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New York Nonprofit Revitalization Act Signed Into Law

New York Nonprofit Revitalization Act Signed Into Law

The New York Nonprofit Revitalization Act of 2013 (the “Act”) was signed into law on December 18, 2013 by Governor Andrew M. Cuomo. The law is intended to reduce red tape while improving governance and accountability of not-for-profits and is generally effective July 1, 2014. The Act is applicable to any not-for-profit organization that is incorporated, operates or solicits charitable contributions in New York.
The Act was the culmination of work performed by the Leadership Committee on Nonprofit Revitalization. The Committee was comprised of 32 leaders of not-for-profit organizations from across the State as well as leading national not-for-profit practitioners.

The Act increases the thresholds for filing returns with the Attorney General as well as the level of reporting on the accompanying financial statements by an independent CPA as indicated in the below table:

Gross Revenues and Support Unaudited Financial Report on Form Provided by AG Independent CPA Review Report Independent CPA Audit Report
Current threshold $100,000 or less More than $100,000 but not more than $250,000 More than $250,000
Effective July 1, 2014 $250,000 or less More than $250,000 but not more than $500,000 More than $500,000
Effective July 1, 2017 $250,000 or less More than $250,000 but not more than $750,000 More than $750,000
Effective July 1, 2021 $250,000 or less More than $250,000 but not more than $1,000,000 More than $1,000,000

Prior to entering into any related party transactions, the board must make a determination that the transaction is fair, reasonable and in the best interests of the organization.

The Act directs the Attorney General to develop rules and regulations permitting or requiring electronic filing. The Attorney General has the specific authority to require an audit report even if not otherwise indicated by the above table upon review of a submitted Independent CPA review report.

Other key components of the Act include the following:

  • Transactions involving real property that do not constitute all or substantially all of the organization’s assets may be approved by a majority of the entire board and no longer require a two-thirds vote of the board. “Entire board” means the total number of directors entitled to vote, assuming no vacancies; the number indicated in the by-laws if the by-laws of a not-for-profit provide the board shall consist of a fixed number of directors; or if the by-laws identify a minimum and maximum number of directors, the number of directors within the range that were elected as of the most recently held election. A committee of the board may also be given the authority to act for the not-for-profit, but it must promptly report any actions taken to the full board.
  • A not-for-profit may pay reasonable compensation to its members, directors and officers for services rendered, but they may not be present or otherwise participate in any board or committee deliberations or vote concerning their own compensation.
  • Fax and e-mail may be used to notify board members of meetings as well as waivers of notice, consent to actions by member vote, consent to actions without a board meeting and authorization of members’ proxies. The Act allows the board to participate in meetings through video screen communication in addition to conference call.
  • An employee of the not-for-profit is prohibited from serving as the chair of the board or any other position with similar responsibilities.
  • The board, or audit committee of the board consisting solely of independent directors, is responsible for the oversight of the accounting and financial reporting process as well as the audit. For larger organizations, the Act provides additional audit oversight responsibilities regarding communications with the auditor.
  • Prior to entering into any related party transactions, the board must make a determination that the transaction is fair, reasonable and in the best interests of the organization. “Related party” is defined as any director, officer or key employee of the not-for-profit or affiliate of the not-for-profit, any relatives of these persons, any entity in which these persons or a relative has a 35% or greater ownership or beneficial interest, or, if the entity is a partnership, direct or indirect ownership exceeding 5%. Directors, officers or key employees should disclose the material facts concerning their interest in the transaction. For related party transactions where the related party has a “substantial financial interest,” the board has additional responsibilities—including the contemporaneous documentation of the board or committee’s approval, including its consideration of any alternative transactions. The Attorney General has the ability to rescind any related party transaction deemed not reasonable or in the best interests of the not-for-profit or seek restitution and the removal of directors or officers.
  • Every not-for-profit must adopt a conflict of interest policy. Furthermore, not-for-profits that have twenty or more employees and had revenue greater than one million dollars in the prior fiscal year must also adopt a whistleblower policy.
  • Streamlines the classification of not-for-profit corporations under the New York Not-for-Profit Corporation Law from four types (Types A, B, C and D) to two—charitable or non-charitable.
  • Not-for-profits who wish to dispose of all or substantially all assets, apply for approval of mergers or consolidations or request approval for a plan of dissolution may petition the Attorney General instead of the Supreme Court.

The complete text of the Act can be found at https://open.nysenate.gov/legislation/bill/A8072-2013.

A checklist to assist your organization with compliance with the Act will be the subject of a future WS+B Not-For-Profit Services Group e-Flash.

QUESTIONS OR COMMENTS?
For more in-depth information on the Act, please call us or visit:
https://open.nysenate.gov/legislation/bill/A8072-2013

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The information contained herein is not necessarily all inclusive, does not constitute legal or any other advice, and should not be relied upon without first consulting with appropriate qualified professionals for your individual facts and circumstances.

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