Iowa Nonprofit Sales Tax Exemptions & Remote Sellers

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hand filling out tax form

In June 2018, the U.S. Supreme Court handed down a decision in South Dakota v. Wayfair that changed the way remote sellers (like internet companies) do business in states where they don’t have a physical presence, like a brick and mortar store or a headquarters. Essentially it means these companies will start collecting sales tax in certain states with economic nexus laws already on the books to enforce collection against said remote retailers. Iowa is one such state.

What does this mean for you and your nonprofit? Most nonprofits may start seeing sales tax tacked on to certain receipts for digital accounts/services. (The rate of sales tax is based on your Iowa primary contact address.) But, some nonprofits are exempt from sales tax and therefore will need to remit an exemption certificate to the remote seller.

writing tax on a check

Taxes and Nonprofits

The interplay between taxes and nonprofits can be confusing. Even if a nonprofit is exempt from state and federal income taxes, it does not mean that entity is auto exempt from paying sales tax for goods and (taxable) services. Generally, sales taxes must be paid unless the nonprofit falls under the umbrella of some other applicable general sales tax exemption. (Local option sales taxes must also be paid on purchases made in existing areas.)

However, the Iowa Code does exempt certain nonprofits from paying sales tax on purchases. The Iowa Department of Revenue’s guide to “Iowa Tax Issues for Nonprofits” provides a (non-exclusive) list of entities that are specifically exempt from sales/use taxes under Iowa law. I’ve included the pretty lengthy list here for your convenience!

  • American Red Cross
  • Navy Relief Society
  • U.S.O. (United Service Organizations)
  • Community health centers (as defined in 42 U.S.C.A. subsection 254c)
  • Migrant health centers (as defined in 42 U.S.C.A. subsection 254b)
  • Residential care facilities and intermediate care facilities for the intellectually disabled and residential care facilities for the mentally ill (licensed by the Department of Inspections and Appeals under Iowa Code chapter 135C)
  • Residential facilities for intellectually disabled children (licensed by the Department of Human Services under Iowa Code chapter 237)
  • Residential facilities for child foster care [licensed by the Department of Human Services under Iowa Code chapter 237, except those maintained by “individuals” as defined in Iowa Code subsection 237.1(7)]
  • Rehabilitation facilities which provide accredited rehabilitation services to persons with disabilities and which are accredited by the Commission on Accreditation of Rehabilitation Facilities or the Accreditation Council for Services for intellectually disabled and other developmentally disabled persons and adult day care services approved for reimbursement by the Iowa Department of Human Services
  • Community mental health centers (accredited by the Department of Human Services under Iowa Code chapter 225C)
  • Home and community-based services providers certified to offer Medicaid waiver services by the Department of Human Services that are any of the following:
      • Health and disability waiver service providers, described in 441 IAC 77.30.
      • Hospice providers, described in 441 IAC 77.32.
      • Elderly waiver service providers, described in 441 IAC 77.33.
      • AIDS/HIV waiver service providers, described in 441 IAC 77.34.
      • Federally qualified health centers, described in 441 IAC 77.35.
      • Intellectual disabilities waiver service providers, described in 441 IAC 77.37.
      • Brain injury waiver service providers, described in 441 IAC 77.39.
  • Sales of tangible personal property and services made to nonprofit hospitals and nonprofit hospices (licensed under Iowa Code chapter 135B)
  • Statewide nonprofit organ procurement organizations
  • Nonprofit legal aid organizations
  • Nonprofit organizations organized solely for the purpose of lending property to the general public for nonprofit purposes
  • Nonprofit private museums*
  • Governmental units, subdivisions, or instrumentalities of the federal government or of the state of Iowa (This includes state, county, and local subdivisions of the government of the State of Iowa and those of any other state which provide a similar sales tax exemption to Iowa and its political subdivisions.) *
  • Recreational lake and water quality districts*
  • Federal corporations created by the federal government which are exempt under federal law *
  • Private nonprofit educational institutions located in Iowa *
  • Private nonprofit art centers located in Iowa
  • Habitat for Humanity in Iowa when purchasing building materials *
  • Toys for Tots when purchasing toys
  • Community action agencies as defined in Iowa Code section 216A.93
  • Substance abuse treatment or prevention facilities that receive block grant funding from the Iowa Department of Public Health

Sales Tax Exemption in Action

So, let’s say you’re an Iowa private nonprofit grade school that subscribes to an online newsletter service (which is based in California) so that administrators can design, write, and send a weekly email update to parents of students. Your organization would likely be exempt from the new sales tax charges imposed by the remote seller on your subscription rate.

