Over the past two months, the New York Society of Association Executives (NYSAE) has been busy–and successful–in dealing with several challenges in the legal regulation of associations by New York State. More proposed changes are expected, and NYSAE needs the support of each of its members.
As part of his budget bill, New York Governor Andrew Cuomo included changes to New York law, which would have done away with the decades-old distinction between charitable nonprofits (such as colleges and universities, hospitals and nursing homes, museums and foundations) and member–based nonprofits (such as associations and chambers of commerce). The proposal was advanced along with those limiting New York State reimbursement for nonprofit executive compensation and other measures intended to save taxpayer dollars.
This distinction is an important one. Charitable nonprofits (usually tax–exempt under Internal Revenue Code Section 501(c)(3)) are usually publicly funded through donations and government contracts. They have the benefit of numerous state tax and other incentives to sustain their activities. As a result, they merit a higher level of governmental oversight. Membership and mutual benefit corporations, such as those classified under Code Section 501(c)(6) on the other hand, are largely funded and supported by their members. Their activities are private, and their own members have a strong and direct interest in being sure that resources are used properly. The need for governmental oversight is minimal, at best.
Seeing that this distinction might be eroded–and associations treated as if they were public charities–NYSAE campaigned for, as was successful in, the removal of the provision from the budget package.
That success becomes all the more important in light of the legislative proposals implementing Attorney General Eric Schneiderman’s report from his Leadership Committee for Nonprofit Revitalization.
The Attorney General’s recommendations do alleviate some of the corporate burdens in the nonprofit sector, but they also impose new regulatory requirements, such as those on executive compensation, audits, conflicts of interest, whistleblower, and other restrictions intended to strengthen public trust in charities.
Of course, by definition these concerns do not arise for associations, which rely upon their members for oversight. (Even associations formed as Code Section 501(c)(3) organizations largely restrict their fundraising to their members.) Moreover, while many associations have already adopted these types of measures as a matter of best practice, voluntary adoption based on member choice should not equate to governmental regulation. So preserving the distinction between public benefit and mutual benefit nonprofit corporations will be an important task over the next year.
We invite members of NYSAE to support its efforts in this regard and help preserve the elements of member choice, autonomy, and efficiency that are so important to private association governance. Please contact Joel Dolci, NYSAE President at jdolci@nysaenet.org or (212) 206-8230