.10
        • d.  Charitable Activities  3.11
        • e.  Educational Purposes  3.12
        • f.  Scientific Purposes  3.13
        • g.  Religious Purposes  3.14
      • 3.  Prohibition on Inurement  3.15
        • a.  Excess Benefits Under IRC §4958; Intermediate Sanction Rules  3.16
        • b.  Definition of Disqualified Person  3.17
        • c.  Definition of Excess Benefit Transaction  3.18
        • d.  Presumption of Reasonableness  3.19
          • (1)  Interested Directors  3.20
          • (2)  Safe Harbor for Small Organizations  3.21
          • (3)  Rebutting the Presumption  3.22
          • (4)  Reasonable Compensation  3.23
        • e.  Adequate Documentation  3.24
        • f.  Deadline for Drafting Minutes  3.25
        • g.  Questionnaire: Creating Rebuttable Presumption of Reasonableness of Compensation  3.26
        • h.  Penalties  3.27
        • i.  Special Rules for Donor-Advised Funds and Supporting Organizations  3.28
      • 4.  Prohibition on Electioneering  3.29
      • 5.  Prohibition on Substantial Lobbying  3.30
    • C.  Qualifying as Public Charity
      • 1.  Public Charity Status Must Be Proved  3.31
      • 2.  Qualification Based on Activities  3.32
        • a.  Churches  3.33
        • b.  Schools  3.34
        • c.  Hospitals and Medical Research Organizations  3.35
      • 3.  Qualification Based on Public Support Under IRC §§170(b)(1)(A)(vi) and 509(a)(1)  3.36
        • a.  Calculating Public Support Test  3.37
        • b.  The One-Third Test  3.38
        • c.  The Facts and Circumstances Test  3.39
      • 4.  Qualification Under IRC §509(a)(2)
        • a.  Qualification Based on Public Support  3.40
        • b.  Tables: Ascertaining Numerator of Public Support Fraction  3.41
      • 5.  Mathematical Public Support Tests
        • a.  Differences Between Tests  3.42
        • b.  Table: Comparison of Mathematical Public Support Tests  3.43
      • 6.  Qualification Based on Affiliation Under IRC §509(a)(3)  3.44
      • 7.  Changing Public Charity Status  3.44A
    • D.  Private Foundations
      • 1.  Default Classification  3.45
      • 2.  General Governing Statutes  3.46
    • E.  Other Tax-Exempt Organizations  3.47
      • 1.  Social Welfare Organizations and Civic Leagues (IRC §501(c)(4))  3.48
      • 2.  Business Leagues and Trade Associations (IRC §501(c)(6))  3.49
      • 3.  Social Clubs (IRC §501(c)(7))  3.50
    • F.  Unrelated Business Income  3.51
    • G.  Federal Tax Deductions  3.52
      • 1.  Individual Donors  3.53
      • 2.  Corporate Donors  3.54
      • 3.  Table: Charitable Contribution Deductions for Individuals  3.55
  • III.  CALIFORNIA TAX ISSUES
    • A.  Tax Exemptions
      • 1.  Franchise Tax  3.56
      • 2.  Property Tax  3.57
      • 3.  Sales Tax  3.58
    • B.  California Tax Deductions  3.59
  • IV.  THE APPLICATION PROCESS
    • A.  Federal Exemption Under IRC §501(c)(3)—IRS Forms 1023 and 1023-EZ
      • 1.  Who Must Apply for Exemption?  3.60
      • 2.  Exceptions to Filing Requirement  3.61
      • 3.  Eligibility to Use Form 1023-EZ  3.61A
      • 4.  Time of Filing  3.62
      • 5.  How and Where to File
        • a.  IRS Form 1023  3.63
        • b.  IRS Form 1023-EZ  3.63A
      • 6.  Tips and Considerations for Completing IRS Forms 1023 and 1023-EZ
        • a.  IRS Form 1023  3.64
        • b.  IRS Form 1023–EZ  3.64A
      • 7.  The IRS Determination Letter  3.65
      • 8.  Remedies if IRS Denies Exemption  3.66
        • a.  Request for Technical Advice  3.67
        • b.  After Denial of Request for Exemption  3.68
        • c.  After Exhausting IRS Appeals  3.69
      • 9.  Applying for Reinstatement After Revocation  3.70
    • B.  Federal Exemption Under Other Provisions of IRC §501(c)—IRS Forms 1024 and 1024-A
      • 1.  Requirements for Filing  3.71
      • 2.  Additional Notice Requirement for §501(c)(4) Organizations   3.71A
      • 3.  Optional Expedited Handling for Certain §501(c)(4) Organizations  3.72
    • C.  Exemption From California Income and Franchise Taxes—FTB Forms 3500 and 3500A  3.73
  • V.  Fiscal Sponsorship
    • A.  Definition of Fiscal Sponsorship  3.74
    • B.  Direct Project (“Model A”) Fiscal Sponsorship  3.75
      • 1.  Mechanics of Model A Sponsorship  3.76
      • 2.  Legal Steps and Considerations
        • a.  Board Approval  3.77
        • b.  Written Agreement  3.78
        • c.  Discretion and Control  3.79
        • d.  Liability  3.80
        • e.  Donor-Advised Fund  3.81
        • f.  Termination  3.82
    • C.  Regrant or Indirect (“Model C”) Fiscal Sponsorship  3.83
      • 1.  Mechanics of Model C Sponsorship  3.84
      • 2.  Legal Steps and Considerations
        • a.  Board Approval  3.85
        • b.  Written Agreement  3.86
        • c.  Discretion and Control  3.87
        • d.  Liability  3.88
        • e.  Termination  3.89

4

Donor Funds, Private Foundations, and Supporting Organizations

Reynolds T. Cafferata

Shannon M. Paresa

  • I.  SCOPE OF CHAPTER  4.1
  • II.  CHOOSING A PRIVATE CHARITABLE ORGANIZATION  4.2
  • III.  DONOR FUNDS  4.3
    • A.  Types of Donor Funds
      • 1.  Donor-Advised Funds  4.4
      • 2.  Field-of-Interest Funds  4.5
      • 3.  Scholarship Funds  4.6
      • 4.  Designated and Restricted Funds  4.7
    • B.  Administrative Costs of Donor Funds  4.8
    • C.  Definition and Characteristics of Donor-Advised Funds  4.9
      • 1.  Taxable Distributions  4.10
      • 2.  Prohibited Benefits  4.11
      • 3.  Excess Benefit Transactions  4.12
      • 4.  Excess Business Holdings  4.13
      • 5.  Grants to Supporting Organizations  4.14
      • 6.  Grants From Donors Seeking Charitable Contribution Deduction
        • a.  Income Tax Deductions  4.15
        • b.  Gift and Estate Tax Deductions  4.16
    • D.  Creating a Donor Fund  4.17
    • E.  Pooling Assets of Donor-Advised Funds  4.18
      • 1.  Agency Funds  4.19
      • 2.  Quasi-Endowment Funds  4.20
    • F.  Uses of Donor Funds  4.21
    • G.  Control Over Donor Funds  4.22
  • IV.  PRIVATE FOUNDATIONS  4.23
    • A.  Limitations on Private Foundations  4.24
      • 1.  Self-Dealing Transactions With Disqualified Persons  4.25
      • 2.  Types of Self-Dealing Transactions  4.26
        • a.  Sale, Exchange, or Lease of Property  4.27
        • b.  Extension of Credit  4.28
        • c.  Furnishing Goods, Services, or Facilities  4.29
        • d.  Payment of Compensation or Expenses  4.30
        • e.  Transfer or Use of Foundation Income and Assets  4.31
        • f.  Payments to Government Officials  4.32
        • g.  Exception for Certain Corporate Transactions  4.33
        • h.  Indirect Self-Dealing  4.34
      • 3.  Penalties for Violating Rules Against Self-Dealing  4.35
      • 4.  Minimum Annual Distributions  4.36
        • a.  Computing Minimum Distribution Requirements  4.37
        • b.  Qualifying Distributions  4.38
        • c.  Penalties  4.39
      • 5.  Net Investment Income  4.40
      • 6.  Interests in Business Enterprises  4.41
      • 7.  Jeopardy Investments  4.42
      • 8.  Compensating Family Members  4.43
      • 9.  Taxable Expenditures  4.44
      • 10.  Independent Audit Committee Requirement  4.45
      • 11.  Grants to Supporting Organizations  4.46
    • B.  Private Operating Foundations  4.47
      • 1.  Income Test  4.48
      • 2.  Alternative Test  4.49
      • 3.  Exempt Operating Foundations  4.50
    • C.  Donor-Directed Funds  4.51
    • D.  Private Pass-Through Foundations
      • 1.  Requirements for Pass-Through Treatment  4.52
      • 2.  Planning Strategies  4.53
    • E.  Private Common Fund Foundations  4.54
    • F.  Termination of Private Foundation Status  4.55
  • V.  SUPPORTING ORGANIZATIONS
    • A.  Definition  4.56
    • B.  Directors  4.57
    • C.  Types of Supporting Organizations  4.58
      • 1.  Type I Supporting Organizations  4.59
      • 2.  Type II Supporting Organizations  4.60
      • 3.  Type III Supporting Organizations  4.61
        • a.  Responsiveness Test  4.62
        • b.  Integral Part Test  4.63
          • (1)  Functionally Integrated Type III Supporting Organizations  4.63A
          • (2)  Nonfunctionally Integrated Type III Supporting Organizations  4.63B
            • (a)  Distribution Requirement  4.63C
              • (i)  Fair Market Value  4.63D
              • (ii)  Attentiveness Requirement  4.63E
        • c.  Advantages of Type III Supporting Organizations  4.64
        • d.  Disadvantages of Type III Supporting Organizations  4.65
    • D.  Limitations on Supporting Organizations  4.66
      • 1.  Rules Applicable to Type III Supporting Organizations
        • a.  Responsiveness Information  4.67
        • b.  Foreign Supported Organizations  4.68
        • c.  No Control by Donor  4.68A
        • d.  Charitable Trusts  4.69
        • e.  Payout Requirements  4.70
          • (1)  “Functionally Integrated” Requirements [Deleted]  4.71
          • (2)  Proposed Payout Requirements [Deleted]  4.72
        • f.  Limitation on Number of Supported Organizations  4.73
      • 2.  Contributions to Type I and III Supporting Organizations  4.74
      • 3.  Excess Business Holdings of Type II and III Supporting Organizations  4.75
      • 4.  Rules Applicable to All Supporting Organizations
        • a.  Excess Benefit Transactions  4.76
        • b.  Distributions to Supporting Organizations
          • (1)  From Private Foundations  4.77
          • (2)  From Donor-Advised Funds  4.78
          • (3)  From a Retirement Plan  4.79
    • E.  Reclassification as Public Charity  4.80
  • VI.  ESTABLISHING AND MAINTAINING PRIVATE CHARITABLE ORGANIZATIONS
    • A.  Pledge Agreements and Self-Dealing  4.81
    • B.  Maintaining Multiple Private Charities  4.82
  • VII.  TABLE: COMPARISON OF PRIVATE CHARITABLE ORGANIZATIONS  4.83

5

Forming the Corporation and Beginning Operations

Cynthia R. Rowland

  • I.  SCOPE OF CHAPTER  5.1
  • II.  TYPES OF NONPROFIT CORPORATIONS  5.2
  • III.  PRELIMINARY CONSIDERATIONS
    • A.  Checklist: Formation of Nonprofit Corporation  5.3
    • B.  Choosing and Reserving Name
      • 1.  Restrictions and Procedures  5.4
      • 2.  Reserving a Name
        • a.  Reserving by Mail  5.5
        • b.  Prepaid Accounts  5.6
        • c.  Intellectual Property Issues  5.7
      • 3.  Form: Consent to Use of Name  5.8
    • C.  Selecting Initial Agent for Service of Process  5.9
  • IV.  COMPLETING CORPORATE ORGANIZATION
    • A.  Necessary Steps  5.10
    • B.  Form: Appointment of Initial Directors and Adoption of Bylaws  5.11
    • C.  Form: Waiver of Notice and Consent to Holding First Meeting of Board of Directors  5.12
    • D.  Minutes of First Meeting of Board of Directors
      • 1.  Form: Heading and Participants  5.13
      • 2.  Form: Adoption of Waiver of Notice and Consent to Meeting  5.14
      • 3.  Form: Articles Filed  5.15
      • 4.  Form: Ratification of Actions by Incorporator  5.16
      • 5.  Form: Adoption of Bylaws  5.17
      • 6.  Form: Number of Directors  5.18
      • 7.  Form: Election of Chair  5.18A
      • 8.  Form: Election of Officers  5.19
      • 9.  Form: Corporate Seal  5.20
      • 10.  Form: Accounting Year  5.21
      • 11.  Form: Principal Office Location  5.22
      • 12.  Form: Accounting Method  5.22A
      • 13.  Form: Bank Account  5.23
      • 14.  Form: Membership Certificate  5.24
      • 15.  Form: Incorporation Expenses  5.25
      • 16.  Form: Exemptions From Federal and State Taxes  5.26
      • 17.  Form: Registration With Attorney General  5.26A
      • 18.  Form: Statement of Information for California Nonprofit Corporation  5.27
      • 19.  Form: Compliance With Local Solicitation Ordinances  5.28
      • 20.  Form: Compliance With Political Reform Act  5.29
      • 21.  Form: Issuance of Memberships and Establishment of Dues  5.30
      • 22.  Form: Application for Qualification or Registration of Offer and Sale of Membership Securities  5.31
      • 23.  Form: Employer Identification Number  5.32
      • 24.  Form: Nonprofit Mailing Permit  5.33
      • 25.  Form: Adoption of Conflict of Interest Policy  5.34
      • 26.  Form: Adoption of Policy for the Detection and Reporting of Fraudulent Activity (Whistleblower Policy)  5.35
      • 27.  Form: Approval of Consent to Use of Electronic Transmissions by Director or Officer  5.36
      • 28.  Other Resolutions  5.37
      • 29.  Form: Adjournment  5.38
    • E.  Action by Unanimous Written Consent of Board
      • 1.  Form: Heading; Participants  5.39
      • 2.  Form: Articles of Incorporation  5.40
      • 3.  Form: Ratification of Actions by Incorporator  5.41
      • 4.  Form: Bylaws  5.42
      • 5.  Form: Number of Directors  5.43
      • 6.  Form: Election of Chair  5.43A
      • 7.  Form: Election of Officers  5.44
      • 8.  Form: Accounting Year  5.44A
      • 9.  Form: Principal Office Location  5.45
      • 10.  Form: Incorporation Expenses  5.46
      • 11.  Form: Authorization to File Applications for Tax Exemptions  5.47
      • 12.  Form: Registration With Attorney General  5.47A
      • 13.  Form: Authorization to Enter Into Contracts  5.48
      • 14.  Form: Authorization to Retain Counsel and Waive Conflicts  5.49
      • 15.  Form: Accounting Method  5.50
      • 16.  Form: Bank Account  5.51
      • 17.  Form: Admission of Members  5.52
      • 18.  Form: Compliance With Local Solicitation Ordinances  5.53
      • 19.  Form: Compliance With Political Reform Act  5.54
      • 20.  Form: Issuance of Memberships and Establishment of Dues  5.55
      • 21.  Form: Application for Qualification or Registration of Offer and Sale of Membership Securities  5.56
      • 22.  Form: Employer Identification Number  5.57
      • 23.  Form: Nonprofit Mailing Permit  5.58
      • 24.  Form: Adoption of Conflict of Interest Policy  5.59
      • 25.  Form: Approval of Policy for the Detection and Reporting of Fraudulent Activity (Whistleblower Policy)  5.60
      • 26.  Form: Approval of Consent to Use of Electronic Transmissions by Director or Officer  5.61
      • 27.  Form: Execution of Consent  5.62
    • F.  Exhibits for Attachment to Minutes of First Meeting or Action by Unanimous Consent of Board
      • 1.  Form: Corporation’s Policy on the Detection and Reporting of Fraudulent Activity (Whistleblower Policy)  5.63
      • 2.  Form: Consent to Use of Electronic Transmissions by Director or Officer  5.64
    • G.  Filing Statement of Information for California Nonprofit Corporation  5.65
    • H.  Registration With Attorney General’s Registrar of Charitable Trusts  5.66
    • I.  Registration With Secretary of State (Political Reform Division)  5.67
    • J.  Compliance With Securities Laws
      • 1.  California Requirements  5.68
      • 2.  Federal Requirements  5.69
    • K.  Compliance With Franchise Laws  5.70

6

Articles of Incorporation

Cynthia R. Rowland

  • I.  SCOPE  6.1
  • II.  GENERAL REQUIREMENTS
    • A.  Mandatory Provisions  6.2
    • B.  Checklist: Articles of Incorporation  6.3
    • C.  Provisions That Are Effective Only When Included in Articles  6.4
    • D.  Provisions Required to Secure Tax-Exempt Status  6.5
    • E.  Optional Provisions  6.6
    • F.  Execution of Articles of Incorporation  6.7
  • III.  ARTICLES OF INCORPORATION
    • A.  Public Benefit Corporation
      • 1.  Form: Heading  6.8
      • 2.  Form: Name  6.9
      • 3.  Form: Purpose  6.10
      • 4.  Form: Optional Supporting Organization Provision  6.11
      • 5.  Form: Agent for Service of Process  6.12
      • 6.  Form: Principal Office  6.12A
      • 7.  Form: Tax-Exempt Status  6.13
      • 8.  Form: Signature Block  6.14
      • 9.  Form: Declaration; Incorporation of Existing Unincorporated Association  6.15
    • B.  Mutual Benefit Corporation
      • 1.  Form: Heading  6.16
      • 2.  Form: Name  6.17
      • 3.  Form: Purpose  6.18
      • 4.  Form: Agent for Service of Process  6.19
      • 5.  Form: Principal Office  6.19A
      • 6.  Form: Tax-Exempt Status  6.20
      • 7.  Form: Signature Block  6.21
      • 8.  Form: Declaration; Incorporation of Existing Unincorporated Association  6.22
    • C.  Religious Corporation
      • 1.  Form: Heading  6.23
      • 2.  Form: Name  6.24
      • 3.  Form: Purpose  6.25
      • 4.  Form: Agent for Service of Process  6.26
      • 5.  Form: Principal Office  6.26A
      • 6.  Form: Tax-Exempt Status  6.27
      • 7.  Form: Signature Block  6.28
      • 8.  Form: Declaration; Incorporation of Existing Unincorporated Association  6.29
    • D.  Other Forms  6.30
  • IV.  FILING ARTICLES OF INCORPORATION
    • A.  Timing Considerations  6.31
    • B.  Filing Procedure  6.32
    • C.  Form: Transmittal Letter  6.33
  • V.  AMENDMENTS TO ARTICLES
    • A.  Limitations on Amendments  6.34
    • B.  Required Authorizations or Approvals
      • 1.  Incorporators  6.35
      • 2.  Board of Directors  6.36
      • 3.  Members and Other Specified Persons  6.37
      • 4.  Classes of Members  6.38
      • 5.  Amendment to Change Status  6.39
      • 6.  Attorney General
        • a.  Property Held in Charitable Trust  6.40
        • b.  Checklist: Contents of Request for Approval  6.41
    • C.  Certificate of Amendment
      • 1.  Requirements  6.42
      • 2.  Certificate of Amendment
        • a.  Form: Incorporators’ Certificate of Amendment  6.43
        • b.  Form: Officers’ Certificate of Amendment  6.44
      • 3.  Filing Certificate of Amendment  6.45
      • 4.  Restated Articles of Incorporation  6.46