What’s the Difference Between Public Charity & Private Foundation

Down to the Details

Exempt nonprofits must pay for their purchases from the entity’s account and should complete and submit an Iowa Sales Tax Exemption Certificate 31-014 to the remote seller.

Questions? Not sure if your nonprofit qualifies for this exemption? Don’t hesitate to contact me at any time to speak about your situation.

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Let’s Head Back to School! First Lesson is on Planned Giving

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September calendar

Recently my social media feeds were alight with friends and family member’s grinning kiddos holding signs announcing their first day of a new grade. It made me nostalgic! While I wouldn’t want to repeat law school all over again, I do think it’s never too late to head back to the classroom—proverbial or real. So, the GFLF is heading back to school with lessons in English (like legal words/phrases of the day), reading (GoFisch book club) history, finance and the like. Today’s lesson on planned giving crosses over between business and economics, and it’s super important for donors of all gift amounts and nonprofit pros alike.

Back to school

What is planned giving?

Planned giving is the process of charitably donating planned gifts. A planned gift is a charitable donation that is arranged in the present and allocated at a future date. A planned gift is often, but not always, donated through a will or trust. (I would say this is true 80-90% of the time; put another way, planned gifts are bequests 80-90% of the time). As such, planned gifts are very often granted after the donor’s death.

Charitable Giving: As American as Apple Pie

Besides charitable gifts made through wills and trusts after death, other planned gifts include charitable gift annuities; charitable remainder trusts (along with the entire alphabet soup of CRATS; CRUTS; NIMCRUTS; FLIPCRUTS; etc.); charitable lead trusts, and remainder interest/life estates in real property. All these gifting tools/techniques/vehicles I’ve discussed previously, sometimes numerous times.

What is a Nonprofit?

  • You give $20 to a person you meet on the street who lost his bus ticket home.
  • At your local gas station, there is a collection jar for a local child with leukemia. You donate your change.
  • You leave money in your will for your niece Jane, hoping she uses it to continue her collegiate studies in engineering.
  • You have a neighbor who suffers from dementia. You and your friends decide to have an informal walk to raise awareness about the disease and raise money for your neighbor’s health care needs.

While noble, these are not examples of “charitable giving,” as we use the term here. In this context, we are talking about charitable giving to an organization formed under 501c3 of the Internal Revenue Service Tax Code. A 501c3 agency can be known by several terms in general usage, including “nonprofit organization” and “public charity.” For simplicity’s sake, we’ll use the term nonprofit throughout.

Nonprofit Policy Special: 10 for Form 990

Nonprofits cover an extremely broad swath of types of organizations, including schools, churches, hospitals, museums, social services organizations, animal welfare groups, and community foundations.

Nonprofits Must Embrace Planned Gifts

Sometimes nonprofits are overwhelmed at the thought of expansive planned giving because of the number and complexity of some of the planned giving vehicles. How does this match up when you want to donate a less obvious gift than cash, such as stocks and bonds or grain? Nonprofits need to expand their ability to accept gifts of many varieties for at least three reasons:

Craft Beer Factor

The first reason I call the “craft beer factor.” (Bear with me here for a moment). I’m old enough to remember when there were just two kinds of beer. Don’t believe me? You should, as it was immortalized in one of the most famous advertising campaigns of all time–“tastes great, less filling!” This ad campaign strongly implied there were really just two types of beers.

craft beer on table

Then came the craft beer movement. I’m not sure whether craft beers were a response to consumers, or whether craft beers created a demand; presumably both. In any case, now a place like Toppling Goliath Brewing Company in Decorah, Iowa, has about thirty varieties of beers (this is based on an informal count from their website).

Now any retail establishment which sells beer must offer lots and lots of different kinds of beer. Any retail establishment which isn’t able to offer its customers wide variety risks irrelevance, or worse.

This is true not just of beer, but of everything. Another quick example– McDonald’s has around 145 menu items, that’s up from about 85 items in 2007. Also, McDonald’s now offers breakfast items not just in the morning, but all day-long.

