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Bylaws: The Constitution of Nonprofits The Art and Science

Details: State laws and IRS require certain provisions; including additional terms is primarily a matter of style REPRINTED FROM NONPROFIT ISSUES® VOL. XVI NO. 1 January 16-31, 2006 Articles of Incorporation, sometimes called a Certificate of Incorporation or Articles of Organization, are the fundamental governing document of a nonprofit corporation.

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Is this governance legal

Details: Bylaws function as a contract among the participants of a nonprofit organization, and although state nonprofit corporation laws usually provide default provisions for governance procedures, in most cases the rules can be modified with the consent of the participants. It is highly unusual to give a board chair a veto power over board decisions

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Bylaws Function as “Constitution” Of Nonprofit

Details: The Articles of Incorporation and the Bylaws essentially form the “Constitution” of the organization and establish the rules for governance. Like all Constitutions, they should be considered carefully. In most states, the state nonprofit corporation law provides minimum standards and …

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Your Legal Questions Answered Nonprofit Issues

Details: If you are a nonprofit executive, lawyer or accountant working with nonprofits, consider joining our database. Each Tuesday we answer a question submitted by a reader. You'll get our unique perspective and you'll get a sense of what's being discussed in the sector. Popular Searches: Starting a nonprofit. 501 (c) (3) 501 (c) (3) versus 509 (a

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What’s the risk in not following the bylaws

Details: Whenever there is an absence of the rule of law, those with the most power at the moment usually have the ability to do what they want. Knowingly and regularly violating a nonprofit’s “constitution” over objection would undermine the rule of law. Depending on the type of violation, such conduct could have a lot of potential ramifications.

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Can a standing committee create its own separate by-laws

Details: Can a standing committee create its own separate by-laws? Any committee is a creature of the organization and, subject to any limitations that may exist under state law, can have whatever authority is given to it by the organization. Such delegation is normally done …

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Must Charity Post Bylaws

Details: Many other organizations post their bylaws for anyone to see. For greater transparency to your members, it might be a good idea to put the bylaws on the website, especially if there is a password protected area for members only, but it is unlikely to be required by law. Monday, February 6, 2012.

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Is Archdiocese exempt from giving laws

Details: Although charitable solicitation registration laws normally carry prohibitions on misrepresentation and misapplication of gifts, states also have general misrepresentation statutes and common law prohibitions. The church is not exempt from those rules. Whether there was a misrepresentation in your case, of course, depends on the exact language

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Are there laws regarding the carryover of funds

Details: It may be 25% to 50% or even more, depending in part on the certainty of your sources of income. You don't want to be in a position where you might run out of cash. Whenever I am asked about the size of a reserve fund or endowment, I point to Harvard University’s “endowment,” which grew to more than $39 Billion (as in $39,000,000,000

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What do we need for a quorum

Details: Most state nonprofit corporation laws and the Model Nonprofit Corporation Act allow the drafters of a nonprofit’s governing document to set quorum requirements as they wish, providing default requirements if the governing documents do not specify otherwise. Like so many other things about a …

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Is it legal for 501(c)(3) charitable organizations to give

Details: New Subscribers can have full access to the entire website and all editions for 3 months for only $17.95. Subscribe Today. Here's what our readers say about Nonprofit Issues Thanks again for your excellent and helpful website - it's a wonderful resource for the non-profit community!

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Would having two co-presidents sharing the position of

Details: Aha, but what if by-laws are silent about how co-presidents’ votes are counted in decision-making. Our nonprofit by-laws permit co-presidents, but do not specify whether they have one vote to cast, or two. This comes into play only with the election of officers, as the board otherwise operates by consensus. -- …

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What recourse for removal for holding “illegal” meeting

Details: The stated reasons for removal of directors in most nonprofit corporation laws, if none are spelled out in the bylaws, are a lot more serious than what appears to be the case in the situation you describe. They include things such as conviction of a crime, or adjudication of incompetency.

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Can a nonprofit organization maintain the right to refuse

Details: The right is not absolute. Some organizations, like the Jaycees and the Fraternal Order of Eagles, have been found to be “public accommodations” under state civil rights laws and ordered not to discriminate against individuals within protected classes. (See: “Court Orders Eagles to Consider Women,” November 1, 2005.) Some trade

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Must conflict provision be in bylaws

Details: As a result, donors, regulators, the media and others who look at 990s expect an organization to have a conflict policy. As a matter of style, we do not recommend putting the conflict policy in bylaws, but recommend passing one as a Resolution. ( See Ready Reference Page: “ …

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Are nonprofits required to give bylaws to members

Details: The new Form 990 tax information return for 2008 asks charities to describe whether, and if so how, they make their governing documents, including bylaws, available to the general public. Although the IRS recognizes that public disclosure is not necessarily required, the question shows its view of good governance. Thursday, May 1, 2008.