7

Bylaws

Cynthia R. Rowland

  • I.  SCOPE OF CHAPTER  7.1
  • II.  PURPOSE OF BYLAWS  7.2
  • III.  TABLE: CORPORATIONS CODE DEFAULT PROVISIONS THAT MAY BE ALTERED IN BYLAWS OR ARTICLES OF INCORPORATION  7.2A
  • IV.  BYLAWS FOR PUBLIC BENEFIT, MUTUAL BENEFIT, AND RELIGIOUS CORPORATIONS
    • A.  Form: Heading  7.3
    • B.  Form: Name  7.4
    • C.  Form: Principal Office of the Corporation  7.5
    • D.  Form: General and Specific Purposes; Limitations  7.6
    • E.  Form: Construction and Definitions  7.7
    • F.  Form: Subordinate Corporation to Religious Entity  7.8
    • G.  Form: Supporting Organization Under IRC §509(a)(3)  7.9
    • H.  Form: Irrevocable Dedication of Assets  7.10
    • I.  Form: Nonvoting Members  7.11
    • J.  Corporations With Members  7.12
      • 1.  Form: Qualifications and Classes of Membership  7.13
      • 2.  Form: Rights of Membership  7.14
      • 3.  Form: Other Persons Associated With Corporation  7.15
      • 4.  Form: Members’ Dues, Fees, and Assessments  7.16
      • 5.  Form: Members in Good Standing  7.17
      • 6.  Form: Termination of Membership  7.18
      • 7.  Form: Suspension of Membership  7.19
      • 8.  Form: Termination or Suspension of Membership  7.20
      • 9.  Form: Transfer of Memberships  7.21
      • 10.  Meetings
        • a.  General Meetings
          • (1)  Form: Annual Meeting  7.22
          • (2)  Form: Place of Meeting  7.23
        • b.  Special Meetings
          • (1)  Form: Authority to Call Special Meetings  7.24
          • (2)  Form: Calling Special Meetings  7.25
          • (3)  Form: Proper Business of Special Meeting  7.26
      • 11.  Notice
        • a.  Form: General Notice Requirements  7.27
        • b.  Form: Notice of Certain Agenda Items  7.28
        • c.  Form: Manner of Giving Notice  7.29
        • d.  Form: Affidavit of Mailing Notice  7.30
      • 12.  Form: Quorum  7.31
      • 13.  Voting
        • a.  Form: Eligibility to Vote  7.32
        • b.  Form: Manner of Voting  7.33
        • c.  Form: Number of Votes  7.34
        • d.  Form: Approval by Majority Vote  7.35
        • e.  Form: Waiver of Notice or Consent  7.36
      • 14.  Actions Without Meetings
        • a.  Form: Action by Unanimous Written Consent  7.37
        • b.  Form: Action by Written Ballot  7.38
        • c.  Form: Solicitation of Written Ballots  7.39
        • d.  Form: Number of Votes and Approvals Required  7.40
        • e.  Form: Revoking Ballots  7.41
        • f.  Form: Filing Ballots  7.42
      • 15.  Record Date
        • a.  Form: Record Date for Notice, Voting, Written Ballots, and Other Board Actions  7.43
        • b.  Form: Record Date for Actions Not Set by Board  7.44
      • 16.  Proxies
        • a.  Form: Members’ Proxy Rights  7.45
        • b.  Form: Solicited Proxies  7.46
        • c.  Form: Subject Matter of Proxy to Be Stated  7.47
        • d.  Form: Revocability of Proxies  7.48
      • 17.  Form: Adjournment and Notice of Adjourned Meetings  7.49
    • K.  Board of Directors  7.50
      • 1.  General and Specific Powers of Board
        • a.  Form: General Powers  7.51
        • b.  Form: Specific Powers  7.52
      • 2.  Form: Number of and Qualifications for Directors  7.53
      • 3.  Form: Restriction on Interested Persons as Directors (Public Benefit Corporations)  7.54
      • 4.  Form: Designated Directors  7.55
      • 5.  Nominations and Elections of Directors  7.56
        • a.  Form: Nominations by Committee  7.57
        • b.  Form: Nominations by Members of Corporations With 500 to 4999 Members  7.58
        • c.  Form: Nominations by Members of Corporations With 5000 or More Members  7.59
        • d.  Form: Floor Nominations  7.60
        • e.  Form: Nominee’s Right to Solicit Votes  7.61
        • f.  Form: Use of Corporate Funds to Support Nominee  7.62
        • g.  Form: Election of Directors (Religious Corporation)  7.63
      • 6.  Vacancies on Board of Directors
        • a.  Form: Events Causing Vacancies on Board  7.64
        • b.  Form: Resignation of Directors  7.65
        • c.  Form: Removal of Directors  7.66
        • d.  Filling Vacancies on Board of Directors
          • (1)  Form: Vacancies Filled by Board  7.67
          • (2)  Form: Vacancies Filled by Members  7.68
        • e.  Form: No Vacancy on Reduction of Number of Directors  7.69
      • 7.  Meetings of Board of Directors
        • a.  Form: Place of Board Meetings  7.70
        • b.  Form: Meetings by Telephone or Other Telecommunications Equipment  7.71
        • c.  Form: Annual and Other Meetings  7.72
        • d.  Special Meetings
          • (1)  Form: Authority to Call Special Meetings  7.73
          • (2)  Form: Notice of Special Meetings  7.74
        • e.  Form: Quorum  7.75
        • f.  Form: Waiver of Notice  7.76
        • g.  Form: Adjournment  7.77
        • h.  Form: Notice of Adjourned Meeting  7.78
      • 8.  Form: Action Without a Meeting  7.79
      • 9.  Form: Compensation and Reimbursement  7.80
      • 10.  Form: Director Voting  7.80A
      • 11.  Committees of Board of Directors
        • a.  Form: Creation and Powers of Committees  7.81
        • b.  Form: Audit Committee  7.82
        • c.  Form: Compensation Committee  7.83
        • d.  Form: Executive Committee  7.84
        • e.  Form: Investment Committee  7.85
        • f.  Form: Meetings and Action of Committees  7.86
    • L.  Officers of the Corporation
      • 1.  Form: Offices Held  7.87
      • 2.  Form: Election of Officers  7.88
      • 3.  Form: Appointment of Other Officers  7.89
      • 4.  Form: Removal of Officers  7.90
      • 5.  Form: Resignation of Officers  7.91
      • 6.  Form: Vacancies in Office  7.92
      • 7.  Responsibilities of Officers
        • a.  Form: Chair of the Board  7.93
        • b.  Form: President  7.94
        • c.  Form: Vice Presidents  7.95
        • d.  Form: Secretary  7.96
        • e.  Form: Chief Financial Officer  7.97
    • M.  Form: Contracts With Directors  7.98
    • N.  Form: Loans to Directors and Officers  7.99
    • O.  Form: Indemnification  7.100
    • P.  Form: Insurance  7.101
    • Q.  Form: Maintenance of Corporate Records  7.102
    • R.  Inspection Rights
      • 1.  Members’ Right to Inspect
        • a.  Form: Membership Records  7.103
        • b.  Form: Accounting Records and Minutes  7.104
        • c.  Form: Maintenance and Inspection of Articles and Bylaws  7.105
      • 2.  Form: Directors’ Right to Inspect  7.106
    • S.  Required Reports
      • 1.  Form: Annual Report  7.107
      • 2.  Form: Annual Statement of Certain Transactions and Indemnifications  7.108
    • T.  Form: Emergency Powers  7.108A
    • U.  Form: Private Foundation Restrictions  7.109
    • V.  Form: Supporting Organization Restrictions  7.109A
  • V.  BYLAW AMENDMENTS
    • A.  Prohibited Amendments  7.110
    • B.  Required Approvals to Amendment
      • 1.  Board of Directors’ Approval  7.111
      • 2.  Members’ Approval  7.112
      • 3.  Class Approval: Public Benefit and Mutual Benefit Corporations  7.113
      • 4.  Other Approvals  7.114
    • C.  Records of Bylaws and Amendments  7.115
    • D.  Amendments to Bylaws
      • 1.  Form: Amendment by Board Subject to Limitation by Members  7.116
        • a.  Form: Changes to Number of Directors  7.117
        • b.  Form: Greater Vote Requirement  7.118
        • c.  Form: Members’ Approval Required  7.119
      • 2.  Form: Amendment by Members  7.120
      • 3.  Form: Amendments to Religious Corporation’s Bylaws  7.121
  • VI.  BYLAWS FOR PUBLIC BENEFIT CORPORATION WITHOUT MEMBERS
    • A.  Form: Heading; Principal Office  7.122
    • B.  Form: Objectives and Purposes  7.123
    • C.  Form: Dedication of Assets  7.124
    • D.  Directors
      • 1.  Form: General and Specific Powers of Directors  7.125
      • 2.  Form: Number of Directors  7.126
      • 3.  Form: Appointment and Term of Office of Directors  7.127
      • 4.  Form: Qualifications of Board Members  7.128
      • 5.  Form: Vacancies  7.129
      • 6.  Form: Place of Meeting; Meeting by Telephone or Other Telecommunications Equipment  7.130
      • 7.  Form: Annual Meeting  7.131
      • 8.  Form: Special Meetings  7.132
      • 9.  Form: Notice of Meetings  7.133
      • 10.  Form: Waiver of Notice  7.134
      • 11.  Form: Quorum  7.135
      • 12.  Form: Adjournment  7.136
      • 13.  Form: Notice of Adjournment  7.137
      • 14.  Form: Action Without Meeting  7.138
      • 15.  Form: Compensation of Directors  7.139
      • 16.  Form: Restriction on Interested Directors  7.140
    • E.  Committees
      • 1.  Form: Creation and Powers of Committees  7.141
      • 2.  Form: Executive Committee  7.142
      • 3.  Form: Compensation Committee  7.143
      • 4.  Form: Advisory Committees  7.144
      • 5.  Form: Audit Committee  7.145
      • 6.  Form: Meeting and Action of Committees  7.146
    • F.  Officers of the Corporation
      • 1.  Form: Offices Held  7.147
      • 2.  Form: Election of Officers  7.148
      • 3.  Form: Subordinate Officers  7.149
      • 4.  Form: Removal of Officers  7.150
      • 5.  Form: Resignation of Officers  7.151
      • 6.  Form: Vacancies in Office  7.152
      • 7.  Form: Responsibilities of Officers  7.153
    • G.  Records and Reports
      • 1.  Form: Maintenance of Articles and Bylaws  7.154
      • 2.  Form: Maintenance of Other Corporate Records  7.155
      • 3.  Form: Inspection by Directors  7.156
      • 4.  Form: Annual Report  7.157
      • 5.  Form: Financial Audit  7.158
    • H.  Indemnification of Directors and Officers
      • 1.  Form: Right to Indemnification  7.159
      • 2.  Form: Insurance  7.160
    • I.  Contracts and Loans With Directors and Officers
      • 1.  Form: Contracts With Directors and Officers  7.161
      • 2.  Form: Loans to Directors and Officers  7.162
    • J.  Form: Fiscal Year  7.163
    • K.  Form: Amendments  7.164
    • L.  Form: Members  7.165
    • M.  Form: Private Foundation Restrictions  7.166
    • N.  Form: Supporting Organization Restrictions  7.167
    • O.  Form: Emergency Provisions  7.167A
    • P.  Form: Construction and Definitions  7.168
    • Q.  Form: Certificate of Secretary  7.169
    • R.  Form: Exhibit A, Members of Board  7.170

8

Sales and Use Taxes

J. Patrick Whaley

Dwayne M. Horii

Carley A. Roberts

  • I.  SCOPE OF CHAPTER  8.1
  • II.  INTRODUCTION TO SALES AND USE TAX  8.2
  • III.  THE SALES TAX
    • A.  Imposition of Sales Tax  8.3
      • 1.  Definition of “Sale”
        • a.  Transfer of Title for Consideration  8.4
        • b.  Distinction Between Sales and Services  8.5
        • c.  Fabrication Taxable as Sale  8.6
      • 2.  “Retail Sale” Versus Resale  8.7
      • 3.  Definition of “Tangible Personal Property”  8.8
      • 4.  Definition of “Person”  8.9
      • 5.  Definition of “Retailer”  8.10
        • a.  “Sellers” as Retailers  8.11
        • b.  Auctioneers  8.12
        • c.  Persons Making More Than Two Retail Sales  8.13
      • 6.  Place of Sale  8.14
      • 7.  Gross Receipts  8.15
        • a.  Allocation of Purchase Price  8.16
        • b.  Services as Part of Sale  8.17
        • c.  General Exclusions From Gross Receipts; Technology Transfer Agreements; Worthless Accounts  8.18
    • B.  Responsibility for Tax Payments
      • 1.  Retailer’s Responsibility  8.19
      • 2.  Reimbursement of Retailers by Purchaser  8.20
  • IV.  THE USE TAX
    • A.  Imposition of Use Tax  8.21
    • B.  What Is Taxed?  8.22
      • 1.  Storage, Use, or Other Consumption  8.23
      • 2.  Property Purchased for Use in California  8.24
        • a.  First Functional Use in California  8.25
        • b.  First Functional Use Outside California  8.26
    • C.  Who Is Taxed?  8.27
    • D.  Collection of Tax
      • 1.  Retailer Engaged in Business in California  8.28
      • 2.  Leases  8.29
    • E.  Measure of Tax  8.30
  • V.  EXEMPTIONS FROM TAX  8.31
    • A.  Occasional Sale Exemption  8.32
    • B.  Sales to Government Agencies  8.33
    • C.  Partial Exemption for Property Purchased for Use in Manufacturing or Research and Development  8.33A
    • D.  Nonprofit Organizations  8.34
      • 1.  Donated Property  8.35
      • 2.  Children’s Clothing  8.36
      • 3.  Meals Served by Religious Organizations  8.37
      • 4.  Meals Served to Patients and Inmates of Health Facilities  8.38
      • 5.  Flags Sold by Nonprofit Veterans’ Organizations  8.39
      • 6.  Art Work  8.40
      • 7.  Prisoner of War Bracelets and Veterans’ Memorial Pins  8.41
      • 8.  Medical Alert Tags  8.42
      • 9.  Friends of the Library, PTAs, and Museum Auxiliaries  8.43
      • 10.  Sales by Youth Organizations  8.44
      • 11.  Sales by Charitable Organizations Engaged in Relief of Poverty or Distress  8.45
      • 12.  Auctions to Raise Funds to Shelter the Homeless  8.46
      • 13.  Property Loaned to Educational Institutions; School Yearbooks  8.47
      • 14.  Organizations Serving Developmentally Disabled Individuals or Emotionally Handicapped Children  8.48
      • 15.  Newspapers Published or Distributed by Nonprofit Organizations  8.49
      • 16.  School Meals  8.50
      • 17.  Meals Delivered to Homebound Elderly and Disabled  8.51
      • 18.  Meals for Low-Income Elderly  8.52
      • 19.  Animals and Plant Species  8.53
      • 20.  Meals Served by Veterans’ Organizations  8.54
      • 21.  Thrift Stores  8.55
      • 22.  Medical Health Information Literature  8.56
      • 23.  Food, Food Products, and Prescription Medicines  8.57
  • VI.  DOING BUSINESS AS RETAILER
    • A.  Obtaining Permit
      • 1.  Seller’s Permit  8.58
      • 2.  Use Tax Registration  8.59
      • 3.  Security  8.60
    • B.  Resale and Other Exemption Certificates
      • 1.  Resale Certificate  8.61
      • 2.  Exemption Certificate  8.62
    • C.  Tax Returns and Payment  8.63
    • D.  Records  8.64

9

Directors and Officers

Gary L. Wollberg

  • I.  SCOPE OF CHAPTER  9.1
  • II.  ROLE OF BOARD OF DIRECTORS
    • A.  Authority of Board  9.2
      • 1.  Significant Matters Typically Requiring Board Action or Approval  9.3
      • 2.  Delegation by Board  9.4
    • B.  Executive Committee and Other Board Committees
      • 1.  Committees Possessing Board’s Authority  9.5
      • 2.  Other Committees Appointed by Board
        • a.  Advisory Committees  9.6
        • b.  Audit Committees  9.7
      • 3.  Powers Not Delegable to Board Committees  9.8
      • 4.  Term of Office, Committee Appointments, and Recordkeeping Requirements  9.9
      • 5.  Appointing Staff as Ex Officio Committee Members  9.10
    • C.  Corporate Officers
      • 1.  Required and Discretionary Officers  9.11
      • 2.  Selection and Resignation of Officers  9.12
      • 3.  Statutory Authority of Officers  9.13
      • 4.  Compensation of Officers  9.14
  • III.  COMPOSITION OF BOARD
    • A.  Size and Qualifications
      • 1.  Number of Directors  9.15
      • 2.  Optimum Board Size  9.16
      • 3.  Becoming a Board Member  9.17
      • 4.  Qualifications and Composition of Board  9.18
        • a.  Board Composition  9.19
        • b.  Chief Executive Officer as Ex Officio Director  9.20
      • 5.  Compensation of Directors  9.21
        • a.  Private Inurement Issues  9.22
        • b.  Potential Adverse Effect of Compensation on Statutory Liability Protections  9.23
        • c.  Potential Adverse Impact on Funding Opportunities  9.24
      • 6.  “Interested Person” Rule—Public Benefit Corporations  9.25
    • B.  Method of Selecting Directors
      • 1.  Election by Members or Delegates  9.26
      • 2.  Cumulative Voting  9.27
      • 3.  Designation of Directors by Specified Persons  9.28
      • 4.  Election by Directors  9.29
      • 5.  Appointment by the Court  9.29A
      • 6.  Appointment Via Emergency Bylaws  9.29B
      • 7.  Court Appointment of Provisional Director  9.30
    • C.  Statutory Nomination and Election Procedures—Public Benefit and Mutual Benefit Corporations
      • 1.  Reasonable Nomination and Election Procedures—Safe Harbor Rule  9.31
        • a.  Mailing Election Materials  9.32
        • b.  Publication of Materials Soliciting Votes; Nominee’s Rights  9.33
        • c.  Nomination Procedures  9.34
        • d.  Close of Nominations; When Election Not Required  9.35
        • e.  Protecting Corporation and Corporate Agents From Liability for Content of Nominee-Generated Election Materials  9.36
      • 2.  Typical Nomination and Election Procedures  9.37
      • 3.  Judicially Imposed Procedural Fairness  9.38
      • 4.  Election Inspectors—Public Benefit and Mutual Benefit Corporations  9.39
      • 5.  Request for Election Results  9.40
      • 6.  Judicial Challenge of Director Elections  9.41
    • D.  Term of Office
      • 1.  Term of Office Generally  9.42
      • 2.  Public Benefit and Mutual Benefit Corporations  9.43
      • 3.  Consecutive Terms of Office  9.44
    • E.  Vacancies  9.45
    • F.  Resignation  9.46
    • G.  Removal of Directors  9.47
      • 1.  Authority to Remove Directors
        • a.  Removal of Board-Elected Directors  9.48
        • b.  Removal of Member-Elected Directors  9.49
        • c.  Removal of Designated Directors  9.50
        • d.  Removal by Court Action  9.51
          • (1)  Grounds for Initiating Court Action—Removal for Cause  9.52
          • (2)  Persons Empowered to Initiate Action  9.53
      • 2.  Ballot Procedure for Removal of Directors—Corporations With Members
        • a.  Inspectors of Election in Director Recall Elections  9.54
        • b.  Procedural Issues Not Addressed in Code  9.55
          • (1)  Form and Content of Recall Petitions  9.56
          • (2)  Communications to Members  9.57
          • (3)  Statements by Directors  9.58
          • (4)  Targeted Directors Participating in Fashioning Board Responses  9.59
          • (5)  Right to Terminate Recall Once Called  9.60
          • (6)  Role of Legal Counsel  9.61
          • (7)  Separate or Combined Recall Vote If More Than One Director Targeted  9.62
          • (8)  Combining Vote to Elect New Candidates to Office With Recall  9.63
      • 3.  Effect of Reduction in Number of Directors  9.64
  • IV.  EXECUTION OF BOARD ACTIONS
    • A.  Board Meetings
      • 1.  Types and Frequency of Meetings  9.65
        • a.  Annual Organizational Meeting  9.66
        • b.  Other Regular Meetings  9.67
        • c.  Special Meetings  9.68
        • d.  Conduct of Board Meetings—Community Associations  9.69
      • 2.  Notice Requirements Applicable to Board Meetings  9.70
        • a.  Form: Notice of Meeting  9.71
        • b.  Form: Call of Meeting  9.72
        • c.  Form: Agenda of Meeting  9.73
        • d.  Waiver of Notice  9.74
          • (1)  Form: Waiver of Notice  9.75
          • (2)  Form: Waiver and Consent in Lieu of Notice  9.76
          • (3)  Form: Approval of Minutes of Meeting  9.77
      • 3.  Meeting Procedure
        • a.  Manner of Attending Meetings  9.78
        • b.  Quorum Requirements  9.79
        • c.  Conducting Board Meetings  9.80
        • d.  Voting by Directors at Meetings  9.81
        • e.  Adjournment of Meetings  9.82
      • 4.  Minutes of Meetings
        • a.  Use and Preparation  9.83
        • b.  Checklist: Preparation of Minutes  9.84
        • c.  Minutes of Board or Committee Meeting
          • (1)  Form: Introductory Statement  9.85
          • (2)  Form: Attendance and Quorum  9.86
          • (3)  Form: Chair and Secretary  9.87
          • (4)  Form: Notice  9.88
          • (5)  Form: Minutes of Last Meeting  9.89
          • (6)  Form: Election of Officers  9.90
          • (7)  Form: Adoption of Resolution  9.91
          • (8)  Form: Establishment of Executive Committee  9.92
          • (9)  Form: Establishment of Special Committees  9.93
          • (10)  Form: Amendment of Articles or Bylaws  9.94
          • (11)  Form: Adjournment or Recess to Another Time or Place  9.95
          • (12)  Form: Final Adjournment  9.96
          • (13)  Form: Submission and Approval  9.97
    • B.  Board Action by Written Consent
      • 1.  General Considerations  9.98
      • 2.  Board’s Consent to Action Without Meeting
        • a.  Form: Unanimous Written Consent  9.99
        • b.  Form: Directors’ Signing of Document  9.100
        • c.  Form: Action Taken by Board  9.101
        • d.  Form: Signature Block  9.102
  • V.  STANDARDS OF CONDUCT FOR DIRECTORS; DIRECTOR LIABILITY
    • A.  Fiduciary Responsibilities Generally
      • 1.  Fiduciary Duties Owed by Directors  9.103
      • 2.  General Scope of Fiduciary Duty  9.104
      • 3.  Standard of Care for Officers  9.105
      • 4.  To Whom Directors Owe Fiduciary Duty  9.106
      • 5.  Business Judgment Rule
        • a.  Definition and Application  9.107
        • b.  Business Judgment Rule and Interested Directors  9.108
    • B.  Standards of Conduct for Directors
      • 1.  Directors’ Duty of Care  9.109
      • 2.  Director’s Duty of Inquiry; Right to Rely on Advice of Others  9.110
      • 3.  Duty of Loyalty
        • a.  Definition  9.111
        • b.  Corporate Opportunity Doctrine  9.112
      • 4.  Investment Standards  9.113
      • 5.  Special Duties—Directors of Community Associations  9.114
    • C.  Effect of Compliance With Standard of Care
      • 1.  No Personal Liability for Directors  9.115
      • 2.  Liability for Tortious Conduct  9.116
      • 3.  Liability to Third Parties for Falsehood or Fraud  9.117
      • 4.  Liability Under Alter-Ego Doctrine  9.118
      • 5.  Liability for Certain Employment Matters  9.119
      • 6.  Liability for Taxes Imposed on Private Foundation’s Self-Dealing Transactions  9.120
    • D.  Persons With Standing to Bring Actions for Breach of Fiduciary Duty or Charitable Trust Obligations
      • 1.  Attorney General  9.121
      • 2.  Statutory Members of Corporation  9.122
      • 3.  Directors and Officers  9.123
      • 4.  Commissioner of Business Oversight  9.124
      • 5.  Persons Granted Relator Status  9.125
      • 6.  Commissioner of Department of Real Estate—Community Associations  9.126
    • E.  Actions Relating to Abuse of Authority or Breach of Trust
      • 1.  Ultra Vires Acts  9.127
      • 2.  Actions for Breach of Trust  9.128
      • 3.  Actions to Enjoin Breach of Express Terms of Gift—Religious Corporations  9.129
      • 4.  Actions to Compel Compliance With Corporate Filing and Membership Rights—Public Benefit and Mutual Benefit Corporations  9.130
  • VI.  TRANSACTIONS BETWEEN NONPROFIT CORPORATIONS AND DIRECTORS
    • A.  Self-Dealing Transactions—Public Benefit Corporations and Religious Corporations  9.131
      • 1.  Transactions Excluded From Definition of Self-Dealing Transactions  9.132
      • 2.  Approving Self-Dealing Transactions  9.133
        • a.  Attorney General’s Approval  9.134
        • b.  Court Approval  9.135
        • c.  Board Validation  9.136
        • d.  Approval by Other Authorized Persons  9.137
        • e.  Approval by Members of Religious Corporations  9.138
      • 3.  Defenses; Statutes of Limitation for Actions to Challenge Self-Dealing Transactions  9.139
      • 4.  Remedies for Self-Dealing Transactions; Liability of Interested Directors  9.140
      • 5.  Checklist: Board Approval of Transactions With Interested Directors  9.141
      • 6.  Form: Minutes Reflecting Approval of Transaction—Public Benefit and Religious Corporations  9.142
    • B.  Self-Dealing Prohibitions—Mutual Benefit Corporations Holding Assets in Charitable Trust  9.143
    • C.  Statutory Regulation of Transactions With Interested Directors—Mutual Benefit Corporations  9.144
    • D.  Transactions Between Nonprofit Corporations and Other Corporations With Interlocking Directorships  9.145
    • E.  Loans and Guaranties
      • 1.  Public Benefit Corporations  9.146
      • 2.  Mutual Benefit Corporations  9.147
      • 3.  Religious Corporations  9.148
      • 4.  Liability for Distributions, Loans, and Guaranties  9.149
    • F.  Additional Conflict of Interest Regulations  9.150
  • VII.  STATUTORY LIABILITY PROTECTIONS
    • A.  Evolution of Statutory Liability Protection  9.151
    • B.  Charities and Trade Associations—Protection Under Corp C §5047.5  9.152
    • C.  Public Benefit and Religious Corporations—Protection Under Corp C §§5239, 9247; CCP §425.15  9.153
    • D.  Community Associations—Protection Under CC §5800  9.154
    • E.  Volunteer Protection Act of 1997  9.155
    • F.  Emergency Actions in Good Faith  9.155A
  • VIII.  INDEMNIFICATION OF DIRECTORS, OFFICERS, AND AGENTS; INSURANCE
    • A.  Statutory Scheme of Indemnification  9.156
    • B.  Minimum Standard of Care Required for Indemnification Eligibility  9.157
    • C.  Agents’ Right to Demand Indemnification  9.158
    • D.  Amount of Indemnification  9.159
    • E.  Litigation Expense Advances  9.160
    • F.  Expansion of Indemnification Rights Prohibited  9.161
    • G.  Insurance  9.162
  • IX.  DIRECTORS’ INSPECTION RIGHTS
    • A.  Scope of Directors’ Rights  9.163
    • B.  Alternative Methods of Responding to Directors’ Requests for Inspection  9.164