Consumers want what they want, when they want, how they want.

Donors expect and often demand the opportunity to use many different options to assist their favorite charities. No longer can nonprofits simply ask folks to pony up cash, or just accept credit cards. Donors want to be able to converse with their fave charity and discuss using their whole portfolio. Nonprofits need to be able to accept, and intelligently discuss, gifting of many different types of non-cash assets.

A nonprofit which doesn’t offer its supporters a wide variety of giving options risks irrelevance, or even worse fates! So, as a donor, if you’re interested in donating an asset that your favorite nonprofit doesn’t typically facilitate, connect them with an experienced nonprofit attorney to make the gift a reality.

Planned Gifts Consist Overwhelmingly of Bequests

Second, planned giving is still mostly about wills and trusts. As already stated, I estimate 80-90% of planned gifts are bequests. Simple! Nonprofits should put substantial efforts to encouraging increased, larger testamentary bequests. Donors who already have an estate plan, but didn’t realize they could designate their favorite organizations as beneficiaries should contact an estate planning attorney.

YOU Are a Super Hero: Charitable Giving Through Estate Planning

Everyone can Understand Planned Giving!

Be it strategies for a monthly giving program or facilitating complex planned giving vehicles like NIMCRUTs, the opportunities for continuous learning about different planned giving technique are seemingly endless! And, there are so many different options, that all donors should feel great about supporting their fave causes with tax-wise gifts that work best for them. I strive to offer free information that breaks down different aspects of planned giving in human terms, as well as promoting community opportunities/events for nonprofit professionals.

heart on blue wood

Still need help understanding planned giving or any particular tool or technique? Want assistance coordinating a complex gift? Reach out to me anytime. I offer a free one-hour consultation to anyone and everyone. You can contact at my email (gordon@gordonfischerlawfirm.com) or on my cell (515-371-6077). I’d truly love to hear from you.

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Smart Marketing: Nonprofit Newsletters, Seminars & Website

marketing strategy

All nonprofits can benefit from smart and targeted outreach to donors and potential donors. This is especially true when donors are increasingly demanding more options when giving. Long gone are the days when nonprofits can simply ask donors to write a check. Rather, current and potential donors want a wide menu of choices when it comes to charitable giving—choices that give them flexibility in the type of gift, in the timing of the gift, in the tool or vehicle that maximizes their tax benefits, and in how to make their support meaningful both to themselves and to the nonprofit.

There are three methods I’ve found that work well for nonprofits to communicate the many ways donors and potential donors can maximize their charitable giving. The communication methods include (1) newsletters; (2) in-person seminars; and (3) website content. Sure, this may seem obvious, but all of these tactics should be well done for the greatest impact. I am happy to advise and assist nonprofits in developing and implementing off of these methods to create an effective and sustainable program for outreach, information, and advocacy.

Build an Even Better Nonprofit in Iowa

Newsletters

Nonprofits interested in using newsletters to communicate with donors should start with an up-to-date email list. Next, divide the list into three groups: (1) donors/potential donors; (2) nonprofits and nonprofit personnel; and (3) professional advisors (accountants, financial advisors, insurance agents, and lawyers…anyone who may recommend or advise your nonprofit). Each group would receive its own newsletter tailored according to its connection to the nonprofit, its interests, and the relationship you want to build with it. Generally speaking, sending newsletters one a month is a good balance. More often than this and you become email clutter, less than this and you’re not keeping the nonprofit top of supporters’ minds.

Donors

The newsletter sent to current and potential donors could focus on a specific topic such as the types of and flexibility of gifts the nonprofit accepts; explanation and use of the Endow Iowa tax credit; and giving through estate planning.

25 Days of Giving: Basics of the Endow Iowa Tax Credit Program

Nonprofits

The newsletter sent to nonprofits and related personnel could focus on compliance controls and internal policies, such as:

New Article Published: Why Every Nonprofit Needs a Gift Acceptance Policy

Professional advisors

The newsletter sent to professional advisors could take deep dives into complex charitable gifting tools such as different charitable remainder trusts (CRATs, CRUTs, NIM-CRUTS, FLIP-CRUTS, etc.), donor-advised funds, and IRA charitable rollover. Illustrating these tools with real-life case studies (with details changed to preserve privacy) will help professional advisors learn how to recognize philanthropic opportunities when presented by their clients.

