Posted on January 4, 2016

As we begin a new calendar year, it’s important for nonprofit leaders to keep the following legal developments in mind.

Proposed Regulations on Donation Acknowledgments: [Update: The IRS withdrew these proposed regulations on January 8, 2016.] On September 17th, 2015, the IRS issued proposed regulations providing an alternative way for 501(c)(3) organizations to acknowledge or “substantiate” charitable donations. Currently, organizations must provide a “contemporaneous written acknowledgement” to the donor for charitable donations of $250 or more. The proposed regulations would allow a charity to instead provide a single annual report to the IRS listing all donations of $250 or more, along with the donors’ names and social security numbers, by February 28th of the year following the donations. Under this alternative approach, donors would not have to keep track of their contemporaneous written acknowledgements, but they would have to provide their social security numbers to the charity. Also, the charity would have to take significant additional steps to protect these social security numbers. The comment period on these proposed regulations ended on December 16th and there were many comments filed critical of proposal. If the proposed regulations become final, a charity is not obligated to use the new approach and may choose to continue to provide contemporaneous written acknowledgements like it has done in the past. For more information on acknowledging donations see our Acknowledgment Guide.

Proposed Changes to Overtime Rules: All employers, including nonprofits, have to pay overtime to employees unless the employees fit into one of the exemptions outlined under Department of Labor regulations. Many high level nonprofit employees, such as the Executive Director and Program Managers, are currently considered exempt from overtime. In 2016, the Department of Labor is expected to issue new regulations that will change the test for exemptions, and make it more difficult for even high-level nonprofit employees to qualify as exempt. One significant part of the proposed regulations would change the salary requirement for exemption from an annual income of $23,600 to an annual income of $50,440. Therefore, all employees who earn less than $50,440 per year will be non-exempt and therefore eligible for overtime pay. Nonprofit employers need to start to plan now for how these changes may impact their overtime practices and compensation strategy. See this article for additional information.

Independent Contractor Status: Because of the increased costs associated with hiring employees, many employers (including nonprofits) are seeking creative ways to get the work done such as by engaging independent contractors. In 2015, the Department of Labor introduced a new test for determining whether an individual performing work can be treated as an independent contractor rather than an employee. The new guidance focuses not on the element of control over the worker, which was the traditional test for independent contractor status, but on whether or not the worker is economically dependent on the organization. It considers a number of factors in making this determination, including the individual’s investment in the business, contribution to the business strategy, and ability to make a profit or incur a loss. In many cases, individuals working for the organization may be employees even if they are classified as independent contractors. See this article for additional information.

Employee Communications on Social Media: Social media is the new “water cooler,” and is the place where employees “gather” to discuss their working conditions. The National Labor Relations Board issued numerous decisions in 2015 restricting the ability of employers to curtail the communications of employees on social media, even when such communications have negative implications in the workplace. The National Labor Relations Board decisions apply to both union and non-union workplaces. Have your employment policies been reviewed to ensure that they are in compliance with this rapidly-evolving area of the law? If not, the new year would be a good time to conduct a review. See this webcast for additional information.

2016 Election Year: It’s hard to forget that 2016 is an election year, but 501(c)(3) organizations must remember they are not permitted to participate in any political activity of any kind. 501(c)(3) organizations may not support or oppose any political candidate. If a candidate is on an organization’s board, the candidate should resign or dissociate him or herself while running for office. A 501(c)(3) should not allow a candidate to align him or herself with the organization as part of the candidate’s campaign, such as by taking a picture in front of the organization’s offices. If a 501(c)(3) holds a political candidate forum or debate, the organization should take great care to (at a minimum) invite all candidates and treat all candidates the same during the forum or debate. If a 501(c)(3) creates a legislative scorecard, it must include a wide range of topics and meet other additional requirements as detailed in this article, Legislative-Scorecards.