10

Members and Other Interested Persons

Gary L. Wollberg

  • I.  SCOPE OF CHAPTER  10.1
  • II.  PRELIMINARY DECISIONS REGARDING MEMBERS
    • A.  Roles of Individuals in Nonprofit Corporations
      • 1.  Definitions of “Member” and “Membership”  10.2
      • 2.  Corporations Without Members; Exercise of Membership Rights by Directors  10.3
      • 3.  The Decision to Issue or Dispense With Memberships  10.4
      • 4.  Delegates  10.5
      • 5.  Associated Persons  10.6
    • B.  Types of Memberships
      • 1.  General Rule: Same Rights for All Members  10.7
      • 2.  Different Rights for Different Members  10.8
        • a.  Classes of Members  10.9
        • b.  Class Voting  10.10
        • c.  One-Person-One-Membership Rule; Exceptions  10.11
    • C.  Application of California Corporate Securities Law to Nonprofit Memberships
      • 1.  Qualification or Exemption From Qualification Required  10.12
      • 2.  Memberships Generally Included in Definition of “Security”  10.13
        • a.  Howey Test  10.14
        • b.  Risk Capital Test  10.15
      • 3.  General Exemption for Nonprofit Corporation Memberships  10.16
      • 4.  Interpretive Regulations and Commissioner’s Releases  10.17
        • a.  Commissioner Release No. 15-C  10.18
        • b.  Commissioner Rule 260.105.20  10.19
      • 5.  Other Possible Corporate Securities Law Exemptions  10.20
    • D.  Application of Federal Securities Laws
      • 1.  Registration, or Exemption from Registration, Required  10.21
      • 2.  Definition of “Security”  10.22
      • 3.  Application of Howey Test to Nonprofit Membership Interests  10.23
      • 4.  General Exemption for Eleemosynary Organizations  10.24
  • III.  ADMITTING MEMBERS
    • A.  Establishing Criteria for Membership  10.25
    • B.  Discriminatory Membership Criteria
      • 1.  Nonprofit Corporation Law Does Not Address Discrimination  10.26
      • 2.  Privacy and First Amendment Rights Versus Barring Discrimination  10.27
      • 3.  The Unruh Civil Rights Act  10.28
    • C.  Eligible Person’s Right to Membership  10.29
      • 1.  Professional or Trade Organization  10.30
      • 2.  Membership Based on Contract Rights or Property Ownership  10.31
    • D.  Consideration of Memberships  10.32
    • E.  Membership Certificates or Other Documents Identifying Members  10.33
  • IV.  MEMBERS’ VOTING RIGHTS
    • A.  Role of Voting Members in Corporate Governance  10.34
    • B.  Actions Requiring Members’ Approval  10.35
    • C.  Statutory Members’ Other (Nonvoting) Rights  10.36
    • D.  Statutory Terms Pertaining to Member Voting Rights
      • 1.  Authorized Number of Members  10.37
      • 2.  Voting Power  10.38
      • 3.  Approval by Majority of All Members  10.39
      • 4.  Approval by Members  10.40
      • 5.  Comparison of Statutory Member Approval Requirements  10.41
      • 6.  Electronic Transmission by or to the Corporation  10.42
    • E.  Right to Vote
      • 1.  Voter Eligibility Requirements  10.43
      • 2.  Voting Rights of Co-Members  10.44
      • 3.  Record Date for Notice, Voting, and Other Rights  10.45
        • a.  Notice  10.46
        • b.  Voting  10.47
        • c.  Other Rights  10.48
    • F.  Member Voting Structures; Modification of Statutory Voting Rules
      • 1.  One-Member-One-Vote Rule and Its Modifications  10.49
      • 2.  Supermajority or Unanimous Vote Requirements  10.50
      • 3.  Class Voting  10.51
      • 4.  Cumulative Voting  10.52
      • 5.  Voting Considerations in Absence of Cumulative Voting  10.53
      • 6.  Voting Trusts and Voting Trust Agreements  10.54
    • G.  Permitted Methods of Voting or Consenting to Action
      • 1.  Voting in Person at Membership Meetings—Public Benefit and Mutual Benefit Corporations  10.55
      • 2.  Voting by Proxy at Membership Meetings
        • a.  Proxy Voting Generally  10.56
        • b.  Advantages and Disadvantages of Full Proxy Voting  10.57
        • c.  Elimination of Proxy Rights  10.58
        • d.  Limited Proxies  10.59
        • e.  Proxies Permitted Only for Quorum Purposes  10.60
        • f.  Irrevocable Proxies—Mutual Benefit Corporations  10.61
        • g.  Matters That Must Be Described in Proxy  10.62
        • h.  Additional Proxy Requirements—Public Benefit and Mutual Benefit Corporations With 100 or More Members  10.63
        • i.  Form: Proxy Distributed to Ten or More Members of Public Benefit or Mutual Benefit Corporation With 100 or More Members  10.64
        • j.  Form: Proxy Distributed to Fewer Than Ten Members or to Members of Nonprofit Corporation With Fewer Than 100 Members  10.65
      • 3.  Member Voting by Written Ballot
        • a.  Authority to Vote by Written Ballot—Public Benefit and Mutual Benefit Corporations  10.66
        • b.  Authority to Vote by Written Ballot—Religious Corporations  10.67
        • c.  Form: Written Ballot to Amend Bylaws  10.68
        • d.  Confidentiality of Written Ballots  10.69
        • e.  Combining Written Ballot Solicitations With Membership Meetings  10.70
        • f.  Members’ Lack of Right to Demand Written Ballot Solicitations  10.71
      • 4.  Provisions Restricting Manner of Voting Enforceable  10.72
      • 5.  Action by Unanimous Written Consent of Members  10.73
      • 6.  Authority of Corporation to Accept or Reject Proxies, Ballots, Consents, and Waivers  10.74
  • V.  MEMBERSHIP MEETINGS
    • A.  Regular Meetings
      • 1.  Public Benefit and Mutual Benefit Corporations  10.75
      • 2.  Religious Corporations  10.76
      • 3.  Homeowners’ Associations  10.77
    • B.  Special Meetings  10.78
    • C.  Notice Requirements for Membership Meetings  10.79
      • 1.  Members Entitled to Receive Notice  10.80
      • 2.  Time for Furnishing Notice
        • a.  For Regular Member Meetings and Special Meetings Called by the Board  10.81
        • b.  For Special Meetings Called by 5 Percent of Members  10.82
        • c.  For Adjourned Meetings  10.83
      • 3.  Contents of Notice
        • a.  General Rule  10.84
        • b.  Matters That Must Be Specified in Notice  10.85
        • c.  Form: Notice of Meeting  10.86
      • 4.  Service of Notice  10.87
      • 5.  Defective Call or Notice  10.88
      • 6.  Court Approval of Defective Notice  10.89
      • 7.  Waiver of Notice
        • a.  Methods of Waiving Notice  10.90
        • b.  Form: Waiver of Notice and Consent  10.91
    • D.  Quorum Requirements
      • 1.  General Rule  10.92
      • 2.  Public Benefit and Mutual Benefit Corporations  10.93
      • 3.  Religious Corporations  10.94
      • 4.  Homeowners’ Associations  10.95
      • 5.  Quorum of Less Than One-Third—Public Benefit and Mutual Benefit Corporations  10.96
      • 6.  Descending Quorum Requirements  10.97
      • 7.  Required Vote for Valid Action When Quorum Present  10.98
      • 8.  Withdrawal of Members Leaving Less Than a Quorum  10.99
      • 9.  Adjournment When Quorum Not Obtained  10.100
    • E.  Adjournment—Public Benefit and Mutual Benefit Corporations  10.101
    • F.  Who Can Attend Membership Meetings  10.102
  • VI.  MEETINGS OR BALLOTS ORDERED BY COURT
    • A.  Corporation Fails to Hold Meeting
      • 1.  Regular Meetings—Public Benefit and Mutual Benefit Corporations  10.103
      • 2.  Special Meetings  10.104
    • B.  Corporation Unable to Hold Meeting or Obtain Member Approvals  10.105
    • C.  Initiation of Court Proceedings
      • 1.  Contents of Petition for Initiation of Court Proceedings  10.106
      • 2.  Hearing and Notice of Hearing  10.107
  • VII.  MEMBERS’ INSPECTION RIGHTS
    • A.  Inspection Rights Generally  10.108
    • B.  Required Records Subject to Member Inspection  10.109
    • C.  Timing for Inspection  10.110
    • D.  What Constitutes Permitted Purpose  10.111
    • E.  Statutory Protections Against Abuse of Inspection Rights  10.112
      • 1.  Protection Against Improper Access by Authorized Number of Members—Public Benefit and Mutual Benefit Corporations  10.113
      • 2.  Limitations on Access to Membership List to Protect Constitutional Rights—Public Benefit and Mutual Benefit Corporations  10.114
      • 3.  Damages From Improper Use  10.115
      • 4.  Corporation’s Right to Seek Damages and Injunctive Relief  10.116
    • F.  Enforcement of Inspection Rights
      • 1.  Enforcement of Demand for Membership List—Public Benefit and Mutual Benefit Corporations  10.117
      • 2.  Enforcement Remedies Available to All Members  10.118
      • 3.  Criminal and Civil Sanctions for Improper Recordkeeping  10.119
      • 4.  Attorney Fees—Public Benefit and Mutual Benefit Corporations  10.120
  • VIII.  MEMBERS’ OBLIGATIONS
    • A.  Payments to Corporation
      • 1.  Fees for Joining, Dues, Assessments  10.121
      • 2.  Enforcing Members’ Payment Obligations  10.122
    • B.  Liability for Corporate Obligations  10.123
    • C.  Ability of Corporate Creditors to Reach Amounts Owed by Members to Corporation  10.124
  • IX.  TERMINATING MEMBERSHIPS
    • A.  Resignation  10.125
    • B.  Expiration of Membership  10.126
    • C.  Expulsion, Suspension, or Termination
      • 1.  Public Benefit and Mutual Benefit Corporations  10.127
        • a.  Grounds for Expulsion, Suspension, or Termination  10.128
        • b.  Procedure: Reasonable Requirements  10.129
        • c.  Members’ Remedies  10.130
      • 2.  Terminating Membership—Religious Corporations  10.131
      • 3.  Terminating Class of Memberships or All Memberships—Public Benefit Corporations  10.132
    • D.  Redemption of Memberships—Mutual Benefit Corporations  10.133
  • X.  TRANSFERRING MEMBERSHIPS
    • A.  Public Benefit and Religious Corporations  10.134
    • B.  Mutual Benefit Corporations  10.135
  • XI.  MEMBERS’ DERIVATIVE SUITS  10.136
  • XII.  DISTRIBUTIONS TO MEMBERS
    • A.  Definitions  10.137
    • B.  Distributions on Dissolution  10.138
    • C.  Restrictions on Distributions; Persons Liable for Violations
      • 1.  Public Benefit Corporations Prohibited From Making Distributions  10.139
      • 2.  Mutual Benefit Corporations May Make Distributions in Certain Situations  10.140
      • 3.  Religious Corporations Prohibited From Making Distributions  10.141
      • 4.  Suit Against Directors Who Approved Unlawful Distribution  10.142

11

Property Tax Exemption for Nonprofit Organizations

William C. Choi

Shannon M. Paresa

  • I.  SCOPE OF CHAPTER  11.1
  • II.  OVERVIEW  11.2
  • III.  WELFARE EXEMPTION
    • A.  Background  11.3
    • B.  Requirements for Exemption  11.4
      • 1.  Qualifying Organization  11.5
        • a.  Religious, Hospital, Scientific, or Charitable Purpose  11.6
        • b.  Not Organized or Operated for Profit; Safe Harbor for Hospitals  11.7
        • c.  No Benefit to Private Individual  11.8
        • d.  Acceptable Dissolution Clause and Statement of Irrevocable Dedication  11.9
          • (1)  BOE Irrevocable Dedication Clauses  11.10
          • (2)  Sample BOE Dissolution Clauses  11.11
        • e.  Must Be Exempt Organization  11.12
        • f.  Limited Liability Companies May Qualify  11.13
        • g.  Limited Partnerships for Lower Income Housing May Qualify  11.13A
      • 2.  Property Owned and Operated by Qualifying Organization  11.14
        • a.  Property Operated by Nonqualifying Organization  11.15
        • b.  Property Owned by Nonqualifying Organization  11.16
        • c.  Long-Term Leases  11.17
        • d.  Possessory Interests  11.18
      • 3.  Exclusive Use for Qualifying Purposes  11.19
        • a.  Qualifying Purposes  11.20
          • (1)  Religious  11.21
          • (2)  Hospital  11.22
            • (a)  Outpatient Clinics  11.23
            • (b)  Hospital Support Organizations  11.24
          • (3)  Scientific  11.25
          • (4)  Charitable  11.26
            • (a)  Community Benefit Test  11.27
            • (b)  Qualifying Educational Activities  11.28
            • (c)  Property Used for Educational Broadcasting  11.29
            • (d)  Nonqualifying Educational Activities  11.30
            • (e)  Homes for the Aged  11.31
            • (f)  Preservation of Nature  11.32
            • (g)  Other Qualifying Activities  11.33
        • b.  Property Used Exclusively for Qualifying Purposes  11.34
          • (1)  “Exclusive Use” Defined: Incidental and Reasonably Necessary Standard  11.35
            • (a)  Cases Finding Property to Be Exempt Under Incidental and Reasonably Necessary Standard  11.36
            • (b)  Cases Finding Property to be Nonexempt Under Incidental and Reasonably Necessary Standard  11.37
          • (2)  “Occasional Use” for Nonqualifying Purposes  11.38
          • (3)  Housing  11.38A
        • c.  Property in Use on January 1 Lien Date  11.39
          • (1)  Unused Property  11.40
          • (2)  Property Under Construction  11.41
        • d.  Property Used for Actual Operation of Exempt Activity and Reasonably Necessary to Accomplishment of Exempt Purpose  11.42
          • (1)  In General  11.43
          • (2)  Fundraising Activities  11.44
            • (a)  Occasional Fundraising Activities  11.45
            • (b)  Examples of Occasional Fundraising Activities  11.46
              • (i)  Examples of Nonqualifying Fundraising Activities  11.47
            • (c)  Fundraising (and Other Income-Generating) Activities With Proceeds Taxable as Unrelated Business Taxable Income (UBTI)  11.48
            • (d)  Partial Exemption Allowed  11.49
              • (i)  Information Required  11.50
          • (3)  Use of Property for Meetings Conducted by Other Exempt Organizations  11.51
        • e.  Prohibition on Property Used to Benefit Private Person  11.52
        • f.  Prohibition on Property Used for Fraternal, Lodge, or Social Club Purposes  11.53
    • C.  Welfare Exemption Claim Process  11.54
      • 1.  Organizational Clearance Certificate Filed With BOE  11.55
      • 2.  Filing of Claim With County Assessor  11.56
        • a.  Filing Date  11.57
        • b.  Effect of Late Filing  11.58
      • 3.  Review of Claim  11.59
      • 4.  Challenging Denial of Claim  11.60
  • IV.  CHURCH AND RELIGIOUS EXEMPTIONS
    • A.  Welfare, Church, and Religious Exemptions Compared  11.61
    • B.  Church Exemption  11.62
      • 1.  Requirements for Exemption  11.63
        • a.  Religious Worship  11.64
        • b.  Exclusive Use Requirement  11.65
      • 2.  Administrative Issues  11.66
    • C.  Religious Exemption  11.67
  • V.  MUSEUMS, LIBRARIES, AND EDUCATIONAL INSTITUTIONS
    • A.  Museum/Library Exemption  11.68
      • 1.  “Museum” and “Library” Defined  11.69
      • 2.  Exemption for Leased Property  11.70
      • 3.  Administrative Issues  11.71
    • B.  Educational Institution Exemption  11.72
      • 1.  Exclusive Use Requirement  11.73
        • a.  Incidental Use for Noneducational Purposes  11.74
        • b.  Residential Use of Property  11.75
      • 2.  Exemption for Leased Property  11.76
      • 3.  Administrative Issues  11.77

12

Required Tax Filings, Recordkeeping, Reporting, and Rights of Inspection

M. Carr Ferguson

Kenneth G. Coveney

Paul J. Dostart

  • I.  SCOPE OF CHAPTER  12.1
  • II.  REQUIRED TAX FILINGS
    • A.  Reports and Returns to Internal Revenue Service
      • 1.  Information That Must Be Furnished to IRS  12.2
      • 2.  The IRS Form 990: Variations and Exceptions From Filing  12.3
        • a.  IRS Form 990—Core Form  12.4
        • b.  Glossary and Appendix  12.5
        • c.  Schedule A (Form 990 or 990-EZ)  12.6
        • d.  Schedule B (Form 990, 990-EZ, or 990-PF)  12.7
        • e.  Schedule C (Form 990 or 990-EZ)  12.8
        • f.  Schedule D (Form 990)  12.9
        • g.  Schedule E (Form 990 or 990-EZ)  12.10
        • h.  Schedule F (Form 990)  12.11
        • i.  Schedule G (Form 990 or 990-EZ)  12.12
        • j.  Schedule H (Form 990)  12.13
        • k.  Schedule I (Form 990)  12.14
        • l.  Schedule J (Form 990)  12.15
        • m.  Schedule K (Form 990)  12.16
        • n.  Schedule L (Form 990 or 990-EZ)  12.17
        • o.  Schedule M (Form 990)  12.18
        • p.  Schedule N (Form 990 or 990-EZ)  12.19
        • q.  Schedule O (Form 990 or 990-EZ)  12.20
        • r.  Schedule R (Form 990)  12.21
      • 3.  IRS Form 990-EZ, Short Form Return of Organization Exempt From Income Tax  12.22
      • 4.  IRS Form 990-T, Exempt Organization Business Income Tax Return  12.23
      • 5.  IRS Form 990-PF, Private Foundation Annual Return  12.24
      • 6.  IRS Form 990-W, Estimated Tax on Unrelated Business Income for Tax-Exempt Organizations  12.25
      • 7.  IRS Form 8282, Donee Information Return  12.26
      • 8.  Time for Filing Form 990  12.27
      • 9.  IRS Form 8868, Application for Extension of Time to File Form 990  12.28
      • 10.  IRS Form 990-N, Electronic Notice (e-Postcard)  12.29
      • 11.  Penalties  12.30
    • B.  Reports and Returns to Franchise Tax Board
      • 1.  Required Filings  12.31
      • 2.  Penalties for Failure to File  12.32
    • C.  Reports to State Board of Equalization and County Assessor  12.33
    • D.  Other Sanctions for False Information and Failing to Report  12.34
  • III.  RECORDKEEPING
    • A.  Records That Must Be Maintained
      • 1.  Copies of Articles and Bylaws  12.35
      • 2.  Books of Account, Minutes of Proceedings, and Membership Lists  12.36
      • 3.  Waivers of Notice, Consents to Holding, and Approvals of Board Meetings  12.37
      • 4.  Consents to Board Action Without Meeting  12.38
      • 5.  Waivers of Notice, Consents to Holding, and Approvals of Membership Meetings  12.39
      • 6.  Consents to Membership Action Without Meeting  12.40
      • 7.  Tax Records: Returns by Tax-Exempt Organizations and Certain Nonexempt Organizations  12.41
    • B.  Sanctions for Failing to Keep Records  12.42
  • IV.  REPORTING
    • A.  Summary of Reporting Requirements  12.43
    • B.  Reports to Members and Directors
      • 1.  Annual Report—Public Benefit Corporations  12.44
      • 2.  Annual Report—Mutual Benefit Corporations  12.45
      • 3.  Annual Report—Religious Corporations  12.46
      • 4.  Accountant’s Certification of Annual Reports—Public Benefit and Mutual Benefit Corporations  12.47
      • 5.  Exemptions From and Alternatives to Annual Reports—Public Benefit and Mutual Benefit Corporations  12.48
      • 6.  Annual Statement of Loans, Indemnifications, and Self-Dealing Transactions—Public Benefit and Mutual Benefit Corporations  12.49
      • 7.  Special Rules for Certain Loans and Guaranties  12.50
      • 8.  Methods of Reporting to Members—Public Benefit and Mutual Benefit Corporations  12.51
      • 9.  Reports to Directors of Religious Corporations  12.52
      • 10.  Reports by Entities Receiving $2 Million or More in Revenue  12.53
    • C.  Reports to Secretary of State
      • 1.  Biennial Statement  12.54
      • 2.  Statement Designating New Agent for Service of Process  12.55
      • 3.  Amendments to Articles and Restated Articles  12.56
    • D.  Reports to Attorney General
      • 1.  Through Registrar of Charitable Trusts  12.57
        • a.  Corporations Required to Report  12.58
        • b.  Entities Exempt From Filing Form RRF-1  12.59
        • c.  Filing and Fee  12.60
        • d.  Registration Requirements  12.61
        • e.  Annual Reports  12.62
        • f.  Mixed and Split-Interest Trusts  12.63
        • g.  Reports Provide Accountability  12.64
        • h.  Sanctions for Failing to File Report
          • (1)  Revocation of Tax Exemption  12.65
          • (2)  Other Sanctions  12.66
        • i.  Reports Under Uniform Prudent Management of Institutional Funds Act  12.67
        • j.  Filings With Registrar of Charitable Trusts Required on Basis of Fundraising Revenues and Expenditures  12.68
      • 2.  Other Reporting Requirements: Articles of Incorporation, Certificates of Amendment, Mergers, and Disposition of Assets  12.69
    • E.  Best Voluntary Reporting Practices
      • 1.  Anti-Terrorist Financing Guidelines  12.70
      • 2.  Voluntary Best Practices Under the Guidelines  12.71
      • 3.  Crisis Management
        • a.  Preparation Required  12.72
        • b.  Best Voluntary Reporting Practices  12.73
  • V.  RIGHTS OF INSPECTION
    • A.  Inspection by General Public
      • 1.  Inspection of IRS Form 990, Form 990-PF, and Form 990-T  12.74
        • a.  Organizations to Which IRS Form 990, Form 990-PF, and Form 990-T Inspection Rights Apply  12.75
        • b.  Nondisclosure of Contributors  12.76
        • c.  Nondisclosure of Information Previously Withheld by Secretary of the Treasury  12.77
      • 2.  Application for Tax-Exempt Status and Related Documents
        • a.  Public Inspection at IRS Office  12.78
        • b.  Public Inspection at Organization’s Office
          • (1)  Exemption Application and Supporting Papers  12.79
          • (2)  Determination Letter
            • (a)  Protected Information  12.80
            • (b)  Other Matters Not Completely Open to Public Inspection  12.81
      • 3.  Organization’s Rights and Obligations Concerning Inspections and Requester’s Right to Complain  12.82
      • 4.  Harassment Limitation  12.83
      • 5.  Making Documents Widely Available  12.84
      • 6.  Obtaining Information Returns  12.85
    • B.  Inspection by Members  12.86
    • C.  Inspection by Directors  12.87
    • D.  Inspection by Attorney General
      • 1.  Through Registrar of Charitable Trusts  12.88
      • 2.  Under Corporations Code  12.89
  • VI.  BROWN ACT APPLICABILITY TO CALIFORNIA NONPROFITS
    • A.  Overview of Ralph M. Brown Act  12.90
    • B.  Nonprofit Corporation Activity Potentially Subject to Brown Act  12.91
    • C.  “Meeting” Defined  12.92
    • D.  Notice and Agenda Requirements
      • 1.  Regular Meetings  12.93
      • 2.  Special Meetings  12.94
      • 3.  Emergency Meetings  12.95
      • 4.  Closed-Session Meetings  12.96
    • E.  Penalties and Remedies for Violation of Act
      • 1.  Criminal Penalties  12.97
      • 2.  Civil Remedies  12.98