Free Guide for Professional Advisors: Smart Charitable Giving Solutions

Seminars

Monthly seminars on charitable giving are a great way to familiarize current and potential donors about what the nonprofit does and to inform them about the many ways their support can be crafted to fit their financial situation, needs, and interests. Holding seminars at the nonprofit’s offices, rather than at a soulless hotel meeting room or corporate campus, has a number of benefits. Visitors can see where the hard work gets accomplished; they can meet staff and volunteers; and overall, they will develop a closer emotional connection to the organization.

Seminars would be customized to the nonprofit’s unique needs and its targeted audience. I have given many nonprofit-focused seminars over the years and am happy to work together to develop the perfect presentation. There are few topics in the area of nonprofits, estate planning, and charitable giving that I do not feel completely comfortable speaking on.

All presentations I give include an engaging visual presentation, handouts, and plenty of time for questions and discussion. I also send slides used in the session to attendees following the training.

In terms of promotion, it’s best to announce the seminar program well in advance, schedule seminars at the same time every month, and hold them at the same location (e.g., the third Thursday of every month, at 8 a.m., at the Nonprofit Offices).

Presentations for Professional Advisors on Charitable Giving

Website Content

There are three topics I recommend every nonprofit website have no matter its size or mission:

  1. charitable giving through estate planning
  2. tools and techniques for charitable gifting
  3. professional advisors

These topics should each have their own webpages.

The “charitable gifting through estate planning” webpage should describe what an estate plan is; how charitable giving happens through an estate plan; the benefits of trusts; and ways to use the beneficiary designations. The page can provide the official and full name of the nonprofit; address; and federal tax ID number. Also, providing sample bequest language can be incredibly helpful to both donors and professional advisors in starting to organize and think through a bequest.

“Tools and techniques for charitable gifting” should describe options aside from checks and credit cards. Short, concise paragraphs should highlight gifting retirement benefit plans; real estate; gifts of grain; charitable remainder trusts; and charitable gift annuities, among others.

The page for professional advisors ideally has a two-fold purpose. First, it is to demonstrate the nonprofit wants to work with professional advisors; that the nonprofit should be seen as another “tool in the toolbox” for professional advisors. Specific examples of ways the nonprofit have previously worked with professional advisors should be provided. Second, it could provide a deep-dive into the charitable gifting tools and techniques discussed earlier: really provide the gritty details, so it’s a valuable resource for professional advisors, complete with case studies.

Purposeful Planned Giving: What it is & How to Make a Powerful Differece

Cautionary Note: Policies & Procedures

Before tackling these marketing ideas, nonprofits should put first things first, and be in optimal compliance with proper, well-drafted, and up-to-date policies and procedures. These should include the 10 major policies and procedures that support the best possible IRS Form 990 practices (such as public disclosure, gift acceptance, and whistleblowing). Nonprofits should also have documents in place covering the topics of employment, grantors and grantees, and endowment management. Further, nonprofits should provide regular training for boards of directors.

Please do not hesitate to contact me via email (gordon@gordonfischerlawfirm.com) or on my cell phone (515-371-6077). I’d be happy to discuss prospective nonprofit marketing strategies through newsletters, seminars, and website content, with you at your convenience.

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Nonprofit Document Drafting: 2 Common Problems to Avoid

compass over land

Forming a new nonprofit can involve a lot of organization and decision making. There are some essentials you need to put in place, including two important documents—articles of incorporation and bylaws. I would be remiss if I didn’t delve into a couple of mistakes I often run across when reviewing nonprofits’ articles and bylaws.

volunteers walking in field

DIY Internet-Sourced Documents

Some nonprofits pull their articles of incorporation and bylaws from the Internet. These may or may not have all the Iowa-specific info required. Also, there may be provisions that simply don’t apply. For example, if a “regular” nonprofit copies governing documents from a granting nonprofit, like a community foundation, there’s sure to be language that doesn’t fit.

Pulling articles of incorporation off the web may seem cheap and time-saving, upfront. But, if mistakes and oversights from the template render the document ineffective or lacking legal requirements, you’ll be way worse off than if you just enlisted a nonprofit attorney to draft your articles suited to your organization’s unique needs, goals, and mission.

