In connection with the war in Ukraine, the United States has significantly enhanced its sanctions against the Russian Federation.  However, the Department of the Treasury’s Office of Foreign Asset Control (“OFAC”) recently issued a new General License, General License No. 27, which clarifies that the sanctions do not apply to certain humanitarian work in Ukraine and the Russian Federation.  Thus, nongovernmental organizations (“NGOs”) (including 501(c)(3) nonprofit charitable organizations) may engage in certain activities, either directly or by transferring funds in support, that would otherwise be prohibited under the sanctions.

On July 1, the Supreme Court issued a major decision concerning nonprofit donor disclosure laws and the First Amendment.  In Americans for Prosperity Foundation v. Bonta, No. 19-251, the Court held that a California law requiring charitable organizations to file their annual I.R.S. Form 990 Schedule Bs with the State—and thus disclose the names and addresses of major donors—is facially unconstitutional because it violates the First Amendment right to free association.  The Court reasoned that disclosure of donor information has a broad chilling effect on charities and their donors, even when the information is kept confidential and the information is already required to be provided in Federal tax filings.

Our colleagues in Patterson Belknap’s Employment Law and Employee Benefits & Executive Compensation practices have published a number of recent alerts on employment law and employee benefits considerations stemming from the Coronavirus pandemic.

Since our last update describing changes made to the Paycheck Protection Program (the “PPP”) by the Paycheck Protection Program Flexibility Act of 2020 (the “PPPFA”), which was signed into law by President Trump on June 5, 2020, the U.S. Small Business Administration (the “SBA”) has published numerous revisions to prior interim final rules (“IFRs”) it had released to govern implementation of the PPP with respect to eligibility requirements, disbursement, loan forgiveness and loan review to conform to the PPPFA and clarify certain requirements set forth therein.  Generally, the PPPFA provides PPP loan borrowers additional time to incur costs that count towards PPP loan forgiveness, reduces the portion of such costs that must be payroll costs, provides additional exemptions from the CARES Act’s (as defined below) loan forgiveness reduction provisions and extends the deadline to rehire workers in order to remain qualified for full forgiveness.  The PPPFA Act also allows businesses that receive loan forgiveness to defer payroll taxes, extends (for new loans), and permits the extension (for existing loans) of, the PPP loan maturity date and extends the PPP loan payment deferral period.  The IFR revisions and guidance implement these changes to the IFRs, and also introduce new rules addressing payroll costs that may be included on a PPP loan application or loan forgiveness application submitted by certain boat owners or operators that have hired one or more crewmembers who are regarded as independent contractors or otherwise self-employed that were not previously reflected in the PPP statutes and guidance.

On June 5, 2020, the Internal Revenue Service (“IRS”) issued proposed regulations on the excise tax on excess tax-exempt organization executive compensation under Section 4960 of the Internal Revenue Code (the “Excise Tax”).  This tax, which was enacted as part of tax reform in 2017, applies to certain tax-exempt organizations (or related organizations) that pay annual remuneration in excess of $1 million or so-called “excess parachute payments” to certain “covered employees” (generally, employees who were among the five highest-compensated employees of the organization for a given taxable year or any prior taxable year in 2017 or later).

The Small Business Administration (the “SBA”), in consultation with the U.S. Department of the Treasury (the “Treasury”), continues to issue guidance on the Paycheck Protection Program (the “PPP”) by updating its Frequently Asked Questions (the “FAQs”) guidance. The updated FAQs as of May 13, 2020 include additional guidance regarding (i) the SBA’s review process of a borrower’s required good-faith certification concerning the necessity of its PPP loan request (the “Necessity Certification”) and (ii) the further extension of the PPP loan repayment deadline for borrowers to repay their PPP loan proceeds and be deemed by SBA to have made the required Necessity Certification in good faith.  Also on May 13, 2020, the SBA posted an Interim Final Rule on Loan Increases (the “Interim Final Rule on Loan Increases”), which provides for certain partnership and seasonal employer PPP loan recipients to increase their PPP loans based on prior guidance on calculation of the maximum PPP loan amount.

The Small Business Administration (“SBA”), in consultation with the U.S. Department of the Treasury (“Treasury”), continues to issue guidance on the Paycheck Protection Program (“PPP”) by updating its Frequently Asked Questions (the “FAQs”) release. The updated FAQs as of May 6, 2020 included additional guidance regarding (i) SBA review of PPP loans, (ii) impact of past layoffs on loan forgiveness, (iii) non-profit hospital qualification under the CARES ACT, (iv) PPP funds return deadline, and (v) applicant employee size standard. Additionally, on April 30, 2020, the SBA released the Interim Final Rule on Corporate Groups and Non-Bank and Non-Insured Depository Institution Lenders (the “Interim Final Rule”), which provides that a single corporate group is subject to a $20 million aggregate limit for all PPP loans received.

The COVID-19 pandemic has impacted all aspects of life, restricting mobility and forcing federal, state and local governments to implement increasingly aggressive measures to curtail the spread of the virus. We have set forth below just some of the pertinent issues to consider. Although we have focused on New York law, these issues apply to leases generally. All companies’ needs are different and we are committed to helping you address the legal and operational challenges affecting your business.

In an effort to provide additional relief in response to the COVID-19 emergency, the Internal Revenue Service and the New York Attorney General’s Charities Bureau have announced filing extensions for exempt organizations. 