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Should bylaws include purpose clause

Details: This is a matter of personal preference, and it is not illegal to include a detailed purpose clause or mission statement in an organization’s bylaws. I don’t think it is a good idea, however. Bylaws set the procedural rules for governance. They are not policy statements. In our basic form of bylaws, we simply say that the purposes of a

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Court Says Volunteer Protection Act Doesn’t Protect from

Details: The VPA “preempts the laws of any State to the extent that such laws are inconsistent with [the VPA], except that [the VPA] shall not preempt any State law that provides additional protection from liability relating to volunteers….” The Court said its task was to determine Congressional intent by examining the statute’s plain language.

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Email Notice Ineffective When Not Specified in Bylaws

Details: An appellate court in Texas has ruled that notice of a meeting of a nonprofit’s nominating committee was ineffective when sent to committee members only by electronic mail and not by one of the methods for providing notice set forth in the bylaws of the corporation. The ruling came in a lengthy opinion denying summary judgment to both sides in a dispute over elections in a homeowners

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Sole Member Bylaws Can Protect Founder of Nonprofit

Details: We have frequently referred to a “sole member” corporation to protect a founder of a nonprofit corporation when the founder wants assurance that he or she can develop the organization as a career to help make the world better in some way. Not everyone believes that they are appropriate or in the public interest.

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What should indemnification bylaw look like

Details: We provide in our bylaws that when an indemnitee is sued by or in the name of the corporation, the board has the power to decide whether or not to advance costs. If a bunch of members brought a baseless suit, the board presumably would advance defense costs. But in the case of the treasurer’s theft, it would not.

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Can nonprofit refuse membership

Details: The Jaycees were prohibited from denying membership to women under state civil rights laws, but the U.S. Supreme Court has held that the Boy Scouts are permitted to ban gays and atheists within their First Amendment right of freedom of expression. Tuesday, October 12, 2010. Keywords: Members.

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Where can I report misconduct at nonprofit

Details: The president of our 501(c)(3) nonprofit is violating by-laws by attempting to treat the organization as his own. He is spending dues and members' money indiscriminately and he has shut down the website where donors and sponsors advertise. He is a founding member and feels it's …

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What court cases or IRS rulings, if any, define restricted

Details: Most charitable solicitation registration laws (and other state consumer protection laws) require a charity to use funds for the purpose for which they are solicited. That is one reason why solicitations ought to include broad charitable use language as well as specific intent.

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Is lawyer responsible if nonprofit doesn’t follow rules

Details: I've reprinted a few sentences here, replacing "accountant" with "lawyer." This is the course's restated advice under a draft Responsibility section: "Management is responsible for the prevention and detection of fraud and noncompliance with laws and regulations, and the maintenance of internal control.

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Are nonprofits required to use competitive bidding for

Details: There isn’t any reason under 501(c)(3) rules that you would be required to use competitive bidding to purchase goods or services. There may be a few rare governmentally related (c)(3)s that are required or otherwise have decided to use competitive bidding, or a few organizations required to use bidding under a government or foundation grant.

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Sole Member Bylaws Can Protect Founder of Nonprofit-Ready

Details: The right to appoint and remove directors and veto any amendments to governing documents is critical to control of the organization. We have frequently referred to a “sole member” corporation to protect a founder of a nonprofit corporation when the founder wants assurance that he or she can develop the organization as a career to help make the world better in some way.

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Would a sole member clause in the bylaws be sufficient

Details: As long as the articles of incorporation (or the state nonprofit corporation law if the articles are silent on the point) do not prohibit the corporation from having members and do not require multiple members, you probably do not need to amend the articles. ( See Ready Reference …

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Our Chamber officers are not following the bylaws, what is

Details: Our Chamber officers are not following the bylaws. The bylaws state that a nominating committee should be appointed and a slate of names be submitted for voting by the membership.

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Fundraising Is Not “Commercial” Activity Protected by

Details: One politically conservative nonprofit organization can bar another from the annual Conservative Political Action Conference (“CPAC”) without violating antitrust laws, a federal District Court has ruled, even if the barred organization is unable to increase its prestige, goodwill, and obtain donations. The federal District Court in Florida has held that the action is not a restraint on

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Are private foundations covered by solicitation

Details: The laws cover anyone, without regard to the tax status of the organization, who asks for charitable contributions or uses a “charitable appeal” in asking for money or purchases. They cover non-charitable nonprofits and for-profit businesses as well as recognized charities. There is no generic exemption or exclusion for private foundations.