Build an Even Better Nonprofit in Iowa

Misplaced Provisions

This may go along with copying off the web. There are sometimes provisions in bylaws and articles that belong somewhere else—the governing documents aren’t the proper place for them. For example, I sometimes see employee rules in articles/bylaws. Generally speaking, employment provisions belong in an employee handbook or employment contract. The same goes for certain policies and procedures such as those on document retention and the whistleblower process. A nonprofit should definitely have these policies, but they don’t fit in the foundational documents.

arrow to the left

So, How Do I Go About Avoiding Mistakes in my Formational Documents?

Each organization is unique and it’s wise to enlist someone (like an attorney well-versed in nonprofit law!) to draft a quality, comprehensive set of documents personalized for your particular situation.

Nonprofit Policy Special: 10 for Form 990

Questions? Want to learn more about turning your dream of an organization that makes a significant impact or positive change? Grab my complimentary Nonprofit Formation Guide and then contact GFLF for a free consult!

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Avoiding Merger Missteps

two men shaking hands

You’re not imaging things if it seems like nonprofit charitable organizations are popping up like sweet corn in the summer. According to the National Center for Charitable Statistics, more than 1.5 million nonprofits were registered with the Internal Revenue Service (IRS) in 2015—an increase of 10.4% from 2005.

Is this a good thing?

On the one hand, Americans are incredibly generous, donating $427.71 billion to charity in 2018. On the other hand, more nonprofits mean more competition for those dollars and the duplication of services, both of which can limit a nonprofit’s effectiveness. When nonprofits can’t pursue their missions effectively, those who benefit from their services may suffer.

The issue of whether or not some nonprofits might be better off merging in order to be more efficient and successful in fulfilling their objectives and meeting their goals is a real one. But for the average donor, or those designating an organization in a will or trust, learning that a favorite nonprofit is merging with another nonprofit can raise questions about what this means immediately and in the long run.

Purposeful Planned Giving: What it is & How to Make a Powerful Differece

The urge to merge

Philanthropy can be incredibly personal. We are motivated to donate time and money to organizations that represent some of our most deeply felt attachments and interests, so when a beloved nonprofit announces it is merging with another one, it can feel like a kind of betrayal.

A merger is a kind of partnership in which two or more organizations become a separate entity. Mergers between and among nonprofits can be well-planned, strategic, and result in greater collective impact and growth. Or, they can be messy, fraught, and lead to confusion and a loss of support.

Make a Nonprofit Merger Happen

Nonprofit mergers are more common than you might think and even though they’re often seen as simply a survival tactic to stave off financial ruin, they can take place for many different reasons:

  • Expand the range or improve the quality of services each provides by pooling and leveraging resources
  • Diminish competition between organizations that vie for donors, board members, and funding
  • Compensate for the loss of a founder or key leader that leads the board to question its viability
  • Establish stronger strategic positioning with funders, competitors, and policymakers
  • Formalize an existing relationship or collaboration

Donors and nonprofit mergers

While a merger might be good for a nonprofit, what about donors or volunteers?

Nonprofits should send out a notice to stakeholders early in the merger process and be completely transparent. It’s a smart step to make supporters aware of the following:

  • The reasons behind the merger
  • Information about the other nonprofit and how each organization’s mission and programs align
  • A timeline and status updates
  • The names of the merger team
  • Any anticipated changes in leadership

YOU Are a Super Hero: Charitable Giving Through Estate Planning

If donors plan to give a donation during life or make a charitable bequest through an estate plan will they go to the new organization? Or the old organization? For donors, one way to make certain a donation is honored for the purpose it’s given by setting clearly articulated expectations. Merging nonprofits can honor this by offering options for donors to do this via a templated form.

Nonprofits are often reluctant to merge because they fear alienating loyal donors, but a merger can mean reducing costs. It can also mean cutting duplication of services and increasing reach and effectiveness for the charity. Nonprofits that effectively articulate these benefits to their loyal funders will be unlikely to lose supporters of the mission. Furthermore, it’s a good idea to invest in a strong set of policies and procedures, including a gift acceptance policy so that equal standards for all gifts are communicated to current and prospective donors.