On April 6, 2020, the Small Business Administration (the “SBA”) in consultation with the Department of the Treasury released additional guidance reflecting the implementation of the Paycheck Protection Program (“PPP”) of the CARES Act in a Frequently Asked Questions (FAQs) format (the “FAQ”), and plans to update the guidance regularly. The FAQ makes clear that borrowers and lenders may rely on the guidance available at the time of their applications’ submission or approval so are not required to revise applications based on these FAQs. Going forward, we recommend that all borrowers consult the Department of Treasury’s website for current guidance before making an application.

The newly enacted Coronavirus Aid, Relief, and Economic Security Act (commonly known as the “CARES Act”) includes provisions designed to encourage charitable contributions of cash, by allowing individual donors to charities to deduct up to 100% of their 2020 adjusted gross income (“AGI”), over and above the usual cap of 60% (or 50% if charitable contributions are made through a combination of cash and other assets).  For corporate donors, the deduction cap is raised to 25%, over and above the usual cap of 10%. Unused deductions allowable under the CARES Act may be carried forward into future tax years, subject to the traditional deductibility limitations, which will be restored in 2021.

As we previously reported, charitable organizations are able to play an important role in providing disaster relief in response to the COVID-19 crisis.  Special rules are relevant to employers that wish to provide hardship support to their current and former employees during this time.  In light of the unique nature of this crisis, additional guidance may be forthcoming from the IRS.

Just in time for the holidays, Congress gave two gifts to tax-exempt organizations as part of the new government funding bill signed into law on December 20, 2019.

We previously reported on A.B. 10336-A (Paulin) / S.B. 8699 (Gallivan) (the “Bill”), which would amend Section 601(a) of the New York Not-for-Profit Corporation Law to raise the minimum number of members of a not-for-profit membership corporation from one to three.  The Bill was signed into law by Governor Cuomo on December 21, 2018.  It will go into effect on July 1, 2019.  New York not-for-profit corporations, and all organizations with New York not-for-profit affiliates, should review the legislation to determine whether any action is required.

Under newly released rules, certain tax-exempt organizations are no longer required to disclose personally identifiable donor information on their annual Form 990 filings.  This change does not affect Section 501(c)(3) or Section 527 organizations.

In recent months, news of Blockchain technology has filled headlines.  The ability of Blockchain—which provides a decentralized means of recording and verifying transactions—to shape the financial sector has been widely reported, as have transactions involving Bitcoin and other cryptocurrencies using Blockchain technology.  Programmers and businesses are quickly turning to various Blockchain platforms to develop new applications of this technology, even as regulatory bodies are beginning to pay increased attention to high-stakes cryptocurrency transactions.

After a short period of deliberations by the House of Representatives (the “House”) and the Senate, President Trump signed the final version of H.R. 1 into Public Law No. 115-97 on December 22, 2017 (the “New Law”). The New Law makes substantial changes to the Internal Revenue Code, and our previous alerts discussed the New Law’s evolution in detail and the impact on tax-exempt organizations of certain provisions of the initial versions of the New Law introduced by the House and the Senate.
 

The Internal Revenue Service (the “IRS”) has issued Notice 2017-73 (the “Notice”) which outlines approaches the Department of the Treasury (“Treasury”) and the IRS are considering with respect to the regulation of certain issues relating to Donor Advised Funds (“DAFs”).  Written comments on the issues raised in the Notice may be submitted by March 5, 2018.

On November 2, 2017, House Ways and Means Committee Chairman Kevin Brady (R-TX) introduced H.R. 1, the “Tax Cuts and Jobs Act” (the “Bill”). At over four hundred pages, the Bill promises substantial changes to the Internal Revenue Code of 1986, as amended (the “Code”).

The IRS will permit 401(k) plans, 403(b) plans, and certain other qualified plans to make plan loans through more streamlined procedures and hardship distributions under liberalized rules to participants and their family members who lived or worked in disaster areas that were impacted by Hurricane Harvey and Hurricane Irma, so long as those disaster areas were among those listed as eligible for individual FEMA assistance.

Among the many elements of corporate housekeeping and compliance that demand the time and attention of directors and officers (and staff), minutes often seem like a burden.  No one doubts that minutes matter.  A well-documented board meeting creates an important historical record that can guide future deliberations and may prove useful during Board disagreements, litigation, Attorney General investigations, other governmental enforcement actions, or an audit by the IRS.  However, clients often nervously ask whether there is a legal standard regarding how much detail minutes should contain. 

Last year, we posted about amendments to the New York Not-for-Profit Corporation Law (the “NPCL”) and the New York Estates, Powers and Trusts Law (the “EPTL”) here and here.  As we noted, the amendments were signed into law last year and take effect on May 27, 2017 (with the exception of the amendment to NPCL Section 713(f) regarding employees serving as board chairs, which took effect January 1, 2017).

During his presidential campaign, President Trump promised to repeal the “Johnson Amendment” which established the absolute prohibition on political campaign activity by 501(c)(3) charitable organizations.  After his inauguration, President Trump promised to “destroy” the amendment (specifically with respect to churches), and three bills have been introduced in the 115^th Congress to modify the prohibition or eliminate it completely for all 501(c)(3) charitable organizations.

In the twelve days since his inauguration, President Donald Trump has issued a flurry of executive orders relating to, among other things, the proposed repeal of the Affordable Care Act, the construction of oil pipelines, the building of a wall on the Mexican border, and immigration restrictions.  These executive orders have begun the process of fulfilling many of the promises President Trump made during the campaign, and it seems likely that additional executive orders will continue to be issued.

Over the summer, we posted about Bill No. A. 10365B/S. 7913, containing amendments to the New York Not-for-Profit Corporation Law (the “NPCL”) and the New York Estates, Powers and Trusts Law (the “EPTL”) here.  After introduction in May and passage by both houses in June, the bill was delivered to the Governor earlier this month and signed into law on November 28.