13

Nonprofit Operations

Pamela S. Kaufmann

  • I.  SCOPE OF CHAPTER: BEYOND SECURING NONPROFIT STATUS  13.1
  • II.  EMPLOYMENT ISSUES
    • A.  Employer Identification Number  13.2
    • B.  Employer Taxes and Withholding
      • 1.  Federal Taxes  13.3
        • a.  IRS Form W-4 (Employee’s Withholding Allowance Certificate)  13.4
        • b.  IRS Form W-2 (Wage and Tax Statement)  13.5
        • c.  Social Security Taxes (FICA)  13.6
        • d.  Medicare Taxes  13.6A
        • e.  Federal Unemployment Taxes (FUTA)  13.7
        • f.  Deposit of Taxes
          • (1)  Requirements  13.8
          • (2)  Frequency of Deposits  13.9
        • g.  Earned Income Credit Payments
          • (1)  Advance Payments  13.10
          • (2)  After-the-Fact Payments [Deleted]  13.11
        • h.  Independent Contractors  13.12
      • 2.  California Taxes  13.13
        • a.  Registration With EDD; Report of New Employees and Independent Contractors  13.14
        • b.  Wage Withholdings  13.15
        • c.  Personal Income Taxes  13.16
        • d.  State Unemployment Insurance Taxes (SUTA)  13.17
        • e.  Section 501(c)(3) Organizations: Options for Financing Unemployment Insurance Costs  13.18
        • f.  Employment Training Tax  13.19
        • g.  State Disability Insurance (SDI) and Family Temporary Disability Insurance (FTDI)  13.20
        • h.  Special Exemption for Certain Employees of Nonprofit Corporations  13.21
        • i.  Single Rate Notice for UI, ETT, and SDI  13.22
        • j.  Mandatory Electronic Filing and Payment  13.22A
        • k.  Workers’ Compensation Insurance  13.23
          • (1)  Choosing an Insurer  13.24
          • (2)  Using a Broker  13.25
          • (3)  Self-Insurance and Other Alternatives to Commercial Insurance  13.26
          • (4)  Covering Volunteers  13.27
        • l.  Independent Contractors  13.28
        • m.  Employer Tax Credits  13.29
      • 3.  Local Payroll Taxes  13.30
    • C.  Immigration and Naturalization  13.31
    • D.  New Employee Registry  13.32
    • E.  Access to Employment Records  13.33
    • F.  Personnel Practices
      • 1.  Survey of Applicable Laws  13.34
      • 2.  Wage and Hour Laws
        • a.  Federal Fair Labor Standards Act; California Wage Orders  13.35
        • b.  Overtime  13.36
        • c.  Bonuses and Severance Payments  13.36A
      • 3.  Occupational Safety Requirements  13.37
      • 4.  Nondiscrimination Laws  13.38
      • 5.  Notices to Employees  13.39
      • 6.  Employee Benefit Plans  13.40
        • a.  Deferred Compensation and Retirement Plans  13.41
        • b.  Health Plans  13.42
        • c.  ERISA Requirements  13.43
        • d.  Transportation Benefits  13.44
        • e.  Health Reimbursement Arrangements and Health Savings Accounts  13.45
      • 7.  Personnel Policies  13.46
      • 8.  Family Medical Leave  13.47
  • III.  OTHER TAXES  13.48
  • IV.  LICENSES AND PERMITS
    • A.  Federal Licenses and Consents  13.49
    • B.  State and Local Licenses and Permits  13.50
      • 1.  Seller’s Permit  13.51
      • 2.  Nonprofit Mailing Permit  13.52
      • 3.  Local Licenses  13.53
    • C.  Solicitation Permits  13.54
    • D.  Commercial Driver’s Licenses  13.55
  • V.  INSURANCE  13.56
    • A.  Officers’ and Directors’ Liability
      • 1.  No Personal Negligence Liability If Nonprofit Is Insured  13.57
      • 2.  Public Benefit Corporations That Attempt to Purchase Insurance  13.58
    • B.  Types of Insurance
      • 1.  Commercial General Liability  13.59
      • 2.  Directors’ and Officers’ Liability Insurance  13.60
        • a.  Coverage  13.61
        • b.  Exclusions  13.62
      • 3.  Workers’ Compensation  13.63
      • 4.  Professional Liability  13.64
      • 5.  Cyber Insurance  13.64A
      • 6.  Class Actions   13.64B
    • C.  “Occurrence” Versus “Claims Made” Coverage  13.65
    • D.  Exclusions and Endorsements  13.66
    • E.  “Duty-to-Defend” Coverage  13.67
    • F.  Obtaining Affordable Insurance  13.68
    • G.  Establishing Relationship With Broker or Agent  13.69
    • H.  Insurance Scarcity  13.70
    • I.  Importance of Risk Management  13.71
  • VI.  BANKING
    • A.  Establishing Bank Account
      • 1.  Selecting Bank  13.72
      • 2.  Comparing Rates  13.73
      • 3.  Selecting Signatories  13.74
    • B.  Borrowing Funds  13.75
    • C.  Report of Foreign Bank and Financial Account (FBAR)  13.75A
    • D.  Due Diligence and Diversification  13.75B
  • VII.  LEASES  13.76
    • A.  Fair Market Considerations  13.77
    • B.  Nonprofit Corporation as Lessor; Property Tax Issues  13.78
  • VIII.  INTELLECTUAL PROPERTY RIGHTS  13.79
    • A.  Trademarks and Service Marks  13.80
      • 1.  Reasons for Seeking Trademark or Service Mark Protection  13.81
      • 2.  Federal Marks  13.82
      • 3.  California Marks  13.83
    • B.  Corporate Names  13.84
    • C.  Fictitious Business Names  13.85
    • D.  Copyrights
      • 1.  Definition; Eligible Works  13.86
      • 2.  Registration; Copyright Notice  13.87
      • 3.  Application Process; Duration  13.88
      • 4.  No State Copyright Law  13.89
      • 5.  Value of Copyright to Nonprofits  13.90
    • E.  Patents
      • 1.  Definition; Criteria  13.91
      • 2.  America Invents Act  13.91A
      • 3.  Registration; Duration  13.92
    • F.  Trade Secrets  13.93
    • G.  Special Restrictions on Certain Tax-Exempt Entities  13.94
    • H.  E-Mail Policies  13.95
    • I.  The Internet  13.96
    • J.  Anti-Spam Law  13.97
    • K.  Identity Theft  13.98
    • L.  Social Media  13.98A
    • M.  Corporate Governance  13.99
  • IX.  CONTINUING COMPLIANCE  13.100

14

Regulation of Fundraising

Carol K. Kao

Rebecca L. O’Toole

Arthur M. Rieman

Frederick R. Vandeveer

  • I.  SCOPE OF CHAPTER  14.1
  • II.  FEDERAL REGULATIONS
    • A.  Solicitation of Deductible Contributions  14.2
      • 1.  Substantiation Requirements—Disclosure and Information to Contributors  14.3
        • a.  Form and Content of Substantiation Receipt  14.4
        • b.  Timing of Disclosure  14.5
        • c.  Exceptions for Low-Cost Articles and Membership Benefits  14.6
        • d.  Special Substantiation Rules for Certain Types of Donations  14.7
        • e.  Special Substantiation Rules for Vehicle Donations  14.8
          • (1)  Substantiation Receipt Contents  14.9
          • (2)  Delivering Substantiation Receipt and Filing IRS Form 1098-C  14.10
          • (3)  Penalties  14.11
        • f.  Form: Acknowledgment and Receipt for Charitable Contribution of More Than $250  14.12
      • 2.  Quid Pro Quo Contributions—Disclosure and Information to Contributors  14.13
        • a.  Form and Content  14.14
        • b.  Safe Harbor—Low-Cost Articles  14.15
        • c.  Safe Harbor—Membership Benefits  14.16
        • d.  Timing of Disclosure  14.17
        • e.  Form: Disclosure Statement for Quid Pro Quo Charitable Contributions  14.18
      • 3.  Telemarketing Disclosures  14.19
      • 4.  Appraisal and Sale Disclosure for Property Worth More Than $5000  14.20
      • 5.  Violations and Penalties  14.21
    • B.  Solicitation of Nondeductible Contributions  14.22
      • 1.  Organizations Subject to Disclosure Requirements  14.23
      • 2.  Fundraising Activities Subject to Disclosure Requirements  14.24
      • 3.  Disclosure Requirements  14.25
        • a.  Safe-Harbor Procedures for Mail and Other Print Media Solicitations  14.26
        • b.  Safe-Harbor Procedures for Telephone Solicitations  14.27
        • c.  Safe-Harbor Procedures for Television Solicitations  14.28
        • d.  Safe-Harbor Procedures for Radio Solicitations  14.29
        • e.  Safe-Harbor Procedures for Labor or Agricultural Organizations and Business Leagues  14.30
      • 4.  Violations and Penalties  14.31
    • C.  Sale of Information or Services Otherwise Available From Federal Agency  14.32
      • 1.  Organizations Subject to Disclosure Requirements  14.33
      • 2.  Activities Subject to Disclosure Requirements  14.34
      • 3.  Disclosure Requirements  14.35
      • 4.  Violations and Penalties  14.36
  • III.  STATE AND LOCAL REGULATIONS
    • A.  Solicitation of Gifts and Sales  14.37
      • 1.  Disclosure and Licensing Requirements
        • a.  Timing and Contents of Disclosure  14.38
        • b.  Constitutional Challenges to Disclosure and Licensing Requirements  14.39
      • 2.  Organizations and Activities Subject to Disclosure Requirements  14.40
      • 3.  Timing and Form of Disclosure  14.41
      • 4.  Exceptions to Disclosure Requirements
        • a.  Nonsale Solicitations by Volunteers  14.42
        • b.  Solicitations by Minor Volunteers  14.43
        • c.  Solicitation of Members or on Organization’s Premises; Bingo Games  14.44
      • 5.  Solicitation or Sale for Charitable Purposes Card for Solicitations by Volunteer
        • a.  Form: Title and Nature of Solicitation  14.45
        • b.  Form: Deductibility of Contribution  14.46
        • c.  Form: Solicitation for Law Enforcement, Firefighting, or Veterans Organizations  14.47
        • d.  Form: Whether Soliciting Organization Will Benefit From Contribution  14.48
        • e.  Form: Signature Block  14.49
      • 6.  Local Ordinances  14.50
      • 7.  Additional Financial Disclosures by Certain Charities  14.51
      • 8.  Prohibited Acts and Practices  14.52
      • 9.  Violations and Penalties  14.53
        • a.  Monetary Penalty  14.54
        • b.  Injunction or Other Civil Remedies  14.55
        • c.  Criminal Enforcement  14.56
        • d.  Penalty for False Representations  14.57
    • B.  Commercial Fundraisers
      • 1.  Required Disclosures  14.58
      • 2.  Limit on Commercial Fundraiser’s Fees  14.59
    • C.  Commercial Coventurer Arrangements  14.59A
    • D.  Crowdfunding   14.59B
    • E.  Solicitations of Salvageable Personal Property
      • 1.  Organizations and Activities Subject to Regulation  14.60
      • 2.  Receipts and Accounting  14.61
        • a.  Motor Vehicle, Aircraft, and Vessel Donations  14.62
        • b.  When Property Is Sold  14.63
      • 3.  Required Identification Card  14.64
      • 4.  Violations  14.65
    • F.  Bingo and Similar Games  14.66
      • 1.  Organizations Authorized to Conduct Bingo Games  14.67
      • 2.  Location and Conduct of Bingo Games  14.68
      • 3.  License and Other Fees  14.69
      • 4.  Accounting and Use of Proceeds  14.70
      • 5.  Lotteries, Casino Games, and Raffles
        • a.  Lotteries  14.71
        • b.  Casino Games  14.72
          • (1)  Operating Limitations  14.73
          • (2)  Revenue Restrictions  14.74
          • (3)  Registration and Recordkeeping  14.75
        • c.  Raffles  14.76
          • (1)  Operating Limitations  14.77
          • (2)  Registration and Recordkeeping  14.78
          • (3)  Raffles Exempt From Governing Statute  14.79
        • d.  Other Relevant Law
          • (1)  Avoiding Illegal Lotteries  14.80
          • (2)  Charitable Deduction for Raffle Tickets or Casino Chips  14.81
          • (3)  Mailing Lottery Information or Lottery Tickets  14.82
      • 6.  Violations and Penalties  14.83
    • G.  Text Message Solicitations  14.84
    • H.  City and County Regulations  14.85
  • IV.  FOREIGN STATE FUNDRAISING SOLICITATION
    • A.  Introduction  14.86
    • B.  Jurisdiction  14.87
      • 1.  General Rule  14.88
      • 2.  Internet Solicitation and the Charleston Principles  14.89
    • C.  Uniform Registration Statement  14.90

14A

Charitable Solicitation Permit and Licensing Information for California Cities and Counties

Elizabeth S. Bluestein

  • I.  INTRODUCTION  14A.1
  • II.  CHARITABLE SOLICITATION PERMIT AND LICENSING REQUIREMENTS FOR CALIFORNIA CITIES  14A.2
  • III.  CHARITABLE SOLICITATION CONTACT INFORMATION FOR CALIFORNIA COUNTIES  14A.3

15

Charitable Giving

Jeffrey D. Davine

  • I.  SCOPE OF CHAPTER  15.1
  • II.  INCOME, ESTATE, AND GIFT TAX DEDUCTIONS
    • A.  Income Tax Incentives
      • 1.  Charitable Contribution Income Tax Deduction  15.2
      • 2.  Gifts of Appreciated Property  15.3
      • 3.  Contributions by Estates and Trusts  15.4
    • B.  Gift and Estate Tax Deductions  15.5
  • III.  TIMING OF DEDUCTIONS  15.6
    • A.  No Deduction Until Payment Made  15.7
    • B.  Conditional Gifts  15.8
    • C.  Gifts by Check  15.9
    • D.  Gifts by Credit Card  15.10
    • E.  Gifts of Securities  15.11
    • F.  Gifts of Real Property  15.12
    • G.  Pledges and Other Promises  15.13
  • IV.  LIMITATIONS ON DEDUCTIONS  15.14
    • A.  Reduction Rules
      • 1.  Ordinary Income Property  15.15
        • a.  Special Rule for Qualified Contributions of Inventory  15.16
        • b.  Scientific Property Used for Research  15.17
        • c.  Contributions of Food Inventory  15.17A
        • d.  Contributions of Book Inventories to Public Schools [Deleted]  15.17B
        • e.  Contributions of Computer Inventory for Educational Purposes  15.17C
      • 2.  Tangible Personal Property  15.18
      • 3.  Capital Gain Property Donated to Private Foundations; Qualified Appreciated Stock  15.19
    • B.  Quid Pro Quo Gifts  15.20
      • 1.  Token Benefits  15.21
      • 2.  Charity Auctions  15.22
      • 3.  Raffle Tickets  15.23
      • 4.  Bargain Sales  15.24
      • 5.  College Athletic Event Seating Rights  15.24A
    • C.  Percentage Limitations  15.25
      • 1.  Contributions by Individuals of Property That Is Not Capital Gain Property
        • a.  Gifts to Public Charities  15.26
        • b.  Gifts to Private Foundations  15.27
      • 2.  Contributions by Individuals of Property That Is Capital Gain Property
        • a.  Gifts to Public Charities  15.28
        • b.  Gifts to Private Foundations  15.29
      • 3.  Ordering Rules  15.30
      • 4.  Carryover of Excess Contributions  15.31
      • 5.  Corporation Donors  15.32
      • 6.  Estates and Trusts Donors  15.33
  • V.  APPRAISAL REQUIREMENTS  15.34
    • A.  Contributions Subject to Appraisal Requirements
      • 1.  Property Valued at Over $5000  15.35
      • 2.  Certain Securities  15.36
    • B.  Qualified Appraisal  15.37
    • C.  Appraisal Summary  15.38
    • D.  Qualified Appraiser  15.39
  • VI.  PRIVATE FOUNDATIONS  15.40
  • VII.  GIFTS OF PARTIAL INTERESTS  15.41
    • A.  Exception If Donor’s Entire Interest Is Partial Interest  15.42
    • B.  Exception for Undivided Portion of Donor’s Entire Interest  15.43
    • C.  Remainder in Residence or Farm  15.44
    • D.  Qualified Conservation Contribution  15.45
    • E.  Gift Annuities  15.46
  • VIII.  SPLIT-INTEREST TRUSTS  15.47
    • A.  Charitable Remainder Trusts  15.48
      • 1.  Charitable Remainder Trust Spousal Waivers  15.49
      • 2.  Tax Aspects  15.50
      • 3.  Term  15.51
      • 4.  Formulas for Distribution of Charitable Remainder Trusts
        • a.  Annuity Trust  15.52
        • b.  Unitrust  15.53
        • c.  Net Income Unitrust  15.54
    • B.  Pooled Income Funds  15.55
    • C.  Charitable Lead Trusts  15.56
      • 1.  Distributions  15.57
      • 2.  Tax Consequences  15.58
    • D.  Possible Liability in Connection With Split-Interest Gifts  15.59
      • 1.  Fiduciary Duties to Donors  15.60
        • a.  Overstatement of Expertise  15.61
        • b.  Charities Serving as Trustees of Charitable Split-Interest Trusts  15.62
      • 2.  Other Bases of Liability  15.63
      • 3.  Damages  15.64
      • 4.  Invalidity of Gift to Person Who Drafts Transfer Instrument  15.65
  • IX.  DISASTER RELIEF  15.66
  • X.  CALIFORNIA CONFORMITY  15.67

16

Management of Charitable Funds

M. Carr Ferguson

Kenneth G. Coveney

Paul J. Dostart

  • I.  SCOPE OF CHAPTER  16.1
  • II.  CHARACTERIZING INSTITUTIONAL FUNDS
    • A.  Terminology  16.2
    • B.  Types of Endowments
      • 1.  True Endowment  16.3
      • 2.  Term Endowment  16.4
      • 3.  Quasi-Endowment  16.5
    • C.  Nonendowed Funds  16.6
  • III.  APPLICABLE LAW  16.7
    • A.  Legal Basis for Charitable Trust Principle  16.8
      • 1.  Coordination of Nonprofit Corporation Law and Trust Law  16.9
      • 2.  Laws Relating to Religious Nonprofits  16.10
    • B.  The Uniform Prudent Management of Institutional Funds Act (UPMIFA)
      • 1.  Application of UPMIFA  16.11
      • 2.  Contrast to Former Spending Rule for Endowments  16.12
      • 3.  Definitions  16.13
      • 4.  Standard of Care  16.14
      • 5.  Release or Modification of Restrictions in Gift Instrument  16.15
        • a.  Modification by Court Order  16.16
        • b.  Release or Modification Without Court Order  16.17
    • C.  Investment of Charitable Assets  16.18
    • D.  Uniform Prudent Investor Act (UPIA)  16.19
  • IV.  SPENDING AND INVESTMENT OF ENDOWMENT FUNDS  16.20
    • A.  Spending Provisions
      • 1.  UPMIFA Spending Provisions Generally  16.21
      • 2.  Prudence Requirement  16.22
      • 3.  Other Spending Requirements  16.23
      • 4.  Spending Net Appreciation  16.24
    • B.  Investment Provisions
      • 1.  Basic Powers of Governing Board  16.25
      • 2.  Standard of Care  16.26
        • a.  Statutory Requirements  16.27
        • b.  Policies and Practices  16.28
      • 3.  Delegation of Investment Management  16.29
    • C.  Endowment Gifts
      • 1.  Accepting an Endowment Gift  16.29A
      • 2.  Form: Model Corporate Resolution for Accepting a Gift With Donor-Imposed Time Restrictions and Use Restrictions  16.29B
  • V.  SPENDING AND INVESTMENT OF NONENDOWMENT FUNDS
    • A.  Spending Provisions  16.30
    • B.  Investment Provisions  16.31
      • 1.  Statutory Harmonization When an Institution Fund Is Held by a Public Benefit Corporation  16.32
      • 2.  Investment Criteria  16.33
      • 3.  Investment Criteria Safe Harbor  16.34
      • 4.  Standard of Care  16.35
        • a.  Standard of Care for Nonprofit Mutual Benefit Corporations  16.36
        • b.  Standard of Care for Religious Corporations  16.37
  • VI.  LITIGATION ISSUES
    • A.  Standing in General  16.38
    • B.  Persons With Clearly Established Standing
      • 1.  Governor  16.39
      • 2.  Attorney General  16.40
        • a.  Statutory Authority Under Probate and Corporations Codes  16.41
        • b.  Common Law Obligation to Enforce Trust  16.42
      • 3.  Private Citizens [Deleted]  16.43
      • 4.  Nonprofit Corporation or Officer or Director of Nonprofit Corporation  16.44
      • 5.  Member of Nonprofit Corporation in the Name of the Corporation  16.45
      • 6.  Settlor and Heirs of Settlor  16.46
      • 7.  Persons With a Special Interest  16.47
      • 8.  Person Granted Relator Status by Attorney General  16.48
    • C.  Standards for Deciding When Use Restrictions Are Violated  16.49
    • D.  Available Remedies
      • 1.  Enjoin, Correct, Obtain Damages for Breach  16.50
      • 2.  Apply Cy Pres Doctrine  16.51
      • 3.  Petition for Writ of Mandamus  16.52
      • 4.  Return Property to Donor’s Estate or Heirs  16.53
  • VII.  EFFECT OF BANKRUPTCY AND RECEIVERSHIP LAW ON INSTITUTIONAL FUNDS
    • A.  Overview of Bankruptcy Law
      • 1.  Eligibility  16.54
      • 2.  Commencement of a Case  16.55
        • a.  Voluntary Bankruptcy  16.56
        • b.  Involuntary Bankruptcy  16.57
      • 3.  The Bankruptcy Estate  16.58
      • 4.  The Automatic Stay (11 USC §362)  16.59
      • 5.  Executory Contracts (11 USC §365)  16.60
      • 6.  Financial Accommodations  16.61
    • B.  Overview of Receivership Law  16.62
      • 1.  Federal Receivership  16.63
      • 2.  California State Receivership  16.64
      • 3.  Involuntary Proceedings Against Charity Permitted Under California Law  16.65
      • 4.  Voluntary Dissolution Proceedings Under California Law  16.65A
    • C.  Choosing Between Bankruptcy and Receivership  16.66
  • VIII.  ASSETS REACHABLE BY CREDITORS
    • A.  General Assets (Unrestricted Funds)  16.67
    • B.  Quasi-Endowments  16.68
    • C.  Assets Held by Nonprofit Corporation (Endowed Funds)  16.69
    • D.  Assets Held by Independent Third Party Trustee  16.70