New Article Published: Why Every Nonprofit Needs a Gift Acceptance Policy

Donors that happen to already support both nonprofits already, should consider contributing the total amount to the merged nonprofit. The old nonprofits will cease to exist upon the merger, but that shouldn’t be let that be a reason to end full support for the causes the donor cares about!

Is your Iowa nonprofit considering a merger? Please contact me via email (gordon@gordonfischerlawfirm.com) or on my cell phone (515-371-6077). I’d be happy to discuss best practices for your merger with you anytime. I offer a free, one-hour consultation for all!

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8 Clauses That Should be in Every Executive’s Employee Agreement

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business man with coffee

One time I gave a presentation to a group of professionals on “Essential Eight: Clauses That Should be in Every Executive’s Contract.” From my experience in nonprofit formation and compliance, it’s clear that great employment relationships start with smart employee agreements. This goes for both private and public, for-profit and nonprofit, organizations. An employee agreement ultimately benefits both the executive hire and the organization as it can minimize risk for both parties. (Remember, an employee handbook is entirely different than an employee agreement and certainly shouldn’t be mistaken for one!)

When is an Employee Handbook not an Employee Handbook?

A good employment agreement should clearly spell out the terms of the employment relationship and should include (in some form of wording or another) the following eight clauses highlighted below.

Executive employee agreement essential 8

Executive employee agreement essential 8 second half

Dispute resolution and forum selection sound a bit confusing? I would be happy to discuss these clauses in detail with you if you’re getting ready to hire a new executive, forming a new nonprofit, or are updating employee agreements. It’s never too early or too late to make sure you maximize the power of the employee agreement.

Contact me at any time to take me up on my offer for a free one hour consult!

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New Article Published: Why Every Nonprofit Needs a Gift Acceptance Policy

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reading gift acceptance policy article

I love the opportunity to write for the Iowa State Bar Association‘s monthly publication, The Iowa Lawyer. I enjoy even more that you don’t have to be an attorney, judge, or even work in the legal field to read it! I recommend all nonprofit professionals, as well as professional advisors that advise nonprofits, to give my latest piece a read. Entitled “Minding the GAP: Why Every Nonprofit Needs a Gift Acceptance Policy,” the article (on page 24) overviews:

  • what this important policy entails
  • why it’s essential
  • what provisions should be included
  • different types of charitable gifts to consider when drafting the policy

minding the GAP - why every nonprofit needs a gift acceptance policy

That all said, a gift acceptance policy is just one of many policies that each nonprofit should have drafted to fit their unique mission and operations. Other documents to review, adopt, and employ include:

I’m happy to discuss any elements regarding how a gift acceptance policy can help your organization; don’t hesitate to contact me by phone (515-371-6077) or email (gordon@gordonfischerlawfirm.com).

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Nonprofits & Sarbanes-Oxley Compliance

two boardroom tables

If you’ll think back to the early 2000s, in the aftermath of the Enron scandal (among others such as Tyco, Global Crossing, and WorldCom) the climate of distrust and dramatic malfeasance demanded reform of corporate accounting, governance, and other business practices. Accordingly, U.S. Congress passed the Sarbanes-Oxley Act, a law name that’s easier to remember than the actual full legislation name: The American Competitiveness and Corporate Accountability Act of 2002. In summary, the legislation required adherence to certain governance standards by corporate management, and expanded the role the governing board plays in financial and auditing oversight and procedures. It also applied standards of operation to public accounting firms.

Sarbanes-Oxley’s intended consequences were multitudinous, including closing accounting loopholes, increasing accountability and disclosure requirements, rebuilding public trust in American corporations, and increasing penalties for corporate and executive wrongdoing.

Although Sarbanes-Oxley was passed with publicly-traded companies top mind, there are two provisions that are explicitly relevant to tax-exempt organizations: the whistleblower policy and document retention and destruction protocol.

Whistleblower

A whistleblower policy is not technically mandated for nonprofit organizations, but it makes smart sense to adopt such a policy. Why? First off, it encourages stakeholders in the organization to bring attention to problems in the early stages where issues may be more solvable. It’s also important for state and federal liability purposes and ensuring organization executives, board members, and other stakeholders understand their right to report as well as the implications of inhibiting such reporting.