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Booster Club Loses Exemption Because of Fundraising

Details: A booster club fundraising program that allowed parents to meet the mandatory assessment for their children’s participation by raising funds from others has cost the club its 501(c)(3) charitable exemption. The Tax Court has upheld the IRS’s revocation of exemption. The Court ruled that the club “operated in a manner that allowed substantial private inurement and promoted private, non

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Why should directors be removable “without cause

Details: In my view, this is one of the most important provisions of the bylaws. Without a provision spelling out the power to remove a director, the state law may be very unclear and may limit the power to situations in which the director is convicted of a crime or is declared mentally incompetent by a court. Even if the statute allows removal for

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Who should know identity of anonymous donor

Details: Directors, of course, have a legal right to inspect the books and records of the corporation so they have a legal right to know the identity. They may decide to rely on the president, the board chair, or an executive committee to determine whether to accept such a gift without personally knowing its source, but they have a right to know.

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May group falsely claim nonprofit status

Details: A statement that an organization is a nonprofit could be accurate even if it is not a charity. It would generally be illegal under state charitable solicitation registration laws or other state laws for an organization to represent or imply that it is a charity to solicit charitable contributions when it is not recognized as a charity.

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Failure to follow bylaws invalidates corporate action

Details: The failure to follow specific provisions in the bylaws of a church has led to more than six years of litigation and the invalidation of the actions purportedly taken on behalf of the corporation. The Supreme Court of Idaho has reversed a trial court and held that a new pastor was not properly selected and that a special meeting of members at which new directors were elected was improperly

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May nonprofit serving older adults require vaccines

Details: If you have enough employees to be covered by anti-discrimination laws, you can’t discriminate on the basis of religion and probably couldn’t fire anyone who has a sincere religious belief against vaccination. Your diversity, equity and inclusion goals would be jeopardized by terminating a black employee who has a legitimate fear because of

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Volunteer May Sue Nonprofits For Harassment Under Title

Details: A federal District Court in Illinois has allowed a woman volunteer for two nonprofit emergency ambulance services to sue for sexual harassment and discrimination under the employee protection provisions of Title VII of the Civil Rights Act. The Court has rejected the defense that compensation is required to bring a worker within the employment discrimination protections of the Act.

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Political signs on church property

Details: You raise an important issue. Let’s take the easy one first. The IRS would undoubtedly deem it an intervention in a political campaign--and potentially a basis for loss of exemption--for a church or any other Section 501 (c) (3) charity to place election campaign signs supporting a …

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Who should elect the directors of 501(c)(3) nonprofit

Details: Who should elect the directors of 501 (c) (3) nonprofit? I am an elected board member of a 501 (c) (3) nonprofit corporation. Our organization had an issue years ago where there was apparently an attempted coup. In response, the by-laws were amended to state that …

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Can Board fire president

Details: Most state laws generally provide that an officer may be removed by the board whenever in its judgment it would be in the best interests of the corporation. Since the statute controls where the bylaws are silent, if you have such a provision in your state law, you could vote him out of office.

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May directors record board meeting

Details: This is a matter of state law, and there are apparently some state laws that prohibit such taping without the consent of the participants. Many organizations nevertheless do tape their meetings, particularly to help prepare the minutes of the meeting.

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Can Executive Director stop hostile takeover

Details: I am the Executive Director of a nonprofit corporation that is experiencing a form of hostile takeover, but in a different format. A donor and charismatic member is puppet-mastering a new and inexperienced board chair to remove board members. Between the two of them, all board meetings have been avoided by cancellation for several months.

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Electronic Board meetings

Details: Unless your state law clearly permits it, to operate this way as a matter of course or in the face of controversy would be risky. If all of the Board members agree on an action by email, it will probably meet the provisions of nonprofit corporation laws that permit a Board to act by unanimous written consent without a meeting. Monday, September

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Article Search Nonprofit Issues

Details: All articles are available to subscribers. Some lead stories and all previous Your Legal Questions Answered items are also free to visitors. New subscribers can chose to subscribe for less than $6/month and obtain access to the entire Archive, plus the current regularly published newsletters. You can scroll through the titles in each section to find answers to your questions, or search on

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May we have two separate sets of bylaws for members

Details: New Subscribers can have full access to the entire website and all editions for 3 months for only $17.95. Subscribe Today. Here's what our readers say about Nonprofit Issues Thanks again for your excellent and helpful website - it's a wonderful resource for the non-profit community!

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D & O policy doesn’t cover RICO claims Nonprofit Issues

Details: A federal District Court in Colorado has held that a homeowner association’s directors and officers liability insurance does not cover a claim for violation of state and federal anti-racketeering laws because the policy specifically excludes liability based upon any intentionally dishonest or fraudulent act.

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May Board change restrictions on endowment

Details: May Board change restrictions on endowment? I am president of a 501 (c) (3) that has a true endowment to provide scholarships to a specific university. The initial $50,000 contribution in 1993 has grown to over $106,000. We would like to expand the giving beyond the restrictions given by the original donor and give to students at other

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