17

Taxation of Investment and Business Activities of Tax-Exempt Corporations

J. Patrick Whaley

Ofer Lion

  • I.  SCOPE OF CHAPTER  17.1
  • II.  SOURCES OF FUNDS  17.2
  • III.  TAXATION OF INVESTMENT INCOME OF PRIVATE FOUNDATIONS
    • A.  Taxation and Exemption From Taxation  17.3
    • B.  Normal Tax Rates  17.4
    • C.  Reduction in Tax  17.5
    • D.  Net Investment Income  17.6
      • 1.  Gross Investment Income  17.7
      • 2.  Capital Gain Net Income  17.8
      • 3.  Allowable Deductions  17.9
    • E.  Reporting of Taxes  17.10
  • IV.  RECAPTURE INCOME  17.11
  • V.  UNRELATED BUSINESS INCOME TAX (UBIT)
    • A.  Imposition of Tax  17.12
    • B.  Organizations Subject to Tax  17.13
    • C.  Definition of “Unrelated Trade or Business”
      • 1.  Basic Test  17.14
      • 2.  Elements of Basic Test
        • a.  Trade or Business  17.15
          • (1)  Comparison With Nonexempt Enterprises  17.16
          • (2)  Profit Intent  17.17
          • (3)  Operation as Part of Larger Enterprise  17.18
          • (4)  Providing “Commercial Type” Insurance  17.19
        • b.  Regularly Carried On  17.20
          • (1)  Advertising Sales  17.21
          • (2)  Single Occurrences  17.22
        • c.  Relationship to Exempt Purpose  17.23
      • 3.  Qualified Sponsorship Income  17.24
      • 4.  Statutory Exceptions and Modifications  17.25
        • a.  Use of Premiums in Soliciting Contributions  17.26
        • b.  Activities Performed by Volunteers  17.27
        • c.  Sale of Donated Merchandise  17.28
        • d.  Income From Investment Transactions—Dividends, Interest, Annuities, Royalties, and Capital Gains  17.29
        • e.  Mailing List Sales  17.30
        • f.  Royalty Income From Mailing List Rentals, Logos, Affinity Cards, and Other Intangibles  17.31
        • g.  Rental Income  17.32
          • (1)  Personal Property Included  17.33
          • (2)  Rental for Business Operations  17.34
        • h.  Trade Shows, State Fairs, and Similar Activities  17.35
        • i.  Bingo Games and Gambling  17.36
        • j.  Income From Research  17.37
        • k.  Activities for Convenience of Persons Related to Certain Organizations  17.38
        • l.  Services Rendered Between Unrelated Hospitals  17.39
        • m.  Insurance Income of Controlled Foreign Corporation  17.40
        • n.  Dues Paid to Agricultural and Horticultural Organizations  17.41
        • o.  Sales of Inventory Acquired From Certain Financial Institutions  17.42
        • p.  Disposition of Brownfield Properties  17.43
      • 5.  Internet Activities  17.44
    • D.  Unrelated Debt-Financed Income  17.45
      • 1.  Debt-Financed Property Defined  17.46
        • a.  Property Used in Connection With Exempt Purposes  17.47
        • b.  Property Used in Unrelated Trade or Business  17.48
        • c.  Property Near Existing Facility  17.49
      • 2.  Determining Debt-Financed Income Subject to Tax
        • a.  Basic Formula  17.50
          • (1)  What Is Acquisition Indebtedness?
            • (a)  General Test  17.51
            • (b)  Property Acquired Subject to Indebtedness  17.52
            • (c)  Effect of Terminating Exempt Purpose of Property  17.53
            • (d)  Exclusions  17.54
            • (e)  Burden of Debt Not on Exempt Organization  17.55
          • (2)  Determining Average Acquisition Indebtedness  17.56
          • (3)  Determining Average Adjusted Basis  17.57
        • b.  Offsetting Direct Expenses of Debt-Financed Property  17.58
    • E.  Computing Tax on Unrelated Business Income  17.59
      • 1.  Expenses and Deductions
        • a.  Expenses Attributable to Unrelated Business and Allocation Rules  17.60
        • b.  Charitable Deduction  17.61
        • c.  Specific Deduction  17.62
        • d.  Net Operating Loss  17.63
      • 2.  Rate of Tax
        • a.  Basic Rate  17.64
        • b.  Alternative Minimum Tax  17.65
        • c.  Returns and Estimated Taxes  17.66
    • F.  Effect of Unrelated Business Income on Exempt Status  17.67
  • VI.  OPERATING BUSINESS THROUGH ANOTHER ENTITY—CONTROLLED ENTITIES  17.68
    • A.  Operating Through Corporations  17.69
      • 1.  S Corporations  17.70
      • 2.  Liquidation and Reorganization of Taxable Subsidiary Corporation  17.71
      • 3.  Attributing Activities of Taxable Corporation to Exempt Organization  17.72
    • B.  Operating Through Partnerships  17.73
    • C.  Limited Liability Companies  17.74
    • D.  Private Foundation Ownership of Independently-Operated Philanthropic Business Holdings  17.74A
  • VII.  INVESTMENTS IN TAX SHELTERS  17.75
    • A.  Disclosure Under IRC §6011  17.76
    • B.  IRC §4965 Excise Taxes  17.77
    • C.  Disclosure Under IRC §6033(a)(2)  17.78
  • VIII.  TAXATION OF INVESTMENT INCOME OF CERTAIN COLLEGES AND UNIVERSITIES
    • A.  Excise Tax  17.79
    • B.  Net Investment Income  17.80
    • C.  Colleges and Universities Subject to the Tax  17.81
    • D.  Assets and Net Investment Income of Related Organizations  17.82

18

Tax-Exempt Financing for Nonprofit Corporations

Jill S. Dodd

Jeff C. Nguyen

Megan A. Christensen

  • I.  SCOPE OF CHAPTER  18.1
  • II.  CORPORATE POWER TO BORROW  18.2
    • A.  Terminology  18.3
    • B.  Other Sources of Information  18.4
  • III.  PARTIES TO A TAX-EXEMPT FINANCING  18.5
    • A.  Issuer  18.6
    • B.  Purchaser or Underwriter  18.7
    • C.  Bond Counsel  18.8
    • D.  Trustee  18.9
    • E.  Credit Enhancement Provider and Swap Provider  18.10
  • IV.  ELIGIBILITY FOR TAX-EXEMPT FINANCING
    • A.  Need for Government Entity  18.11
    • B.  Eligible Nonprofit Corporations  18.12
    • C.  Eligible Costs  18.13
  • V.  RESTRICTIONS ON TAX-EXEMPT FINANCING  18.14
    • A.  Internal Revenue Code Requirements  18.15
      • 1.  Private Business Use  18.16
        • a.  Short-Term Contracts  18.17
        • b.  Safe Harbor for Management and Service Contracts  18.18
        • c.  Sponsored Research  18.19
        • d.  Naming Privileges  18.20
        • e.  Private Business Use Distinguished From Unrelated Business Taxable Income  18.21
      • 2.  Arbitrage Bonds
        • a.  Definition; Prohibition On  18.22
        • b.  Rebate Rule  18.23
        • c.  Exceptions to Rebate Rule  18.24
      • 3.  Useful Life  18.25
      • 4.  Reimbursement  18.26
      • 5.  Spending Proceeds  18.27
      • 6.  Change in Use  18.28
      • 7.  Limitation on Amount of Outstanding Bonds  18.29
      • 8.  Federal Guaranty Prohibition  18.30
      • 9.  Qualified Bank Bonds and the American Recovery and Reinvestment Act of 2009 [Deleted]  18.30A
    • B.  Securities Law Requirements
      • 1.  Federal  18.31
      • 2.  State  18.32
    • C.  State Laws Governing Bond Issuance  18.33
  • VI.  FINANCING STRUCTURES  18.34
    • A.  Revenue Bonds  18.35
    • B.  Certificates of Participation  18.36
    • C.  Security Interests  18.37
      • 1.  Revenue Pledge  18.38
      • 2.  Deeds of Trust and Security Interests  18.39
      • 3.  Endowment Funds and Other Cash Collateral  18.40
      • 4.  Reserve Fund  18.41
    • D.  Restrictive Covenants  18.42
  • VII.  FINANCING PROCESS
    • A.  Timing Considerations  18.43
    • B.  Disclosure  18.44
    • C.  Approvals  18.45
      • 1.  Issuer  18.46
      • 2.  TEFRA Approval  18.47
      • 3.  Governing Body Approval
        • a.  Reimbursement Resolution  18.48
        • b.  Form: Reimbursement Resolution  18.49
        • c.  Approving Resolution  18.50
        • d.  Form: Approving Resolution  18.51
        • e.  Form: Committee Approval  18.52
    • D.  Pricing and Closing  18.53
  • VIII.  TASKS FOR CORPORATE COUNSEL
    • A.  In General  18.54
    • B.  Disclosure and Due Diligence Investigation  18.55
    • C.  Overall Transaction Advice  18.56
    • D.  Liens  18.57
    • E.  Opinion  18.58
    • F.  Table: Time and Responsibility Schedule  18.59

19

Legislative and Political Activities

Emily Andrews

Gregory L. Colvin

Rosemary E. Fei

Eric K. Gorovitz

Lacey E. Keys

Lance H. Olson

  • I.  SCOPE OF CHAPTER
    • A.  Introduction  19.1
    • B.  Lobbying and Candidate Electioneering  19.2
    • C.  Chapter Organization  19.3
    • D.  Table of Organizations and Activities  19.4
  • II.  LOBBYING
    • A.  Federal Tax Law: IRC §501(c)(3) Charities  19.5
      • 1.  “Substantial Part” Test  19.6
        • a.  What Constitutes Lobbying  19.7
        • b.  How Much Lobbying Is “Substantial”  19.8
        • c.  Reporting Lobbying Activities to IRS  19.9
      • 2.  IRC §501(h) Election  19.10
        • a.  Charities Eligible to Make Election  19.11
        • b.  Procedure for Making or Revoking Election  19.12
        • c.  Spending Limits  19.13
        • d.  Penalties for Exceeding Limits  19.14
        • e.  Activities Defined as Lobbying  19.15
          • (1)  Direct and Grassroots Lobbying  19.16
          • (2)  Excluded Activities  19.17
          • (3)  Meaning of “Specific Legislation”  19.18
        • f.  Exceptions to Definitions  19.19
        • g.  Special Rules  19.20
          • (1)  Ballot Measures  19.21
          • (2)  Communicating With Members  19.22
          • (3)  Affiliated Charities  19.23
          • (4)  Mass Media Rule  19.24
          • (5)  Subsequent Use Rule  19.25
        • h.  Tracking Lobbying Expenditures  19.26
          • (1)  Donations to Other Entities  19.27
          • (2)  Mixed Purpose Communications  19.28
        • i.  Reporting Lobbying Expenditures to IRS  19.29
        • j.  Pros and Cons of Making §501(h) Election  19.30
      • 3.  Lobbying Prohibition on Private Foundations  19.31
      • 4.  Deductibility of Contributions  19.32
    • B.  Federal Tax Law: Noncharitable Organizations
      • 1.  Comparison With Charitable Organizations  19.33
      • 2.  Scope of Lobbying  19.34
      • 3.  Deductions: Disclosure and Tax
        • a.  No Charitable Deduction; Required Statement in Solicitations  19.35
        • b.  Business Deduction and Proxy Tax  19.36
    • C.  California Tax Law  19.37
    • D.  Nontax Laws Affecting Lobbying  19.38
      • 1.  Federal
        • a.  Lobbying Disclosure Act (LDA)  19.39
        • b.  Rules Applicable to Federal Grantees  19.40
        • c.  Executive Order  19.40A
      • 2.  California
        • a.  Ballot Measures  19.41
          • (1)  Financial Disclosure Reports  19.42
          • (2)  Recipient Committee Reports  19.43
            • (a)  Triggering Recipient Report Requirement  19.43A
            • (b)  Reporting Donors  19.43B
            • (c)  No History of Contributions in California; Disclosure Requirement as Independent Expenditure Committee  19.43C
          • (3)  Reporting Staff Time  19.44
          • (4)  Reporting Member Communications  19.44A
          • (5)  Electronic Filing Requirements  19.45
        • b.  Other Lobbying  19.46
  • III.  CANDIDATE ELECTIONEERING  19.47
    • A.  Federal Tax Law: IRC §501(c)(3) Charities  19.48
      • 1.  Scope of Prohibition: Speech and Attribution  19.49
      • 2.  Permissible Election-Oriented Activities [Deleted]  19.49A
        • a.  Voter Education  19.50
        • b.  Issue Advocacy  19.51
          • (1)  “Nonpartisan” Defined  19.52
          • (2)  “Candidate” and “Public Office” Defined  19.53
          • (3)  Acts of Others Attributed to the Charity  19.54
      • 3.  Specific Activities  19.55
        • a.  Voter Registration and Get-Out-the-Vote Efforts  19.56
        • b.  Publishing Voting Records and Voter Guides  19.57
        • c.  Candidate Forums and Debates  19.58
        • d.  Efforts to Influence Candidates or Parties  19.59
        • e.  Organizer or Candidate Training  19.60
        • f.  Fundraising  19.61
        • g.  Relationship to Candidates and Political Organizations  19.62
        • h.  Internet Activities  19.63
      • 4.  Comparing Candidate Electioneering With Issue Advocacy  19.64
      • 5.  Consequences of Violating Prohibition  19.65
      • 6.  Particular Organizations
        • a.  Special Rules for Private Foundations  19.66
        • b.  Special Rules for Churches  19.67
      • 7.  Reporting to the IRS  19.68
    • B.  Federal Tax Law: Noncharitable Organizations
      • 1.  Comparison With Charitable Organizations  19.69
      • 2.  Deductions: Disclosure and Tax  19.70
        • a.  No Charitable Deduction; Required Statement in Solicitations  19.71
        • b.  Business Deduction and Proxy Tax  19.72
      • 3.  Limits on Candidate Electioneering  19.73
      • 4.  Political Organizations, Funds, and PACs  19.74
        • a.  Taxation of Political Organizations; Exempt Function Income  19.75
        • b.  Educational and Lobbying Activities as Exempt Functions  19.76
        • c.  Incorporating a Political Organization  19.77
        • d.  Public Disclosure Rules
          • (1)  Reporting Requirements  19.78
          • (2)  Forms to Be Filed  19.79
        • e.  Table: Filing Requirements for Political Entities  19.80
      • 5.  Political Spending Tax on IRC §501(c) Groups  19.81
      • 6.  Reporting to the IRS  19.82
    • C.  California Tax Law  19.83
    • D.  Nontax Laws on Candidate Electioneering
      • 1.  Federal Law
        • a.  Federal Election Law  19.84
          • (1)  Prohibition on Expenditures to Influence Campaigns  19.85
          • (2)  Electioneering Communications  19.86
          • (3)  Independent Expenditures for Election of Federal Candidates  19.87
          • (4)  Prohibition on Soliciting Funds for Organizations That Make Expenditures for Federal Election Activity  19.88
          • (5)  Prohibition on Soliciting Funds for IRC §527 Organizations  19.89
          • (6)  Restrictions on Fundraising by Federal Candidates  19.90
          • (7)  Complying With Federal Election Law  19.91
        • b.  Rules Applicable to Federal Grantees  19.92
      • 2.  California Law  19.93
  • IV.  USE OF AFFILIATED ORGANIZATIONS  19.94

20

Corporate Changes

Lisa A. Runquist

  • I.  SCOPE OF CHAPTER  20.1
  • II.  MAKING CORPORATE CHANGES  20.2
    • A.  Statutory Scheme  20.3
    • B.  Choosing Method of Restructuring or Dissolution  20.4
    • C.  Attorney General Intervention  20.5
  • III.  SALE OR DISPOSITION OF ASSETS  20.6
    • A.  Required Approvals  20.7
    • B.  Consideration  20.8
    • C.  Notice to Attorney General
      • 1.  When Required  20.9
      • 2.  Contents of Notice  20.10
    • D.  Certification of Instrument of Transfer
      • 1.  Use and Effect  20.11
      • 2.  Certificate of Approval of Sale of Assets
        • a.  Form: Title; Identification of Parties  20.12
        • b.  Form: Conveyance Approved  20.13
        • c.  Form: Notice to Attorney General  20.14
        • d.  Form: Members’ Approvals  20.15
        • e.  Form: Other Approvals  20.16
        • f.  Form: Signature Block  20.17
    • E.  Filing With the IRS  20.18
    • F.  Abandonment of Sale of Assets  20.19
    • G.  Special Rule for Health Facilities: Attorney General’s Consent for Certain Transactions
      • 1.  When Attorney General’s Consent Required  20.20
      • 2.  Substitution of Members  20.21
      • 3.  Request for Waiver  20.22
      • 4.  Notice to Attorney General
        • a.  Filing Requirements  20.23
        • b.  Contents of Notice  20.23A
      • 5.  Attorney General’s Duties on Receipt of Notice  20.24
  • IV.  CONVERSIONS
    • A.  General Rules  20.25
    • B.  Changing For-Profit Corporation to Nonprofit Corporation
      • 1.  Amendments to Articles  20.26
      • 2.  Requirement to Apply for Exempt Status  20.27
    • C.  Changing Nonprofit Corporation to Another Type of Corporation  20.28
    • D.  Required Approvals  20.29
    • E.  Property Held in Charitable Trust  20.30
    • F.  Checklist: Contents of Request for Approval From Attorney General  20.31
    • G.  Charitable Trust Requirements of Health Care Service Plans  20.32
    • H.  Certificate of Amendment Changing Status
      • 1.  Form: Title and Introduction  20.33
      • 2.  Form: Member or Shareholder Approval  20.34
      • 3.  Form: Public Benefit Corporation to Mutual Benefit, Business, or Social Purpose Corporation  20.35
      • 4.  Form: Mutual Benefit Corporation to Public Benefit Corporation  20.36
      • 5.  Form: Other Approvals  20.37
      • 6.  Form: Declaration and Signatures  20.38
      • 7.  Filing Requirements  20.39
    • I.  Franchise Tax Payment  20.40
  • V.  MERGERS
    • A.  General Requirements
      • 1.  Terminology  20.41
      • 2.  Mergers Permitted  20.42
      • 3.  Table: Role of Attorney General: Prior Consent or Notice  20.43
      • 4.  Form: Letter to Attorney General With Copy of Merger Agreement  20.43A
      • 5.  Contents of Notice  20.44
      • 6.  Approval by Corporation or Business Entity  20.45
    • B.  Merger Requirements
      • 1.  Chart: Surviving Public Benefit Corporation  20.46
      • 2.  Chart: Surviving Mutual Benefit Corporation  20.47
      • 3.  Chart: Surviving Religious Corporation  20.48
    • C.  Merger Agreements
      • 1.  Required Contents  20.49
      • 2.  Simple Merger Agreement  20.50
        • a.  Form: Introduction and Parties  20.51
        • b.  Form: Merger Terms  20.52
        • c.  Form: Attestation and Signatures  20.53
      • 3.  More Detailed Agreement of Merger  20.54
        • a.  Form: Introduction  20.55
        • b.  Form: Parties’ Intent  20.56
        • c.  Participating Corporations
          • (1)  Form: Surviving Corporation  20.57
          • (2)  Form: Disappearing Corporation  20.58
        • d.  Form: Effective Date  20.59
        • e.  Form: Approvals and Consents  20.60
        • f.  Form: Statement of Merger  20.61
        • g.  Form: Articles and Bylaws  20.62
        • h.  Form: Directors and Officers  20.63
        • i.  Form: Effect of Merger on Memberships  20.64
        • j.  Form: Interim Provisions  20.65
        • k.  Form: Termination or Abandonment  20.66
        • l.  Form: Amendments to Agreement  20.67
        • m.  Form: Governing Law  20.68
        • n.  Form: Entire Agreement  20.69
        • o.  Form: Counterparts  20.70
        • p.  Form: Further Assurances  20.71
        • q.  Form: Attestation and Signatures  20.72
      • 4.  Certificate of Approval of Agreement of Merger
        • a.  Form: Title; Identification of Parties  20.73
        • b.  Form: Board Approval of Merger  20.74
        • c.  Form: Member Approval of Merger  20.75
        • d.  Form: Additional Required Approvals  20.76
        • e.  Form: Attorney General Notice or Consent  20.77
        • f.  Form: Approval of Commissioner of Business Oversight  20.78
        • g.  Form: Declaration and Signatures  20.79
      • 5.  Filing Requirements  20.80
      • 6.  Effect of Merger  20.81
      • 7.  Filing of Final Informational Returns by Disappearing Corporation  20.82
  • VI.  PLANNING DISSOLUTIONS  20.83
  • VII.  VOLUNTARY DISSOLUTIONS
    • A.  Checklist: Procedures  20.84
    • B.  Table: Dissolution Procedure Summary  20.85
    • C.  Commencing Dissolution  20.86
      • 1.  Initial Resolutions
        • a.  Board of Director’s Resolution to Wind Up and Dissolve
          • (1)  Form: Intention to Wind Up and Dissolve Corporation  20.87
          • (2)  Form: Corporation Without Members  20.88
          • (3)  Form: Resolution to Wind Up and Dissolve  20.89
          • (4)  Form: Members’ Consent  20.90
          • (5)  Form: Resolution for Certificate of Election to Wind Up and Dissolve  20.91
          • (6)  Form: Resolution Authorizing Filing of Final Tax Returns  20.92
          • (7)  Form: Resolution Permitting Other Necessary Actions  20.93
          • (8)  Form: Introduction to Plan of Liquidation and Distribution of Assets  20.94
          • (9)  Form: Resolution to Provide for Debts  20.95
          • (10)  Form: Resolution to Set Aside Reserve  20.96
          • (11)  Form: Resolution to Distribute Assets  20.97
          • (12)  Form: Resolution Authorizing Necessary Instruments  20.98
        • b.  Form: Resolution by Members Approving Dissolution  20.99
      • 2.  Certificate of Election to Wind Up and Dissolve
        • a.  Filing Requirements  20.100
        • b.  Form: Nonprofit Certificate of Election to Wind Up and Dissolve (Optional Secretary of State Form ELEC NP)  20.101
        • c.  Certificate of Election to Wind Up and Dissolve (Attorney-Drafted Form)
          • (1)  Form: Title, Parties, and Election  20.102
          • (2)  Form: Declaration and Signatures  20.103
      • 3.  Notice to Attorney General
        • a.  Attorney General’s Role  20.104
        • b.  Letter to Attorney General  20.105
          • (1)  Form: Address and Salutation  20.106
          • (2)  Form: Request for Waiver of Objections  20.107
          • (3)  Form: Documents Enclosed  20.108
          • (4)  Form: Nature of Corporate Assets  20.109
          • (5)  Form: Assets Are Not Proceeds of Restricted Funds  20.110
          • (6)  Form: Distribution of Assets  20.111
          • (7)  Form: Distributees’ Status  20.112
          • (8)  Form: Closing and Signatures  20.113
      • 4.  Tax Return Filing Obligation  20.114
    • D.  Revoking Election  20.115
    • E.  Procedure During Winding Up and Dissolution
      • 1.  Board’s Powers and Duties  20.116
      • 2.  Form: Notice to Members and Creditors  20.117
      • 3.  Payment of Liabilities and Distribution of Assets
        • a.  Payment of Liabilities
          • (1)  General Requirement  20.118
          • (2)  Exceptions to Requirement  20.119
          • (3)  Notice to Creditors
            • (a)  Creditors’ Responsibilities  20.120
            • (b)  Form: Notice to Creditors  20.121
        • b.  Distribution of Assets  20.122
      • 4.  Court-Aided Dissolution  20.123
      • 5.  Certificate of Dissolution
        • a.  Procedure  20.124
        • b.  Form: Nonprofit Certificate of Dissolution (Optional Secretary of State Form DISS NP)   20.125
        • c.  Certificate of Dissolution (Attorney-Drafted Form)
          • (1)  Form: Title; Identification of Parties  20.126
          • (2)  Form: All Final Franchise Returns  20.127
          • (3)  Form: Corporate Affairs Wound Up  20.128
          • (4)  Form: Debts and Liabilities  20.129
          • (5)  Form: Election to Dissolve  20.130
          • (6)  Form: Distribution of Assets; Public Benefit or Religious Corporations  20.131
          • (7)  Form: Distribution of Assets; Mutual Benefit Corporations  20.132
          • (8)  Form: Statement of Dissolution  20.133
          • (9)  Form: Declaration and Signatures  20.134
      • 6.  Short Form Certificate of Dissolution
        • a.  When Procedure Is Available   20.134A
        • b.  Form: Nonprofit Short Form Dissolution Certificate (Secretary of State Form DSF NP)   20.134B
      • 7.  Court Order in Lieu of Filing Certificate of Dissolution  20.135
      • 8.  Filing of Final Informational Returns  20.136
  • VIII.  INVOLUNTARY DISSOLUTIONS  20.137
    • A.  Grounds for Involuntary Dissolution
      • 1.  General Grounds  20.138
      • 2.  Additional Grounds for Dissolution Action by Attorney General  20.139
    • B.  Who May File Complaint or Convert Proceedings  20.140
    • C.  Parties to Action  20.141
    • D.  Curative Steps Before Suit  20.142
    • E.  Procedural Matters
      • 1.  Jurisdiction of Court  20.143
      • 2.  Notice to Creditors and Settlement of Claims  20.144
      • 3.  Appointment of Receiver  20.145
      • 4.  Decree of Dissolution and Other Orders  20.146
      • 5.  Winding Up  20.147
      • 6.  Order of Dissolution  20.148
  • IX.  ADMINISTRATIVE DISSOLUTION  20.148A
  • X.  POSTDISSOLUTION ACTIVITIES  20.149