Collective Responsibilities of Nonprofit Boards

Section 1107 of Sarbanes-Oxley makes it a federal crime to knowingly take any action with the intent of retaliation against a person who has reported truthful information to law enforcement relating to any current or possible federal offense. Violators of this provision are subject to fines and/or imprisonment for up to 10 years.

An ideal nonprofit whistleblower policy should both set a process for complaints to be addressed and include protection for whistleblowers. A well-written whistleblower policy can encourage an appropriate, swift response of investigation and solutions to complaints.

Form 990, the annual information report the majority of nonprofit organizations are required to file, states the following in its instructions:

A whistleblower policy encourages staff and volunteers to come forward with credible information on illegal practices or violations of adopted policies of the organization, specifies that the organization will protect the individual from retaliation, and identifies those staff or board members or outside parties to whom such information can be reported.

Record-keeping

macbook on table

The acts of document retention and destruction are also covered under Sarbanes-Oxley. Section 802 of the Act defines the criminal penalties for tampering with documents in relation to federal investigations and bankruptcy. It reads:

Whoever knowingly alters, destroys, mutilates, conceals, covers up, falsifies, or makes a false entry in any record, document, or tangible object with the intent to impede, obstruct, or influence the investigation or proper administration of any matter within the jurisdiction of any department or agency of the United States or any case filed under title 11, or in relation to or contemplation of any such matter or case, shall be fined under this title, imprisoned not more than 20 years, or both.

You read that right. Violators of this provision can be fined and/or imprisoned for up to 20 years.

Additionally, Section 1102 of Sarbanes-Oxley makes it a crime to tamper with a record or otherwise impede an official proceeding. Violators of the provision may be fined and/or imprisoned up to 20 years if they “corruptly” alter, destroy, mutilate, or conceal a record, document or other objects, or make an attempt to do so, with the intent to impair the object’s integrity or availability for use in an official proceeding. (Note, the term “corruptly” is not defined, but your organization can and should use the best judgment on the word.)

Your nonprofit should include specifics related to these Sarbanes-Oxley provisions in a “document retention and destruction policy.” This policy should clarify what types of documents should be retained, how they should be filed, and for what duration. It should also outline proper deletion and or destruction techniques to ensure compliance and reduce liability risks.

Get Policies Set in Place: 10 for 990 Policy Special

Nonprofit Policy Special: 10 for Form 990

Nonprofit organizations should have relevant and updated policies in place that provide guidance for compliance with these Sarbanes-Oxley requirements. I’m offering the 10 for 990 nonprofit policy special where I’ll draft 10 policies related to annual reporting on Form 990 for only $990. Two of the policies included—whistleblower and document retention and destruction—specifically address requirements under Sarbanes-Oxley.

Seize the opportunity to get strong policies in place for a compliant future! Additionally, if you have specific questions about Sarbanes-Oxley compliance don’t hesitate to contact me directly via email (Gordon@gordonfischerlawfirm.com) or by phone (515-371-6077).

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When is an Employee Handbook not an Employee Handbook?

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employees as a desk

An employee handbook is just an employee handbook…or so you may think. But, what happens when it doesn’t have an appropriate “disclaimer?”

Incorporate a Disclaimer

In addition to smart employment policies, all nonprofit entities should develop an employee handbook as a part of the onboarding/training process for all employees. The handbook, like other employment policies, serve the purpose of capturing the values you wish to instill in your workforce, outline the standards of behavior you expect, and provide a clear guide for rights and responsibilities.

Smart Employment Policies for Nonprofits

That said, an employee handbook can actually be considered an employment contract if you’re not careful. And, to best set out the parameters of the employment relationship, it’s best if the handbook and contract are two different documents.

If you think about it, an employee handbook has all the elements of a contract—it’s written, it’s specific, it “promises” certain things will (or won’t) happen. It’s even “signed” by the nonprofit/company.

An employee handbook could actually be considered a unilateral employment contract unless the employer includes an appropriate disclaimer, with wording like this:

“The policies, procedures and standard practices described in this manual are not conditions of employment.  This manual does not create an express or implied contract between the Nonprofit/Company and employees.  Nonprofit/Company reserves the right to terminate any employee, at any time, with or without notice or procedure, for any reason deemed by the Nonprofit/Company to be in the best interests of the Nonprofit/Company.”

