Looking Ahead: What to Expect in 2023
2022 brought many challenges for nonprofits – back to work policies and constantly changing Covid guidance, finding and retaining qualified staff amidst the “great resignation” and low unemployment rate, turbulence in the financial markets, addressing national and local housing shortages, political polarization and the rise of authoritarianism, the crisis in Ukraine, climate change, the overturning of Roe v. Wade, and so much more. While we seem to be approaching some semblance of post-Covid normalcy in the workplace, these other challenges will continue into 2023 and beyond.
Financial market volatility warrants heightened diligence by Investment Committees and their advisors to ensure directors and officers are satisfying their fiduciary obligations to protect their organizations’ endowments and other investments, and that the actions they take in this respect are documented in meeting minutes or other internal records. Organizations should look carefully at their staff retention policies, training opportunities, benefits, and culture with an eye toward keeping talent in a hot job market, even if budgets tighten and even as the gap between nonprofit and for-profit salaries widens.
We expect to see more groups forming in service of the protection of voting rights and other democratic principals in the US. At a time when basic facts have become politicized, we expect the lines between political, lobbying and charitable activities to become more blurred; and given the change in control in the U.S. House of Representatives after the mid-terms, and a presidential election less than two years away, we expect even more heated debates and mud-slinging in policy areas in which many nonprofits are directly or indirectly involved. These nonprofits will want to revisit their social media policies and staff training around political and lobbying activity, as well as their compliance protocols.
As the Supreme Court has shifted to the right, some precedents long thought to be settled now look shaky, including in the areas of abortion access, affirmative action in college admissions, and gun safety. We will continue to see new and existing charities looking for ways to help provide access to services for people in states that prohibit or restrict certain rights (e.g., abortion rights), in a manner that serves their mission while preventing or minimizing legal exposure. Also, as concern over climate change continues to mount, tax-exempt organizations will increasingly focus on programs and educational initiatives to address these concerns, often collaborating with for-profit entities via complex structures that raise interesting legal issues.
All the while, new and existing charities nationwide will continue to provide the more traditional yet critical services that so many vulnerable populations rely on – food, housing, physical and mental health, and affordable medicine, to name a few. Corporate structures and delivery/financing models will continue to evolve, as the lines between for-profit and non-profit organizations continue to blur (e.g., with the mainstreaming of impact investing, ESG, PRIs, social enterprise, and “hybrid” structures). It remains to be seen how the FTX debacle and the “crypto winter” will impact donations of cryptocurrency, as well as charities’ willingness to accept these donations and their policies about how quickly they must liquidate them.
In addition, policymakers will continue to debate changes to the appropriate role of the IRS in the regulation of tax-exempt organizations, the rules governing donor-advised funds, whether to reinstitute or make permanent the “universal charitable deduction” in some form, and whether and how to address the problem of “dark money,” particularly in light of recent high-profile transfers of wealth to 501(c)(4) social welfare organizations with limited or no tax liability.
Thought Leadership and Advisories
- Carter Ledyard and Plan A Advisors, a nonprofit management consultancy, are collaborating on an in-depth exploration of “Boards & Bylaws.” This multi-part series will help nonprofit executives and board members consider revisions and amendments to make their bylaws more congruent with the way nonprofits actually operate, improve governance, and ensure compliance with current law. It also serves as a practical refresher on fulfilling fiduciary obligations. The first few articles in the series cover Bylaw Basics, Mission and Board Role, Board Membership and Terms, and Board Meetings, all in the form of a client friendly tool to help our most valued clients and friends.
- Carter Ledyard’s TEO group also posts regular updates on legal issues of concern to tax-exempt organizations on its blog, the Tax-Exempt Organizations Bulletin, and will be ramping up these updates to help our clients address the challenges of 2023.
- Members of the Tax-Exempt Organizations Group speak and publish frequently about issues of concern to tax exempt organizations. In 2022, Pamela Mann chaired a Practising Law Institute program on Advising Nonprofit Organizations and made a presentation on nonprofit formation. Jeremy Steckel gave a presentation on corporate mergers and dissolutions at the conference. For more information, see here: Pamela Mann and Jeremy Steckel Present on Advising Nonprofit Organizations in Program Produced by Practising Law Institute.
- A group of nationally-recognized litigators on the formation of a new public interest law firm to litigate constitutional cases to support principles of democracy and the rule of law.
- An organization dedicated to sustainable and equitable farming on structuring contractual arrangements with a related for-profit entity.
- A family foundation on concluding an agreement with a leading New York hospital governing the creation of an innovative psychiatric treatment model for adolescent patients.
- An organization dedicated to spiritual education on obtaining approval of the NY Attorney General on the sale of its headquarters – and the purchase of a new, more suitable headquarters – on an expedited timeframe.
- An organization dedicated to employment equity in the technology industry on resolving a conflict between the organization and its founder.
- A NYC-based social services agency committed to addressing issues of homelessness and domestic violence on a broad range of corporate, real estate, insurance, employment, compliance and tax matters.
- An organization facing dissent from its members regarding compliant governance practices, on responding to related litigation brought against the organization.
- An organization devoted to Jewish scholarship and academics on applying to the Internal Revenue Service for a change in its exempt status from a private grant-making foundation to a private operating foundation.
- A global organization devoted to increasing the use of environmentally sound materials and practices in the area of textiles on tax-compliant procedures for conducting lobbying and other advocacy efforts.
New Partner Announcement
Carter Ledyard is pleased to announce the promotion of Jeremy Steckel, from counsel to partner, effective January 1, 2023.
Jeremy represents public charities, private foundations, social welfare organizations, trade associations, and other tax-exempt organizations on corporate, compliance, and governance matters. For clients looking to establish new nonprofits, Jeremy guides them through the incorporation and startup process, providing them with state-of-the-art bylaws, conflict of interest and other key policies, and seeking recognition from the IRS of federal 501(c) status.
Jeremy also advises existing nonprofits on corporate governance, board fiduciary duties, internal investigations, excess benefit transactions, self-dealing, charitable solicitation, charitable giving, fiscal sponsorship, program-related investments, impact investing and other innovative philanthropy, joint ventures, relationships with other not-for-profit and for-profit entities, commercial contracts, structural changes, mergers, asset sales, and dissolutions.