21

Financial Accounting for Not-for-Profit Organizations

Nancy E. Shelmon

Joan M. Murphy

  • I.  SCOPE OF CHAPTER  21.1
  • II.  ACCOUNTING GUIDANCE
    • A.  Terminology  21.2
    • B.  The Hierarchy of Generally Accepted Accounting Principles (GAAP)
      • 1.  FASB Accounting Standards Codification  21.3
      • 2.  Fund Accounting  21.4
  • III.  TRIAD OF RESPONSIBILITY FOR FINANCIAL ACCOUNTING AND REPORTING  21.5
    • A.  Management  21.6
      • 1.  Internal Controls  21.7
      • 2.  Internal Reporting  21.8
      • 3.  External Reporting  21.9
    • B.  Board of Directors  21.10
      • 1.  Audit Committee  21.11
      • 2.  Investment Committee  21.12
      • 3.  Internal Audit  21.13
    • C.  External Auditors  21.14
  • IV.  FINANCIAL ACCOUNTING AND REPORTING STARTS WITH INTERNAL CONTROLS  21.15
    • A.  Definition of Internal Controls  21.16
    • B.  Internal Control Components  21.17
      • 1.  Control Environment  21.18
      • 2.  Risk Assessment  21.19
      • 3.  Control Activities  21.20
      • 4.  Information and Communication  21.21
      • 5.  Monitoring Activities  21.22
    • C.  Communicating Internal Control Related Matters Identified in an Audit (AU-C 265)  21.23
    • D.  Auditor’s Communication With Those Charged With Governance (AU-C 260)   21.24
    • E.  Internal Control Characteristics Unique to NPOs  21.25
    • F.  Internal Controls in Anti-Fraud Programs  21.26
  • V.  REPORTING AND DISCLOSURES IN FINANCIAL STATEMENTS
    • A.  Combination Versus Consolidation  21.27
      • 1.  ASC Topic 958–810—Not-for-Profit Entities: Consolidation  21.28
      • 2.  Combined Financial Statements  21.29
      • 3.  ASC Topic 958–805; Pushdown Accounting; Discontinued Operations  21.30
    • B.  Financial Statement Requirements Under ASC Topic 958  21.31
      • 1.  Statement of Financial Position  21.32
        • a.  Sequence of Assets and Liabilities  21.33
        • b.  Net Assets  21.34
      • 2.  Statement of Activities  21.35
        • a.  Results of Operations  21.36
        • b.  Program Services and Supporting Activities  21.37
        • c.  Release From Restrictions  21.38
      • 3.  Statement of Cash Flows  21.39
        • a.  Operating Activities  21.40
        • b.  Investing Activities  21.41
        • c.  Financing Activities  21.42
      • 4.  Reporting Methodologies  21.43
      • 5.  Issues Unique to NPOs
        • a.  Contributions of Permanently Restricted Cash  21.44
        • b.  Contributions of Securities  21.45
        • c.  Contribution of Long-Lived Assets  21.46
        • d.  Collections  21.47
          • (1)  If Collections Are Not Capitalized  21.48
          • (2)  If Collections Are Capitalized  21.49
      • 6.  Statement of Functional Expenses  21.50
      • 7.  Disclosures  21.51
        • a.  Tax-Exempt Status  21.52
        • b.  Net Asset Components  21.53
        • c.  Pledges  21.54
        • d.  Investment Unitization  21.55
        • e.  Fundraising Expenses  21.56
        • f.  Contributed Services  21.57
        • g.  Split-Interest Agreements  21.58
      • 8.  Information Used by Outside Parties  21.59
      • 9.  External Versus Internal Reporting  21.60
  • VI.  CONTRIBUTIONS, PLEDGES, AND NONCASH TRANSACTIONS  21.61
    • A.  Contribution or Exchange Transaction?  21.62
    • B.  Is Transaction Restricted, Unrestricted, Conditional, or Unconditional?  21.63
      • 1.  Contributed Services  21.64
      • 2.  Contributed Goods, Including Gifts in Kind  21.65
      • 3.  Collections  21.66
      • 4.  Split-Interest Agreements  21.67
  • VII.  ACCOUNTING FOR INVESTMENTS, ENDOWMENTS, AND BOARD-DESIGNATED FUNDS (INCLUDING QUASI-ENDOWMENTS)
    • A.  Valuation Guidance  21.68
      • 1.  Investment Income  21.69
      • 2.  Unrealized and Realized Gains and Losses  21.70
      • 3.  Donor-Restricted Endowment Funds  21.71
      • 4.  Disclosures  21.72
      • 5.  Pooled Investments  21.73
      • 6.  Spending Rate  21.74
    • B.  Valuation Under ASC Topic 820  21.75
      • 1.  “Fair Value” Under ASC Topic 820  21.76
      • 2.  Key Definitions and Concepts  21.77
      • 3.  Valuation Techniques  21.78
      • 4.  Fair Value Disclosures  21.79
    • C.  Fair Value Option Under ASC Topic 825  21.80
    • D.  Other Valuations  21.81
  • VIII.  AGENCY TRANSACTIONS AND INTERRELATED ORGANIZATIONS  21.82
  • IX.  OTHER ACCOUNTING ISSUES FOR NONPROFIT ORGANIZATIONS
    • A.  Federal and Government Funding  21.83
    • B.  Federal Funding  21.84
    • C.  Nonfederal Government Funding  21.85
      • 1.  Tax-Exempt Financing  21.86
      • 2.  Functional Expenses  21.87
      • 3.  Fundraising Expenses and Joint Costs  21.88
      • 4.  Special Events  21.89
      • 5.  Allocation of Overhead Costs  21.90
  • X.  ACCOUNTING FOR CERTAIN SPECIFIC NONPROFIT ORGANIZATIONS  21.91
    • A.  Health Care Providers  21.92
    • B.  Colleges and Universities  21.93
    • C.  Governmental Colleges, Universities, and NPOs  21.94
    • D.  Voluntary Health and Welfare Organizations  21.95
    • E.  Private Foundations  21.96
  • XI.  RECENT DEVELOPMENTS IN FINANCIAL ACCOUNTING AND REPORTING FOR NOT-FOR-PROFIT ORGANIZATIONS; IMPORTANT WEBSITES  21.97
  • XII.  TABLES AND DIAGRAMS
    • A.  Table: Indicators Useful in Distinguishing Contributions From Exchange Transactions  21.98
    • B.  Table: Indicators Useful for Determining the Contribution and Exchange Portions of Membership Dues  21.99
    • C.  Chart: Relationship With Another Not-for-Profit Organization  21.100
    • D.  Table: Factors to Be Considered in Assessing Whether a Donor Has Made a Bona Fide Pledge to a Donee  21.101

22

Suspension, Forfeiture, and Revocation of Tax-Exempt Status

William C. Staley

  • I.  SCOPE OF CHAPTER  22.1
  • II.  BASIC CONCEPTS
    • A.  Corporate Powers, Rights, and Privileges  22.2
    • B.  Foreign Nonprofit Corporations Doing Business in California  22.3
    • C.  Suspension, Restoration, and Revivor of Domestic Nonprofit Corporation  22.4
      • 1.  Suspension by Secretary of State for Failure to File Statement of Information  22.5
      • 2.  Suspension by FTB for Failure to File Return or Pay Taxes  22.6
      • 3.  Revivor  22.7
      • 4.  Restoration  22.8
    • D.  Forfeiture of Foreign Nonprofit Corporation  22.9
    • E.  Good Standing With the Secretary of State and Franchise Tax Board  22.10
    • F.  Good Standing With the Registry of Charitable Trusts  22.10A
    • G.  Suspension of Registration With the Registry of Charitable Trusts  22.10B
  • III.  EFFECTS OF SUSPENSION OR FORFEITURE  22.11
    • A.  Tax Returns and Exemption Applications  22.12
    • B.  Corporate Name  22.13
    • C.  Participation in Litigation  22.14
    • D.  No Real Property Transfers  22.15
    • E.  Contract Voidability and Relief From Contract Voidability  22.16
    • F.  Summary of Actions Allowed and Prohibited to Suspended or Forfeited Nonprofit Corporation  22.17
  • IV.  CONSEQUENCES FOR CALIFORNIA NONPROFIT CORPORATIONS
    • A.  Consequences of Failure to File Statement of Information With Secretary of State  22.18
    • B.  Consequences of Failure to File Form RRF-1 With California Attorney General  22.19
    • C.  Consequences of Revocation of Registration With California Attorney General  22.19A
    • D.   Reinstatement of Registration With California Attorney General  22.19B
    • E.  Consequences of Failure to File Return With or Pay FTB  22.20
    • F.  Revivor  22.21
    • G.  Relief From Contract Voidability (RCV)  22.22
  • V.  CONSEQUENCES FOR NON-CALIFORNIA NONPROFIT CORPORATIONS DOING BUSINESS IN CALIFORNIA
    • A.  Consequences of Failure to Register with Secretary of State  22.23
    • B.  Consequences of Failure to File Statement of Information With Secretary of State, After Registering  22.24
    • C.  Consequences of Failure to File Form RRF-1 or Revocation of Registration With the Attorney General  22.25
    • D.  Consequences of Failure to File Return With or Pay FTB  22.26
  • VI.  MAINTAINING TAX-EXEMPT STATUS OF NONPROFIT CORPORATION  22.27
    • A.  Effectiveness of Determination Letter  22.28
    • B.  Revocation of Exempt Status  22.29
    • C.  Reestablishment of Exempt Status
      • 1.  Reestablishment of Federal Exemption  22.30
      • 2.  Reestablishment of California Exemption  22.31

 

ADVISING CALIFORNIA NONPROFIT CORPORATIONS

(3d Edition)

June 2018

TABLE OF CONTENTS

 

File Name

Book Section

Title

CH01

Chapter 1

Attorney’s Role During Formation and Operation

01-003

§1.3

Should the Attorney Accept the Matter?

01-004

§1.4

Is a New Organization Necessary?

01-005

§1.5

Is There a Sound Business Plan: Program, Financing, People?

01-006

§1.6

Considering the Goals or Purposes of the Founders, Should the Organization Be a Nonprofit or Another Type of Organization?

01-008

§1.8

If Nonprofit, What Type of Entity Should It Be?

01-009

§1.9

In What State or Country Should It Be Organized?

01-012

§1.12

Is Income Tax Exemption Appropriate and Desirable?

01-014

§1.14

If the Entity Will Be an IRC §501(c)(3) Organization, Can It Qualify as a Public Charity Under IRC §509(a)?

01-021

§1.21

Table of Contents for Operating Manual

01-022

§1.22

Checklist: Areas Requiring Review

01-029

§1.29

Paragraph in Engagement Letter Confirming That Entity to Be Formed Will Be the Client

01-031

§1.31

Paragraph in Engagement Letter Confirming That Entity to Be Formed Will Be Separate Client

01-032

§1.32

Consent to Representation and Conflict Waiver Letter for Foundation Formed for Existing Client

CH03

Chapter 3

Planning for, Obtaining, and Maintaining Tax-Exempt Status

03-026

§3.26

Questionnaire: Creating Rebuttable Presumption of Reasonableness of Compensation

CH05

Chapter 5

Forming the Corporation and Beginning Operations

05-003

§5.3

Checklist: Formation of Nonprofit Corporation

05-008

§5.8

Consent to Use of Name

05-011

§5.11

Appointment of Initial Directors and Adoption of Bylaws

05-012

§5.12

Waiver of Notice and Consent to Holding First Meeting of Board of Directors

05-013

§§5.13-5.38

Heading and Participants

 

§5.14

Adoption of Waiver of Notice and Consent to Meeting

 

§5.15

Articles Filed

 

§5.16

Ratification of Actions by Incorporator

 

§5.17

Adoption of Bylaws

 

§5.18

Number of Directors

 

§5.18A

Election of Chair

 

§5.19

Election of Officers

 

§5.20

Corporate Seal

 

§5.21

Accounting Year

 

§5.22

Principal Office Location

 

§5.22A

Accounting Method

 

§5.23

Bank Account

 

§5.24

Membership Certificate

 

§5.25

Incorporation Expenses

 

§5.26

Exemptions From Federal and State Taxes

 

§5.26A

Registration With Attorney General

 

§5.27

Statement of Information for California Nonprofit Corporation

 

§5.28

Compliance With Local Solicitation Ordinances

 

§5.29

Compliance With Political Reform Act

 

§5.30

Issuance of Memberships and Establishment of Dues

 

§5.31

Application for Qualification or Registration of Offer and Sale of Membership Securities

 

§5.32

Employer Identification Number

 

§5.33

Nonprofit Mailing Permit

 

§5.34

Adoption of Conflict of Interest Policy

 

§5.35

Adoption of Policy for the Detection and Reporting of Fraudulent Activity (Whistleblower Policy)

 

§5.36

Approval of Consent to Use of Electronic Transmissions by Director or Officer

 

§5.38

Adjournment

05-039

§§5.39-5.64

Heading; Participants

 

§5.40

Articles of Incorporation

 

§5.41

Ratification of Actions by Incorporator

 

§5.42

Bylaws

 

§5.43

Number of Directors

 

§5.43A

Election of Chair

 

§5.44

Election of Officers

 

§5.44A

Accounting Year

 

§5.45

Principal Office Location

 

§5.46

Incorporation Expenses

 

§5.47

Authorization to File Applications for Tax Exemptions

 

§5.47A

Registration With Attorney General

 

§5.48

Authorization to Enter Into Contracts

 

§5.49

Authorization to Retain Counsel and Waive Conflicts

 

§5.50

Accounting Method

 

§5.51

Bank Account

 

§5.52

Admission of Members

 

§5.53

Compliance With Local Solicitation Ordinances

 

§5.54

Compliance With Political Reform Act

 

§5.55

Issuance of Memberships and Establishment of Dues

 

§5.56

Application for Qualification or Registration of Offer and Sale of Membership Securities

 

§5.57

Employer Identification Number

 

§5.58

Nonprofit Mailing Permit

 

§5.59

Adoption of Conflict of Interest Policy

 

§5.60

Approval of Policy for the Detection and Reporting of Fraudulent Activity (Whistleblower Policy)

 

§5.61

Approval of Consent to Use of Electronic Transmissions by Director or Officer

 

§5.62

Execution of Consent

 

§5.63

Corporation’s Policy on the Detection and Reporting of Fraudulent Activity (Whistleblower Policy)

 

§5.64

Consent to Use of Electronic Transmissions by Director or Officer

CH06

Chapter 6

Articles of Incorporation

06-003

§6.3

Checklist: Articles of Incorporation

06-008

§§6.8-6.15

Heading

 

§6.9

Name

 

§6.10

Purpose

 

§6.11

Optional Supporting Organization Provision

 

§6.12

Agent for Service of Process

 

§6.12A

Principal Office

 

§6.13

Tax-Exempt Status

 

§6.14

Signature Block

 

§6.15

Declaration; Incorporation of Existing Unincorporated Association

06-016

§§6.16-6.22

Heading

 

§6.17

Name

 

§6.18

Purpose

 

§6.19

Agent for Service of Process

 

§6.19A

Principal Office

 

§6.20

Tax-Exempt Status

 

§6.21

Signature Block

 

§6.22

Declaration; Incorporation of Existing Unincorporated Association

06-023

§§6.23-6.28

Heading

 

§6.24

Name

 

§6.25

Purpose

 

§6.26

Agent for Service of Process

 

§6.26A

Principal Office

 

§6.27

Tax-Exempt Status

 

§6.28

Signature Block

06-029

§6.29

Declaration; Incorporation of Existing Unincorporated Association

06-033

§6.33

Transmittal Letter

06-041

§6.41

Checklist: Contents of Request for Approval

06-043

§6.43

Incorporators’ Certificate of Amendment

06-044

§6.44

Officers’ Certificate of Amendment

CH07

Chapter 7

Bylaws

07-003

§§7.3-7.109A

Heading

 

§7.4

Name

 

§7.5

Principal Office of the Corporation

 

§7.6

General and Specific Purposes; Limitations

 

§7.7

Construction and Definitions

 

§7.8

Subordinate Corporation to Religious Entity

 

§7.9

Supporting Organization Under IRC §509(a)(3)

 

§7.10

Irrevocable Dedication of Assets

 

§7.11

Nonvoting Members

 

§7.13

Qualifications and Classes of Membership

 

§7.14

Rights of Membership

 

§7.15

Other Persons Associated With Corporation

 

§7.16

Members’ Dues, Fees, and Assessments

 

§7.17

Members in Good Standing

 

§7.18

Termination of Membership

 

§7.19

Suspension of Membership

 

§7.20

Termination or Suspension of Membership

 

§7.21

Transfer of Memberships

 

§7.22

Annual Meeting

 

§7.23

Place of Meeting

 

§7.24

Authority to Call Special Meetings

 

§7.25

Calling Special Meetings

 

§7.26

Proper Business of Special Meeting

 

§7.27

General Notice Requirements

 

§7.28

Notice of Certain Agenda Items

 

§7.29

Manner of Giving Notice

 

§7.30

Affidavit of Mailing Notice

 

§7.31

Quorum

 

§7.32

Eligibility to Vote

 

§7.33

Manner of Voting

 

§7.34

Number of Votes

 

§7.35

Approval by Majority Vote

 

§7.36

Waiver of Notice or Consent

 

§7.37

Action by Unanimous Written Consent

 

§7.38

Action by Written Ballot

 

§7.39

Solicitation of Written Ballots

 

§7.40

Number of Votes and Approvals Required

 

§7.41

Revoking Ballots

 

§7.42

Filing Ballots

 

§7.43

Record Date for Notice, Voting, Written Ballots, and Other Board Actions

 

§7.44

Record Date for Actions Not Set by Board

 

§7.45

Members’ Proxy Rights

 

§7.46

Solicited Proxies

 

§7.47

Subject Matter of Proxy to Be Stated

 

§7.48

Revocability of Proxies

 

§7.49

Adjournment and Notice of Adjourned Meetings

 

§7.51

General Powers

 

§7.52

Specific Powers

 

§7.53

Number of and Qualifications for Directors

 

§7.54

Restriction on Interested Persons as Directors (Public Benefit Corporations)

 

§7.55

Designated Directors

 

§7.57

Nominations by Committee

 

§7.58

Nominations by Members of Corporations With 500 to 4999 Members

 

§7.59

Nominations by Members of Corporations With 5000 or More Members

 

§7.60

Floor Nominations

 

§7.61

Nominee’s Right to Solicit Votes

 

§7.62

Use of Corporate Funds to Support Nominee

 

§7.63

Election of Directors (Religious Corporation)

 

§7.64

Events Causing Vacancies on Board

 

§7.65

Resignation of Directors

 

§7.66

Removal of Directors

 

§7.67

Vacancies Filled by Board

 

§7.68

Vacancies Filled by Members

 

§7.69

No Vacancy on Reduction of Number of Directors

 

§7.70

Place of Board Meetings

 

§7.71

Meetings by Telephone or Other Telecommunications Equipment

 

§7.72

Annual and Other Meetings

 

§7.73

Authority to Call Special Meetings

 

§7.74

Notice of Special Meetings

 

§7.75

Quorum

 

§7.76

Waiver of Notice

 

§7.77

Adjournment

 

§7.78

Notice of Adjourned Meeting

 

§7.79

Action Without a Meeting

 

§7.80

Compensation and Reimbursement

 

§7.80A

Director Voting

 

§7.81

Creation and Powers of Committees

 

§7.82

Audit Committee

 

§7.83

Compensation Committee

 

§7.84

Executive Committee

 

§7.85

Investment Committee

 

§7.86

Meetings and Action of Committees

 

§7.87

Offices Held

 

§7.88

Election of Officers

 

§7.89

Appointment of Other Officers

 

§7.90

Removal of Officers

 

§7.91

Resignation of Officers

 

§7.92

Vacancies in Office

 

§7.93

Chair of the Board

 

§7.94

President

 

§7.95

Vice Presidents

 

§7.96

Secretary

 

§7.97

Chief Financial Officer

 

§7.98

Contracts With Directors

 

§7.99

Loans to Directors and Officers

 

§7.100

Indemnification

 

§7.101

Insurance

 

§7.102

Maintenance of Corporate Records

 

§7.103

Membership Records

 

§7.104

Accounting Records and Minutes

 

§7.105

Maintenance and Inspection of Articles and Bylaws

 

§7.106

Directors’ Right to Inspect

 

§7.107

Annual Report

 

§7.108

Annual Statement of Certain Transactions and Indemnifications

 

§7.108A

Emergency Powers

 

§7.109

Private Foundation Restrictions

 

§7.109A

Supporting Organization Restrictions

07-116

§§7.116-7.121

Amendment by Board Subject to Limitation by Members

 

§7.117

Changes to Number of Directors

 

§7.118

Greater Vote Requirement

 

§7.119

Members’ Approval Required

 

§7.120

Amendment by Members

 

§7.121

Amendments to Religious Corporation’s Bylaws

07-122

§§7.122-7.169

Heading; Principal Office

 

§7.123

Objectives and Purposes

 

§7.124

Dedication of Assets

 

§7.125

General and Specific Powers of Directors

 

§7.126

Number of Directors

 

§7.127

Appointment and Term of Office of Directors

 

§7.128

Qualifications of Board Members

 

§7.129

Vacancies

 

§7.130

Place of Meeting; Meeting by Telephone or Other Telecommunications Equipment

 

§7.131

Annual Meeting

 

§7.132

Special Meetings

 

§7.133

Notice of Meetings

 

§7.134

Waiver of Notice

 

§7.135

Quorum

 

§7.136

Adjournment

 

§7.137

Notice of Adjournment

 

§7.138

Action Without Meeting

 

§7.139

Compensation of Directors

 

§7.140

Restriction on Interested Directors

 

§7.141

Creation and Powers of Committees

 

§7.142

Executive Committee

 

§7.143

Compensation Committee

 

§7.144

Advisory Committees

 

§7.145

Audit Committee

 

§7.146

Meeting and Action of Committees

 

§7.147

Offices Held

 

§7.148

Election of Officers

 

§7.149

Subordinate Officers

 

§7.150

Removal of Officers

 

§7.151

Resignation of Officers

 

§7.152

Vacancies in Office

 

§7.153

Responsibilities of Officers

 

§7.154

Maintenance of Articles and Bylaws

 

§7.155

Maintenance of Other Corporate Records

 

§7.156

Inspection by Directors

 

§7.157

Annual Report

 

§7.158

Financial Audit

 

§7.159

Right to Indemnification

 

§7.160

Insurance

 

§7.161

Contracts With Directors and Officers

 

§7.162

Loans to Directors and Officers

 

§7.163

Fiscal Year

 

§7.164

Amendments

 

§7.165

Members

 

§7.166

Private Foundation Restrictions

 

§7.167

Supporting Organization Restrictions

 

§7.167A

Emergency Provisions

 

§7.168

Construction and Definitions

 

§7.169

Certificate of Secretary

CH09

Chapter 9

Directors and Officers

09-071

§9.71

Notice of Meeting

09-072

§9.72

Call of Meeting

09-073

§9.73

Agenda of Meeting

09-075

§§9.75-9.84

Waiver of Notice

 

§9.76

Waiver and Consent in Lieu of Notice

 

§9.77

Approval of Minutes of Meeting

 

§9.84

Checklist: Preparation of Minutes

09-085

§§9.85-9.97

Introductory Statement

 

§9.86

Attendance and Quorum

 

§9.87

Chair and Secretary

 

§9.88

Notice

 

§9.89

Minutes of Last Meeting

 

§9.90

Election of Officers

 

§9.91

Adoption of Resolution

 

§9.92

Establishment of Executive Committee

 

§9.93

Establishment of Special Committees

 

§9.94

Amendment of Articles or Bylaws

 

§9.95

Adjournment or Recess to Another Time or Place

 

§9.96

Final Adjournment

 

§9.97

Submission and Approval

09-099

§§9.99-9.102

Unanimous Written Consent

 

§9.100

Directors’ Signing of Document

 

§9.101

Action Taken by Board

 

§9.102

Signature Block

09-141

§9.141

Checklist: Board Approval of Transactions With Interested Directors

09-142

§9.142

Minutes Reflecting Approval of Transaction—Public Benefit and Religious Corporations

CH10

Chapter 10

Members and Other Interested Persons

10-064

§10.64

Proxy Distributed to Ten or More Members of Public Benefit or Mutual Benefit Corporation With 100 or More Members