Reasons to Enlist an Attorney to Write your Nonprofit’s Policies

Free Employee Handbook Sample

To make all of this more salient, I’ve compiled a free Employee Handbook guide that you can use as a sample guide to better understand how a handbook and a contract or agreement differ.

There are many reasons why an employee handbook should be just that and not also serve as an employment contract. I would be happy to review the employment documents you currently have in place or outline what documents your nonprofit needs, to ensure you have the best possible foundation for legal compliance. Shoot me an email (gordon@gordonfischerlawfirm.com) or give me a call (515-371-6077) and we’ll get your free (no-obligation) one-hour consultation scheduled.

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Expert Employers: Absenteeism & the Americans with Disabilities Act (ADA)

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man stretching at desk

For decades, employers enjoyed very wide latitude in disciplining and firing employees for attendance problems, even if the absenteeism was the result of illness or injury. That latitude has been significantly altered since the passage of the Americans with Disabilities Act (ADA) in 1990. Let’s explore how some of the policy implications of the civil rights law play out in the workplace. Don’t forget the ADA applies to nonprofit employers too, and non-compliance is not an option!

ADA Coverage

The ADA protects only “qualified individuals with a disability.” Disabilities as defined under the ADA can mean either physical or mental impairment that substantially limit one or more major life activities. It can also mean an individual who has a record of such an impairment or is regarded as having such an impairment.

 

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A qualified individual must be able to perform essential functions of the job, with or without reasonable accommodation. What’s a reasonable accommodation? It may include the following (but is certainly not limited to):

  • Making existing employee facilities readily accessible for use by persons with disabilities
  • Modifications to work schedule
  • Job restructuring
  • Appropriate reassignment to a vacant position
  • Acquiring/modifying equipment or devices
  • Adjusting/modifying examinations, training materials, or policies
  • Providing qualified readers or interpreters

Tension Between ADA and Absenteeism

It can be difficult when an employee is absent for a health reason, and co-workers must pick up the slack, or the work simply goes unfinished. But, the employer risks violating the ADA if the company terminates or disciplines such an employee without first considering whether the employee is a “qualified individual with a disability.” If the answer is yes, the employee does fall under the ADA umbrella, then the employer must consider whether they can reasonably accommodate the employee. An employer is required to make a reasonable accommodation to the known disability of a qualified employee, if it would not impose an “undue hardship” on the employer’s operation. Yet another term that sounds ambiguous at its face, undue hardship is defined as an action requiring significant expense or difficulty with regard to things like the structure of its operation, employer’s size, financial resources, and nature of the industry.

Employers are NOT required to make an accommodation if it would mean lowering quality or production standards. (They’re also not required to provide personal items for use, like hearing aids.)

Of course, not all persons with a disability will need the same kinds of accommodation. Some examples relating to absenteeism include:

  • Abe was diagnosed with cancer and will be absent as he undergoes chemotherapy.
  • Betty has a chronic medical impairment in the form of diabetes and will need to attend related medical appointments in regular intervals.
  • Charlie deals with major depressive disorder, and a recent exacerbation of symptoms means he’ll need time to recuperate.
  • Diana will also need time to recover from surgery for her chronic back condition.

Practice Pointers

To control attendance problems without violating the ADA, you should:

  • Evaluate each situation (that is, whether the employee is qualified, disabled, or whether you can provide a reasonable accommodation) on a case-by-case basis while acting as consistently as possible with past practice and in accordance with your attendance policy;
  • Have a written attendance policy that emphasizes the necessity of good attendance, but also provides you with flexibility that you might need to accommodate a qualified individual with a disability;
  • Maintain accurate records of all absences, including a separate and confidential file for any medical certifications or medical information relating to an employee’s absences;
  • Be aware of the interplay between business/nonprofit policies and state and federal laws; and
  • Call your attorney when you have questions about your duties under the ADA. The saying, “An ounce of prevention is worth a pound of cure,” is smart to keep in mind!

Smart Employers Seek Advice

Again, nonprofit employers, remember the ADA applies to you too! The ADA can be a complex law, and it can get even trickier when trying to accommodate appropriately for absenteeism, while balancing business/nonprofit operations. Know you don’t have to navigate it alone. Questions? In need of counsel? Don’t hesitate to contact me.

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