10-065

§10.65

Proxy Distributed to Fewer Than Ten Members or to Members of Nonprofit Corporation With Fewer Than 100 Members

10-068

§10.68

Written Ballot to Amend Bylaws

10-086

§10.86

Notice of Meeting

10-091

§10.91

Waiver of Notice and Consent

CH14

Chapter 14

Regulation of Fundraising

14-012

§14.12

Acknowledgment and Receipt for Charitable Contribution of More Than $250

14-018

§14.18

Disclosure Statement for Quid Pro Quo Charitable Contributions

14-026

§14.26

Safe-Harbor Procedures for Mail and Other Print Media Solicitations

14-027

§14.27

Safe-Harbor Procedures for Telephone Solicitations

14-028

§14.28

Safe-Harbor Procedures for Television Solicitations

14-029

§14.29

Safe-Harbor Procedures for Radio Solicitations

14-030

§14.30

Safe-Harbor Procedures for Labor or Agricultural Organizations and Business Leagues

14-045

§§14.45-14.49

Title and Nature of Solicitation

 

§14.46

Deductibility of Contribution

 

§14.47

Solicitation for Law Enforcement, Firefighting, or Veterans Organizations

 

§14.48

Whether Soliciting Organization Will Benefit From Contribution

 

§14.49

Signature Block

CH18

Chapter 18

Tax-Exempt Financing for Nonprofit Corporations

18-049

§18.49

Reimbursement Resolution

18-051

§18.51

Approving Resolution

18-052

§18.52

Committee Approval

CH20

Chapter 20

Corporate Changes

20-012

§§20.12-20.17

Title; Identification of Parties

 

§20.13

Conveyance Approved

 

§20.14

Notice to Attorney General

 

§20.15

Members’ Approvals

 

§20.16

Other Approvals

 

§20.17

Signature Block

20-031

§20.31

Checklist: Contents of Request for Approval From Attorney General

20-033

§§20.33-20.38

Title and Introduction

 

§20.34

Member or Shareholder Approval

 

§20.35

Public Benefit Corporation to Mutual Benefit, Business, or Social Purpose Corporation

 

§20.36

Mutual Benefit Corporation to Public Benefit Corporation

 

§20.37

Other Approvals

 

§20.38

Declaration and Signatures

20-043A

§20.43A

Letter to Attorney General With Copy of Merger Agreement

20-051

§§20.51-20.53

Introduction and Parties

 

§20.52

Merger Terms

 

§20.53

Attestation and Signatures

20-055

§§20.55-20.72

Introduction

 

§20.56

Parties’ Intent

 

§20.57

Surviving Corporation

 

§20.58

Disappearing Corporation

 

§20.59

Effective Date

 

§20.60

Approvals and Consents

 

§20.61

Statement of Merger

 

§20.62

Articles and Bylaws

 

§20.63

Directors and Officers

 

§20.64

Effect of Merger on Memberships

 

§20.65

Interim Provisions

 

§20.66

Termination or Abandonment

 

§20.67

Amendments to Agreement

 

§20.68

Governing Law

 

§20.69

Entire Agreement

 

§20.70

Counterparts

 

§20.71

Further Assurances

 

§20.72

Attestation and Signatures

20-073

§§20.73-20.79

Title; Identification of Parties

 

§20.74

Board Approval of Merger

 

§20.75

Member Approval of Merger

 

§20.76

Additional Required Approvals

 

§20.77

Attorney General Notice or Consent

 

§20.78

Approval of Commissioner of Business Oversight

 

§20.79

Declaration and Signatures

20-084

§20.84

Checklist: Procedures

20-087

§§20.87-20.98

Intention to Wind Up and Dissolve Corporation

 

§20.88

Corporation Without Members

 

§20.89

Resolution to Wind Up and Dissolve

 

§20.90

Members’ Consent

 

§20.91

Resolution for Certificate of Election to Wind Up and Dissolve

 

§20.92

Resolution Authorizing Filing of Final Tax Returns

 

§20.93

Resolution Permitting Other Necessary Actions

 

§20.94

Introduction to Plan of Liquidation and Distribution of Assets

 

§20.95

Resolution to Provide for Debts

 

§20.96

Resolution to Set Aside Reserve

 

§20.97

Resolution to Distribute Assets

 

§20.98

Resolution Authorizing Necessary Instruments

20-099

§20.99

Resolution by Members Approving Dissolution

20-102

§§20.102-20.103

Title, Parties, and Election

 

§20.103

Declaration and Signatures

20-106

§§20.106-20.113

Address and Salutation

 

§20.107

Request for Waiver of Objections

 

§20.108

Documents Enclosed

 

§20.109

Nature of Corporate Assets

 

§20.110

Assets Are Not Proceeds of Restricted Funds

 

§20.111

Distribution of Assets

 

§20.112

Distributees’ Status

 

§20.113

Closing and Signatures

20-117

§20.117

Notice to Members and Creditors

20-121

§20.121

Notice to Creditors

20-126

§§20.126-20.134

Title; Identification of Parties

 

§20.127

All Final Franchise Returns

 

§20.128

Corporate Affairs Wound Up

 

§20.129

Debts and Liabilities

 

§20.130

Election to Dissolve

 

§20.131

Distribution of Assets; Public Benefit or Religious Corporations

 

§20.132

Distribution of Assets; Mutual Benefit Corporations

 

§20.133

Statement of Dissolution

 

§20.134

Declaration and Signatures

 

Selected Developments

June 2018 Update

Congress enacted the Tax Cuts and Jobs Act (Pub L 115–97, 131 Stat 2054), effective January 1, 2018. Among its provisions affecting nonprofit organizations, the Act makes the following changes:

  • Imposes a 21 percent excise tax on compensation in excess of $1 million and excess parachute payments made by tax-exempt organizations to certain covered employees. IRC §4960. See §§1.6, 3.15, 7.83, 7.143, 13.40.

  • Imposes a new 1.4 percent excise tax on investment income of certain private colleges and universities. IRC §4968. See §§1.45A, 17.79–17.82.

  • Suspends availability of the bicycle commuter reimbursement exclusion during any tax year beginning after December 31, 2017, and before January 1, 2026. IRC §132(f)(8). See §13.44.

  • Eliminates the donee charity reporting exemption to the charitable contribution substantiation requirement under IRC §170(f)(8). As a result, donors are required in all cases to obtain contemporaneous written receipts from the donee charity. See §14.3.

  • Repeals the deduction for amounts paid for college athletic event seating rights. IRC §170(l). See §14.7.

  • Increased the standard deduction to $24,000 for married couples filing jointly and $12,000 for individual taxpayers. IRC §63. See §15.3.

  • Increased the estate tax basic deduction to $10 million per person, as indexed for inflation for decedents dying after December 31, 2017 ($11,180,000 in 2018). IRC §2010(c)(3); Rev Proc 2018–18, 2018–10 Int Rev Bull 392. See §15.5.

  • Provides that, as of January 1, 2018, no charitable deduction is allowed for a payment to a college or university in exchange for which the donor receives the right to purchase tickets to an athletic event. IRC §170(l)(1). See §15.24A.

  • Provides that a donor may deduct a cash contribution to a public charity in an amount equal to 60 percent of the donor’s contribution base. IRC §170(b)(1)(G)(i). See §15.26.

  • Maintains nonrecognition of gain or loss for like-kind exchanges of real property; however, the Act excludes like-kind exchanges of non–real property and real property held primarily for sale from nonrecognition. IRC §1031. See §17.8.

  • Treats amounts used by tax-exempt organizations to pay for certain fringe benefits, including qualified transportation fringe benefits, any parking facility used in connection with qualified parking, and on-premises athletic facilities, offered to employees as unrelated business taxable income (provided that the amounts are not deductible under IRC §274). IRC §512(a)(7). See §17.12.

  • Changes certain limitations on the a corporation’s use of the cash method of accounting provided in IRC §448(c)(1). See §17.59.

  • Requires tax-exempt organizations operating more than one unrelated trade or business to compute unrelated business taxable income separately for each line of unrelated trade or business activity. IRC §512(a)(6). See §§17.60, 17.63.

  • Eliminates carrybacks of net operating losses incurred in years after December 31, 2017 (with some exceptions), but allows net operating losses to be carried forward indefinitely. IRC §172. See §17.63.

  • Repeals the federal corporate alternative minimum tax. IRC §38(c)(6)(E). See §17.65.

  • Reduces the federal corporate tax rate to a flat 21 percent. IRC §11(b). See §§17.64, 19.73.

Effective for tax years beginning on or after January 1, 2018, the IRS generally will no longer require a new tax exemption application from a nonprofit unincorporated association that changes its form of organization to a nonprofit corporation. Rev Proc 2018–15, 2018–9 Int Rev Bull 379. See §§2.12, 20.25.

The California Attorney General released the 2017 edition of the Attorney General’s Guide for Charities. https://oag.ca.gov/sites/all/files/agweb/pdfs/charities/publications/guide_for_charities.pdf. See §§2.24, 6.40, 20.31.

On December 4, 2017, the IRS released IRS Notice 2017–73, 2017–51 Cum Bull 562, requesting comments on proposed guidance for donor-advised funds with respect to several issues, including grants to public charities, quid pro quo gifts, and satisfying a donor’s pledge. See §§4.9, 4.11.

In Puri v Khalsa (9th Cir 2017) 844 F3d 1152, the Ninth Circuit held that the “ecclesiastical abstention doctrine” will not apply to claims that can be resolved by application of neutral law without encroaching on a religious organizations right of autonomy in matters of doctrine or administration. See §9.2.

In 2017, the Internal Revenue Service released guidance relating to audit techniques for specific types of nonprofits, in Audit Technique Guides (ATGs) for Exempt Organizations, available at https://www.irs.gov/charities-non-profits/audit-technique-guides-atgs-for-exempt-organizations. See §12.47.

As of January 1, 2018, California employers are prohibited from providing voluntary consent to immigration enforcement agents to enter nonpublic areas of a place of labor, unless the agent provides a judicial warrant. Govt C §7285.1. Employers also must provide a current employee notice of an inspection of his or her Employment Eligibility Verification (IRS Form I-9) forms or other employment records conducted by an immigration agency within 72 hours of receiving the federal notice of inspection. Lab C §90.2. See Stats 2017, ch 492 (AB 450–Chiu); §13.31.

Any mandatory harassment training provided by a covered employer under the California Fair Employment and Housing Act (FEHA) (Govt C §§12900–12996) must address harassment based on gender identity, gender expression, and sexual orientation. Govt C 12950.1(b). See §13.38.

In Advocate Health Care Network v Stapleton (2017) ___ US ___, 137 S Ct 1652, the Supreme Court held that a plan maintained by a principal purpose organization (as defined under 29 USC §1002(33)) qualifies as a church plan for ERISA exemption purposes, regardless of whether the plan was initially established by a church. See §13.43.

Under the federal Family and Medical Leave Act of 1993 (FMLA) (29 USC §§2611–2654) and the California Family Rights Act (CFRA), employers with 50 or more employees must provide eligible employees with a total of 12 weeks of unpaid leave for family care, medical leave, and parental bonding. Effective January 1, 2018, the New Parent Leave Act (Govt C §12945.6) provides that California employers with 20 to 49 employees are also required to provide 12 weeks of parental bonding leave to eligible employees. New Govt C §12945.6 will be repealed and replaced with a new version on January 1, 2020. See §13.47.

The IRS has adjusted certain amounts for inflation, including amounts for (1) the value of goods or services of insubstantial value that an organization need not disclose, (2) token benefit amounts that are not taken into account to reduce charitable deductions, (3) membership benefits, and (4) various other low-cost amounts. Rev Proc 2018–18, 2018–10 Int Rev Bull 392. See §§14.15–4.16, 15.21, 17.26, 17.41.

The charts in chap 14A of charitable solicitation permit and licensing contact information for California cities and counties have been completely updated with current contact information and current municipal codes covering charitable solicitations.

The discussion in chap 16 of the legal basis for the charitable trust principle has been significantly expanded, and now includes discussion of recent important actions and settlements demonstrating the Attorney General’s goal of enforcing charitable donor intent, including People v Crawford Smith Found. (San Diego Super Ct, Apr. 9, 2014, No. 37-2012-00086290-CU-BT-CTL) (allegations of misconduct resulted in lifetime injunctions against directors from serving on board of any other California charity); People v Help Hospitalized Veterans (Riverside Super Ct, Apr. 26, 2013, No. RIC1212288 (HHV)) (allegations of excessive executive compensation, improper reporting, dissemination of false information likely to mislead potential donors, and unlawful diversions led to settlement resulting in similar lifetime injunctions against directors); People v Monterey County AIDS Project (Monterey Super Ct, July 25, 2011, No. M105979) (allegations that restricted funds were improperly used resulted in settlement requiring directors to jointly pay $1 million, reimburse costs, and dissolve charitable entity, and in similar lifetime injunctions on them from serving as future directors of California charities, but with ability to petition for redress after 5 years). See §16.8.

In New Jersey Council of Teaching Hosps. v Commissioner (2017) 149 TC No. 22, the Tax Court found that fees paid to a tax-exempt organization to endorse a vendor’s debt collection services constituted compensation for services rendered, not excludable royalties under IRC §512(b)(2). The court also held that the organization’s activities allegedly helping members save time or money by directing them to low-cost or high-quality vendors did not serve the convenience of its members in their capacity as members for IRC §513(a)(2) exemption purposes. See §§17.31, 17.38.

The Bipartisan Budget Act of 2018 (Pub L 115–123, 132 Stat 64) added the “Newman’s Own” exception to the limitations on the ownership of excess business holdings by private foundations, allowing private foundations to own independently-operated philanthropic business holdings. See §17.74A.

Operative January 1, 2018, California law added more precise definitions of earmarking and specific reporting and disclaimer requirements for earmarked contributions. Govt C §§84501, 85704. See §19.43A.

In Freedom Path v Lerner (ND Tex, July 7, 2017, No. 3:14–CV–1537–D) 2017 US Dist Lexis 104970, the Northern District Court of Texas held that the IRS’s use of the “facts and circumstances” test in determining whether a social welfare organization has engaged in excessive electioneering is not facially unconstitutional. See §19.73.

In Lair v Motl (9th Cir 2017) 873 F3d 1170, the Ninth Circuit reversed the district court’s decision invalidating individual contribution limits in Montana, finding that there was sufficient evidence of the risk of actual quid pro quo corruption in Montana and that the limits in Montana were closely drawn to serve the state’s anti-corruption interest. See §19.84.

Effective January 1, 2018, Stats 2017, ch 782 enacted various amendments governing the rights and requirements of California nonprofit health facilities, other covered facilities offering similar services, and the Attorney General with respect to the sale, disposition, and transfer of material assets or operations to another entity. The changes include

  • Requiring that the mandatory written notice to the Attorney General include a list of primary languages spoken at the facility and the threshold languages for Medi-Cal beneficiaries, as determined by the Department of Health Care Services in the county where the facility is located. Corp C §§5914(b), 5920(b). See §§20.20, 20.23A.

  • Extending the Attorney General’s time to issue a decision from 60 days of receipt of the written notice to 90 days of receipt of the notice. Corp C §§5915, 5921. See §20.24.

  • Requiring the Attorney General’s notice of public hearing to be provided in English, in the primary languages spoken at the facility, and in the threshold languages for Medi-Cal beneficiaries in the relevant county. Corp C §5916. See §20.24.

  • Authorizing the Attorney General to enforce any condition imposed by its consent to the contract or transaction, including actions for specific performance, injunctive relief, other equitable remedies and to recover attorney fees and costs. Corp C §5926. See §20.24.

The assignee of a suspended corporation cannot bring an action that the suspended corporation itself would be barred from bringing in its own name. Casiopea Bovet v Chiang (2017) 12 CA5th 656. See §22.14.

About the Third Edition Authors

EMILY ANDREWS, a senior associate at the Sacramento firm of Olson Hagel & Fishburn LLP, advises clients on compliance with state and federal campaign, election, and lobbying laws. She received her J.D. from the University of San Francisco School of Law in 2011, where she served on the USF Law Review Editorial Board as the Symposium Editor. Ms. Andrews is a member of the California Political Attorneys Association. She is an author of chapter 19 (Legislative and Political Activities).

ELIZABETH S. BLUESTEIN, Vice President and General Counsel at Public Counsel in Los Angeles, is responsible for supervising and coordinating the operational work of Public Counsel’s various legal programs and ensuring compliance with applicable corporate and legal requirements. Before 2009, Ms. Bluestein was the Directing Attorney of Public Counsel’s Community Development Project. In that role, she provided a wide range of legal and capacity-building services to nonprofit community-based organizations. Ms. Bluestein is an adjunct professor at Loyola Law School Los Angeles, where she teaches a nonprofit tax and transaction clinic. She served as the chair of the California State Bar Association’s Standing Committee on the Delivery of Legal Services from 2013 to 2014, and is an advisor to the State Bar Business Law Section’s Nonprofit Organizations Committee. She is also a past Chair of the Exempt Organizations Committee of the Tax Section of the Los Angeles County Bar Association. Ms. Bluestein graduated from Harvard University, magna cum laude, in 1990, and received her J.D. in 1993 from the University of California, Berkeley, School of Law, where she was a member of the Order of the Coif. Before joining Public Counsel, Ms. Bluestein developed substantial transactional legal experience at the law firm of Sullivan & Cromwell LLP, where she represented clients in complex financing and acquisition transactions, and she gained extensive experience in transactional tax law at Gibson, Dunn & Crutcher LLP, advising and structuring transactions for clients including start up companies, real estate developers, multinational corporations, and nonprofit organizations. She is the author of chapter 14A (Charitable Solicitation Permit and Licensing Information for California Cities and Counties).

REYNOLDS T. CAFFERATA, a partner with the Los Angeles firm of Rodriguez, Horii, Choi & Cafferata LLP, advises charitable organizations and individuals regarding complex charitable gifts, charitable trusts, donor-advised funds, private foundations, support organizations, and other gift mechanisms and counsels corporate fiduciaries regarding the management of charitable trusts. He is a fellow of the American College of Trust and Estate Counsel and has served as chair of the Exempt Organizations Committee of the Los Angeles County Bar Association. He is also a frequent speaker on complex charitable gifts and trusts and has authored numerous articles on the subject. Mr. Cafferata received his B.A. from George Washington University (summa cum laude), and his J.D. from the University of Southern California, where he was a member of the Order of the Coif. He is an author of chapter 4 (Donor Funds, Private Foundations, and Supporting Organizations).

STEVEN J. CHIDESTER, a partner in the Rancho Santa Fe office of Luce, Forward, Hamilton & Scripps LLP, practices in the areas of estate planning, trust and estate administration, charitable giving, and the representation of tax-exempt organizations. Mr. Chidester has represented exempt organizations in civil and probate court and before states Attorneys General and also has considerable experience designing and using computer modeling to show the economic consequences of various estate planning and charitable giving techniques. He is a frequent writer and speaker on charitable giving issues. Mr. Chidester received his B.A. from Brigham Young University, cum laude, and his J.D. from Brigham Young University, magna cum laude, and clerked for the Honorable Gilbert S. Merritt in the Sixth Circuit Court of Appeals. Mr. Chidester is an author of chapter 1 (Attorney’s Role During Formation and Operation).

WILLIAM C. CHOI, a member of the Los Angeles firm of Rodriguez, Horii, Choi & Cafferata LLP, specializes in the areas of tax-exempt organizations and state and local taxation. He has served as a member of the Executive Committee of the California State Bar Taxation Section and as Chair of the Exempt Organizations Committee, Taxation Section, of the Los Angeles County Bar Association. Mr. Choi received his B.S. (Highest Honors) from San Jose State University, and his J.D. from the University of Southern California, where he was a member of the law review. He is an author of chapter 11 (Property Tax Exemption for Nonprofit Organizations).

MEGAN A. CHRISTENSEN is a partner in the Washington, DC, office of Manatt, Phelps & Phillips LLP. Her practice focuses on federal income taxation. She advises taxable and tax-exempt clients in a broad array of areas, including tax-exempt status, nonprofit governance, new markets and rehabilitation tax credits, and federal and state civil tax issues. She is a member of the District of Columbia Bar Association and the Business Law and Taxations Sections of the American Bar Association, and she is Vice Chair of the American Bar Association Business Law Section’s Committee on Nonprofit Organizations. She has spoken and written widely on tax and tax-exempt matters. Ms. Christensen received her B.A. from The College of William & Mary in 1996, her J.D. from the Washington University School of Law in 2005, where she clerked for the majority tax counsel of the Senate Finance Committee, and an LL.M. from the New York University School of Law in 2006. She is an author of chapter 18 (Tax-Exempt Financing for Nonprofit Corporations).

LANI MEANLEY COLLINS, a partner at Collins & Associates, Santa Barbara, specializes in nonprofit and tax-exempt organizations and estate and trust planning and administration. Ms. Collins has over 30 years of experience in estate, gift, generation-skipping, and property tax planning and charitable planned giving. She has also acted as an outside “in-house counsel” to local, regional, and national tax-exempt organizations. She is a past chair of the Nonprofit Organizations Committee of the Business Law Section of the California State Bar and is immediate past president of the Estate Planning Council of Santa Barbara. She is a frequent speaker and instructor on estate planning and exempt and nonprofit organizations. Ms. Collins received her B.A. with highest honors from the University of California, Santa Barbara, where she was elected to Phi Beta Kappa, and her J.D. from Cornell Law School. She is a certified specialist in Estate Planning, Probate & Trust Law by the Board of Legal Specialization of the State Bar of California. Ms. Collins is an author of chapter 1 (Attorney’s Role During Formation and Operation).

GREGORY L. COLVIN, a principal and Chair of the Board of the San Francisco firm of Adler & Colvin, a Law Corporation, specializes in nonprofit and tax-exempt law. He is the co-chair of the Subcommittee on Political and Lobbying Organizations and Activities of the Exempt Organizations Committee of the ABA Section of Taxation. Mr. Colvin is also an adjunct professor at the University of San Francisco Institute for Nonprofit Organization Management, author of numerous publications, and a frequent speaker at seminars on IRS political and lobbying rules. He received his A.B. (magna cum laude) from the University of Washington, where he was elected to Phi Beta Kappa, and his J.D. from Yale Law School, where he served on the Board of Editors of the Yale Law Journal. Mr. Colvin is an author of chapter 19 (Legislative and Political Activities).

KENNETH G. COVENEY is a partner at Dostart Hannink & Coveney LLP, La Jolla, and an Adjunct Professor of Law in the University of San Diego Graduate Tax Program. Mr. Coveney’s practice is devoted to estate and transfer tax planning, estate and trust administration, tax-exempt organizations, and general tax consultation, with a focus on the creation, protection, and disposition of client assets. Mr. Coveney earned a B.C.E. from Santa Clara State University; his law degree from Stanford University, where he was elected to the Order of the Coif; and his LL.M. in Taxation from New York University School of Law. He is an author of chapter 12 (Required Tax Filings, Recordkeeping, Reporting, and Rights of Inspection) and chapter 16 (Management of Charitable Funds).

JEFFREY D. DAVINE, a partner in the Los Angeles firm of Mitchell Silberberg & Knupp LLP, specializes in taxation, including representation of nonprofit entities and charitable gift planning. He chairs the Entertainment and Tax Committee of the Los Angeles County Bar Association Taxation Section and is past chair of the Los Angeles County Bar Association Young Tax Lawyers. He is a frequent writer on charitable giving and other taxation issues. He received his B.S. from the University of California, Berkeley, where he was elected to Phi Beta Kappa, and his J.D. from the University of California, Los Angeles, School of Law. Mr. Davine is the author of chapter 15 (Charitable Giving).

JILL S. DODD is a partner in the San Francisco office of Manatt, Phelps & Phillips LLP. Her practice focuses on the representation of charitable organizations, and on trusts, estates, and wealth transfer planning for very high net worth individuals and families, with a particular emphasis on planned charitable giving. She acts as outside general counsel to charitable organizations of all sizes, from large community foundations to operating charities to private family foundations, and counsels very high net worth individuals in all aspects of gift, estate, and philanthropic planning. Ms. Dodd is immediate past president of the Board of Directors of the Northern California Planned Giving Council, was voted a “California Super Lawyer” for 2007 and 2008, and was voted one of the “Best Lawyers in America” for 2005–2009. She is a frequent speaker on charitable giving and nonprofit management issues. Ms. Dodd received her B.A. from Oberlin College (highest honors), where she was elected to Phi Beta Kappa, an M.A. from Harvard University, and her J.D. from the University of California, Berkeley, School of Law. Ms. Dodd is an author of chapter 18 (Tax-Exempt Financing for Nonprofit Corporations).

PAUL J. DOSTART is a partner in the La Jolla firm of Dostart Hannink & Coveney LLP, and an Adjunct Professor of Law in the University of San Diego Graduate Tax Program. Mr. Dostart primarily counsels tax-exempt organizations on tax compliance, corporate governance, and fiduciary issues. He is a Life Fellow of the American Bar Foundation, a fellow of the American College of Tax Counsel, and former chair of the San Diego County Bar Association Tax Law Section. He is the 2009 chair of the Tax Exempt Organizations Committee of the California State Bar Taxation Section, and an officer of the Exempt Organizations Committee of the ABA Section of Taxation. Mr. Dostart received his B.S. from the University of Iowa, his J.D. from the University of Houston, and his LL.M. in Taxation from New York University. He is registered as a CPA in Illinois. He is an author of chapter 12 (Required Tax Filings, Recordkeeping, Reporting, and Rights of Inspection) and chapter 16 (Management of Charitable Funds).

CHERIE L. EVANS is a partner in the Berkeley firm of Evans & Rosen LLP. She primarily counsels nonprofit and tax-exempt organizations on corporate and tax law issues. Ms. Evans is a past chair of the Nonprofit Organizations Committee of the California State Bar Business Law Section. She received her B.A. (cum laude) from California Polytechnic State University, her J.D. from Pepperdine University School of Law, her LL.M. in Taxation (with honors) from Golden Gate University School of Law, and her LL.M. in French and European Community Law from Université Paris 1 Panthéon-Sorbonne. She is the Executive Editor of the book, as well as an author of chapter 2 (Choice of Entity Considerations). She also authored the Table of Corporations Code Default Provisions in chapter 7.

ROSEMARY E. FEI is a principal in the San Francisco firm of Adler & Colvin, a Law Corporation, and specializes in nonprofit and tax-exempt law, with emphasis on nonprofits’ lobbying and partisan political activities and on corporate governance. Ms. Fei is on the Board of Directors of The Conservation Campaign; a member of the Exempt Organizations Committee of the ABA Section of Taxation; the former chair of the Board of Redefining Progress; and a former director of the Center for Lobbying in the Public Interest, CompassPoint Nonprofit Services, and The Marine Mammal Centers. She also serves on the Public Policy Steering Committee of Northern California Grantmakers. Ms. Fei frequently speaks on IRS political and lobbying rules and on corporate governance and fiduciary duties of nonprofit directors. She received her B.S. (summa cum laude) from The Wharton School, University of Pennsylvania, and her J.D. (cum laude) from Harvard Law School. Ms. Fei is an author of chapter 19 (Legislative and Political Activities).

M. CARR FERGUSON is senior counsel at Davis, Polk & Wardwell, New York, New York, and a visiting Professor of Law at the University of San Diego Graduate Tax Program. As a member of the Davis, Polk & Wardwell Tax Controversy Practice Group, his practice includes federal and international taxation of corporations and individuals, principally in the areas of business transactions, including sales, acquisitions, financing, and insolvency arrangements. Mr. Ferguson is a former trial attorney for the United States Department of Justice and served as the Assistant Attorney General of the United States in charge of the United States Department of Justice Tax Division. He was also a professor of law for many years at Iowa State University, Stanford University, and New York University, where he was the Charles L. Denison Professor of Law. Mr. Ferguson is the author of several books and articles on federal taxation. He is a member of the American Law Institute, a fellow of the American College of Tax Counsel, and former chair of the ABA Section of Taxation as well as the 2008 recipient of its Distinguished Service Award. Mr. Ferguson received a B.A. and an LL.B. from Cornell University and an LL.M. in taxation from New York University School of Law. He is an author of chapter 12 (Required Tax Filings, Recordkeeping, Reporting, and Rights of Inspection) and chapter 16 (Management of Charitable Funds).

ERIC K. GOROVITZ, a principal of the San Francisco firm Adler & Colvin, a Law Corporation, practices in the areas of nonprofit and tax-exempt legal issues, with an emphasis on political advocacy and nonprofit corporate governance. He has served as consumer attorney at Hersh & Hersh, San Francisco, and is a member of the California Political Attorneys Association, the ABA Section of Taxation, the California State Bar Association, and the Bar Association of San Francisco. Mr. Gorovitz has published and spoken widely on nonprofit legal and advocacy issues and has conducted many trainings for nonprofit organizations. He received his B.A. from Cornell University, his J.D. from Georgetown University Law Center, and his M.P.H. from Johns Hopkins University. He is an author of chapter 19 (Legislative and Political Activities).

DWAYNE M. HORII is a partner in the Los Angeles firm of Rodriguez, Horii, Choi & Cafferata LLP, where his practice focuses on the representation of clients in the areas of California state and local tax, federal tax disputes, and tax-exempt organizations. He has served as a member of the Executive Committee of the Taxation Section of the State Bar of California, Chair of the Taxation Section of the Los Angeles County Bar Association, and as a member of the City of Los Angeles Business Tax Advisory Committee. Mr. Horii received his B.S. from the University of California, Berkeley, in 1982, and his J.D. from the University of Michigan Law School, in 1985. He is an author of chapter 8 (Sales and Use Taxes).

CAROL K. KAO is a partner in the Rancho Santa Fe offices of Withers Bergman LLP, and specializes in estate planning, probate and trust administration, charitable giving, and nonprofit and tax-exempt organizations. She is a fellow in the American College of Trust and Estate Counsel. Ms. Kao is also a CPA in California. She is the past chair of the Tax Exempt Organizations Committee of the California State Bar Taxation Section. In addition, she is a former member of the Executive Committee of the California State Bar Trusts and Estate Section. Ms. Kao received her B.A. from the University of California, Los Angeles, and her J.D. from the University of Southern California. She is an author of chapter 14 (Regulation of Fundraising).

PAMELA S. KAUFMANN, a partner in the San Francisco firm of Hanson Bridgett LLP, specializes in nonprofit corporations and tax law, senior care and housing, and health care law. She is the Director of Sustainability and Charitable Giving at Hanson Bridgett, a former chair of the Tax Exempt Organizations Committee of the California State Bar Taxation Section, and a member and past chair of the Legal Committee of LeadingAge, the national trade association for nonprofit homes and services for the aging. Ms. Kaufmann frequently writes and speaks on issues of interest to the nonprofit and tax-exempt sector. She received her B.A. (with distinction in all subjects) from Cornell University and her J.D. from the University of Virginia. Ms. Kaufmann is the author of chapter 13 (Nonprofit Operations).

LACEY E. KEYS is a Senior Associate Attorney in the Sacramento firm of Olson Hagel & Fishburn LLP. She practices in the firm’s political law group advising clients, including nonprofits and other organizations, on compliance with federal, state, and local campaign finance, election, lobbying, and governmental ethics laws. Ms. Keys is a member of the California Political Attorneys Association and serves as a board member and officer for the Sacramento Law Foundation and the Sacramento County Bar Association’s Diversity Fellowship Program. Ms. Keys received her B.A. from the University of San Diego and her J.D. from the University of California, Hastings College of the Law. She is an author of chapter 19 (Legislative and Political Activities).

OFER LION is a partner in the Los Angeles office of Seyfarth Shaw LLP, where his practice focuses on tax-exempt organizations and nonprofits, including health care organizations, colleges and universities, academic and research institutions, public charities, private foundations, and private operating foundations. He has represented such institutions in a wide range of tax, transactional, corporate, governance, and fiduciary matters. Mr. Lion received his B.A. from Pennsylvania State University in 1997, and his J.D. from the University of California, Los Angeles, School of Law in 2002. He was named as a Super Lawyers Magazine “Southern California Rising Star” in 2011, 2012, and 2013. He is a member of the American Bar Association Tax Section, Exempt Organizations Committee, and is Co-Chair of that Committee’s Subcommittee on Unrelated Business Income Tax (UBIT). He is also a member of the California State Bar Association Taxation Section, Tax-Exempt Organizations Committee, and is past Chair of the Los Angeles Bar Association, Exempt Organizations Practice Group. He has been quoted as a tax-exempt organizations authority in numerous news stories, including on NPR, in the New York Times, and in the Wall Street Journal, and taught a course in tax-exempt organizations as an adjunct professor at the University of California, Los Angeles, School of Law. Mr. Lion is an author of chapter 17 (Taxation of Investment and Business Activities of Tax-Exempt Corporations).

JOAN M. MURPHY is an Assurance Partner at PwC, where she specializes in providing audit and accounting services for higher education and not-for-profit organizations, including private, public, and community foundations; colleges and universities; and governmental entities. Ms. Murphy is an instructor and editor of PricewaterhouseCoopers’s governmental, higher education, and not-for-profit industry training courses. She has been a member of the planning committee for the AICPA’s Financial Executive Forum for Not-for-Profit organizations, which is a national conference held annually. She also has been a moderator and panelist at several presentations hosted by this conference as well as other industry conferences. Ms. Murphy received her B.A. from Sonoma State University in 1983, and her California CPA license in March 1990. She is a member of the American Institute of Certified Public Accountants (AICPA) and the California Society of CPAs. She is an author of chapter 21 (Financial Accounting for Not-for-Profit Organizations).

JEFF C. NGUYEN, a partner in the San Francisco office of Manatt, Phelps & Phillips LLP, specializes in the representation of tax-exempt organizations and advises a broad range of organizations on all aspects of their operations. He has represented tax-exempt organizations in resolving complex disputes with the IRS and state authorities, in obtaining IRS private letter rulings on novel issues, and in the acquisition of charitable subsidiaries and assets in the domestic and international arenas. He has served the charitable community in various volunteer capacities, including serving on several nonprofit governing boards and committees and advising a number of other charitable organizations on a pro bono basis. Mr. Nguyen received his B.S. from Oregon State University, his J.D. from the University of California, Hastings College of the Law, and his LL.M. from Golden Gate University. Mr. Nguyen is an author of chapter 18 (Tax-Exempt Financing for Nonprofit Corporations).

LANCE H. OLSON is a partner in the Sacramento firm of Olson Hagel & Fishburn LLP, where his practice areas include politics, elections, ethics, lobbying, campaign initiatives, and conflict of interest law. He served as an Adjunct Professor at the McGeorge School of Law, teaching election law from 1996 through 2004. He was a member of the Bi-Partisan Commission on the California Political Reform Act. He is a member and past president of the California Political Attorneys Association from 1989 to 1990 and a member of the Democratic National Committee National Lawyers Council. Mr. Olson received his B.A. from California State University, Sacramento, and his J.D. from the McGeorge School of Law, University of the Pacific. He is an author of chapter 19 (Legislative and Political Activities).

REBECCA L. O’TOOLE is a partner in the Rancho Santa Fe offices of Withers Bergman LLP, where she specializes in estate planning, probate and trust administration, charitable giving, and nonprofit and tax-exempt organizations. She is a fellow in the American College of Trust and Estate Counsel, and she is certified as a specialist in estate planning, trust, and probate law by the State Bar of California Board of Legal Specialization. Ms. O’Toole is the past chair of the Tax Exempt Organizations Committee of the California State Bar Taxation Section and a former member of the Executive Committee of the California State Bar Taxation Section. She received her B.A. from the University of Arizona, and her J.D. from the University of San Diego. She is an author of chapter 14 (Regulation of Fundraising).

SHANNON M. PARESA, of counsel at the Los Angeles firm of Rodriguez, Horii, Choi & Cafferata LLP, practices in the areas of California nonprofit corporations law, federal and California tax exemption, and California state and local taxation. She received her B.B.A. from the University of Hawai’i at Manoa, and her J.D. from the University of California, Los Angeles, School of Law. She is an author of chapter 4 (Donor Funds, Private Foundations, and Supporting Organizations) and chapter 11 (Property Tax Exemption for Nonprofit Organizations).

STEPHANIE L. PETIT is a principal in the San Francisco law firm of Adler & Colvin, a Law Corporation, which specializes in the representation of nonprofit organizations and their donors, with an emphasis on tax and corporate matters. Ms. Petit serves as the editor of the Exempt Organizations Department of the Journal of Taxation and is a member of the ABA Section on Taxation. She has served as an adjunct faculty member at the University of San Francisco’s Institute for Nonprofit Organization Management and regularly teaches continuing legal education classes and speaks on nonprofit law. Before joining Adler & Colvin, Ms. Petit practiced general business law and served as a law clerk to the Honorable Sidney R. Thomas of the U.S. Court of Appeals for the Ninth Circuit. Ms. Petit received her A.B. (cum laude) in 1995 from Princeton University and her J.D. in 1998 from the University of California, Berkeley, School of Law, where she was a member of the Order of the Coif and an associate editor of the California Law Review. She is an author of chapter 3 (Planning for, Obtaining, and Maintaining Tax-Exempt Status).

ARTHUR M. RIEMAN is a principal and managing attorney of The Law Firm for Non-Profits, P.C., Studio City. He specializes in nonprofit and exempt organization law. Mr. Rieman has served as a corporate lawyer and a plaintiff’s employment and civil rights attorney, and as general counsel for a direct marketing firm. Before becoming a lawyer, he spent 6 years launching start-up telecommunications companies. Mr. Rieman received his MBA from the University of California, Los Angeles, and his J.D. in 1988 from the University of California, Los Angeles, School of Law. He co-founded The Cultural Planning Group, a nonprofits arts consulting firm, and has served on numerous nonprofits boards. Mr. Rieman writes and speaks frequently on nonprofit corporation operations and governance and is an author of chapter 14 (Regulation of Fundraising).

CARLEY A. ROBERTS, a partner at Sutherland Asbill & Brennan LLP, Sacramento, specializes in state and local tax matters, as well as multistate tax matters, with particular proficiency in income and franchise tax, sales and use tax, gross receipts tax, and local tax. Ms. Roberts was listed as a Leading Lawyer, State and Local Tax, Chambers USA (2007–2008 and 2011–2013), has been recognized as a Northern California Super Lawyer in the area of Tax (2011–2013), was the Recipient of the V. Judson Klein Award in 2013, was the Chair/Chair Emeritus of the California Tax Policy Conference (2007–2013), has been a member of the California State Bar Taxation Section Executive Committee (2007–2012), and currently serves as an advisor to the Taxation Section Executive Committee. Ms. Roberts received her B.S., with honors, in 1996 from Brigham Young University, and her J.D., with honors, in 1999 from the Pacific McGeorge School of Law. She is an author of chapter 8 (Sales and Use Tax).

BARBARA A. ROSEN, a partner with the Berkeley firm of Evans & Rosen LLP, advises nonprofit and tax-exempt organizations on governance and tax matters. She is a member and past chair of the Exempt Organizations Committee of the California State Bar’s Taxation Section, a past member of the Executive Board of the Taxation Section, and a member of the ABA Taxation Section’s Exempt Organizations Committee. She speaks and writes frequently on tax-exempt issues and is a co-author of several articles on these issues. She is an editor on Fishman & Schwarz, Nonprofit Organizations, Cases and Materials (2d ed 2001). Ms. Rosen is an associate member of, and professional advisor to, the Association of Small Foundations and is a member of the Northern California Planned Giving Council. She is an adjunct professor with the LL.M program of Golden Gate University and has taught at the University of California, Hastings College of the Law. Ms. Rosen received her B.A. from Indiana University in 1973, an M.S. in Taxation from Golden Gate University in 1987, and her J.D. from the University of California, Hastings College of the Law, in 2000. Ms. Rosen is licensed to practice law in California and is also a licensed California CPA. She is an author of chapter 2 (Choice of Entity Considerations).

CYNTHIA R. ROWLAND, a partner in the San Francisco firm of Farella Braun + Martel LLP, specializes in counseling tax-exempt organizations on tax and corporate law issues. She has written numerous articles on current tax laws and tax issues of interest to tax-exempt organizations and charitable donors, frequently organizes seminars for tax-exempt organizations and their advisers, and regularly lectures on topics in the field for the ABA Section of Business Law, the California State Bar, and other groups. Ms. Rowland is a past chair of both the Nonprofit Corporations Committee of the ABA Section of Business Law and the Tax Exempt Organizations Committee of the California State Bar Taxation Section. She received her B.B.A. in finance, with honors, from the University of Notre Dame, and her J.D. from the University of California, Hastings College of the Law. She is listed in Best Lawyers in America in the field of nonprofit/charities law. Ms. Rowland is the author of chapter 5 (Forming the Corporation and Beginning Operations), chapter 6 (Articles of Incorporation), and chapter 7 (Bylaws).

LISA A. RUNQUIST is a principal of the Northridge firm of Runquist & Associates, and specializes in nonprofit organizations. She is a past chair of the California State Bar Business Law Section Nonprofit Organizations Committee and of the ABA Section of Business Law Committee on Nonprofit Corporations, its Subcommittees on Current Developments in Nonprofit Corporation Law and on Religious Organizations, and the Section of Taxation Exempt Organizations Subcommittees on Religious Organizations, State and Local Regulation, and Non-(c)(3) Exempt Organizations. Ms. Runquist is also the author of numerous publications, most recently principal author and editor of Guide to Representing Religious Organizations (ABA 2009). In addition, she is the author of the ABC’s of Nonprofits (ABA 2005), and is a frequent speaker at seminars on nonprofit organizations. She received her B.A. from Hamline University and her J.D. from the University of Minnesota. Ms. Runquist is the author of chapter 20 (Corporate Changes).

NANCY E. SHELMON, CPA, was a Senior Partner in the Not-For-Profit and Higher Education Services group of PricewaterhouseCoopers LLP. Before her retirement, Ms. Shelmon devoted her time at PwC to not-for-profit, higher education, and governmental entities. She received her B.S. in accounting from the University of Minnesota. She was a member of the American Institute of Certified Public Accountants (AICPA)’s Not-for-Profit Expert Panel from 2001 to 2011. In addition, Ms. Shelmon was chair of the AICPA planning committee for the Annual Not-for-Profit Conference and was a speaker and panelist at the organization’s conferences from 2001 to 2011. She is a co-author of Gross, McCarthy & Shelmon, Financial and Accounting Guide for Not-for-Profit Organizations (8th ed 2012), published by Wiley & Sons. She was the lead speaker for 8 years at the California CPA Society’s annual nonprofit conference, and drafted the current version of the AICPA publication, Not-for-Profit Entities—AICPA Audit and Accounting (2011). Ms. Shelmon was also a member of the group that developed the The AICPA Audit Committee Toolkit: Not-for-Profit Organizations (2010). She is Audit Chair for the Board of Directors of both the Los Angeles Urban League and the International Medical Corps. Ms. Shelmon is an author of chapter 21 (Financial Accounting for Not-for-Profit Organizations).

WILLIAM C. STALEY, Woodland Hills, practices primarily in the areas of tax planning and general business law for closely held businesses and nonprofit organizations. He focuses on structuring, negotiating, and documenting business start-ups, reorganizations, acquisitions, and dispositions, business succession planning, and obtaining rulings on tax issues. He has special expertise in organizing, restructuring, reviving, and dissolving nonprofit corporations and private foundations. He is a past chair of the Taxation Section of the Los Angeles County Bar Association and is a member of the California State Bar Taxation and Business Law Sections and the American Bar Association Taxation and Business Law Sections. Mr. Staley received his B.A. from California State University, Northridge, and his J.D. in 1981 from the University of California, Los Angeles, School of Law. He speaks frequently to groups of attorneys, accountants, and other business advisors. He is the author of chapter 22 (Suspension, Forfeiture, and Revocation of Tax-Exempt Status).

PATRICK B. STERNAL, formerly of the Los Angeles firm Runquist & Associates, works with nonprofit and business organizations, forming, maintaining, merging, and dissolving business and tax-exempt entities. He is the past chair of the Religious Organizations Subcommittee of the Nonprofit Corporations Committee of the ABA Section of Business Law, and a member of the Exempt Organizations Committee of the ABA Section of Taxation. He is also a member of the Exempt Organizations Committee of the California State Bar Taxation Section and the Nonprofit Organizations Committee of the California State Bar Business Law Section. He received his B.A. from Thomas Aquinas College, his J.D. from Ave Maria School of Law, and his LL.M. (with high distinction) from Loyola Law School. He is an author of chapter 2 (Choice of Entity Considerations).

FREDERICK R. VANDEVEER, a partner in the Rancho Santa Fe firm of Withers Bergman LLP, specializes in estate planning, probate and trust administration, and tax-exempt organizations. Mr. Vandeveer is a past chair of the Tax-Exempt Organizations Committee of the California State Bar Taxation Section and a fellow of the American College of Trust and Estates Council as well as a member of its Charitable Planning Committee. He received his B.A. from the University of Utah and his J.D. from Brigham Young University. Mr. Vandeveer is an author of chapter 14 (Regulation of Fundraising).

ROBERT A. WEXLER is a principal in the San Francisco law firm of Adler & Colvin, a Law Corporation, which specializes in the representation of nonprofit organizations and their donors, with an emphasis on tax and corporate matters. Mr. Wexler is an Instructor in Law at Stanford Law School, where he teaches the Law of Nonprofit Organizations, and he is also an Adjunct Instructor at the Institute for Nonprofit Organization Management at the University of San Francisco. He has served as a board member and officer on nonprofit boards, and he has been actively involved in the Volunteer Legal Services Program of the Bar Association of San Francisco. Mr. Wexler served as the editor of the Exempt Organizations Department of the Journal of Taxation for more than 10 years. He is a member of the ABA and an active participant of the Section of Taxation’s Exempt Organization Committee, where he serves as co-chair of the Subcommittee on Unrelated Business Income Activities. Mr. Wexler received his B.A., magna cum laude, Phi Beta Kappa, from Brown University, and his J.D. from Columbia University. He is an author of chapter 3 (Planning for, Obtaining, and Maintaining Tax-Exempt Status) and also provided the Chart on Attributes of Corporations, Flexible Purpose Corporations, and Benefit Corporations in chapter 2.

J. PATRICK WHALEY, a partner in the Los Angeles firm of Musick, Peeler & Garrett LLP, specializes in taxation and nonprofit and charitable organizations. He has served as chair of the Exempt Organizations Committee of the ABA Section of Taxation and the Los Angeles County Bar Association. He is a frequent speaker about the various legal problems of tax-exempt organizations and has authored numerous articles on this subject. Mr. Whaley received his A.B. from Pomona College, his LL.B. from Stanford University, and his LL.M. from New York University. He is the former Executive Editor of this book, as well as an author of chapter 8 (Sales and Use Taxes) and chapter 17 (Taxation of Investment and Business Activities of Tax-Exempt Corporations).

GARY L. WOLLBERG, a partner in the San Diego office of Musick, Peeler & Garrett LLP, specializes in corporation law with a special expertise in representing nonprofit organizations in matters of formation, federal and state tax compliance, governance, capital financing, acquisitions, and dissolutions. He has served as chair of the Nonprofits Committee of the California State Bar Business Law Section, and has spoken and written frequently on corporations, nonprofit law, and business litigation. He received his B.A., summa cum laude, from the University of California, San Diego, and his J.D. from the University of California, Berkeley, School of Law. Mr. Wollberg is the author of chapter 9 (Directors and Officers) and chapter 10 (Members and Other Interested Persons).

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PRACTICE AREA Business Law
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