Key Nonprofit Corporate Law Developments in 2010

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January 20, 2011; Source: Health Law Reporter | This issue of the Health Law Reporter is a very useful summary of key developments in nonprofit law and regulation from the past year, and well worth a read. Among the useful observations in this Bureau of National Affairs (BNA) summary are these:

"In an Oct. 19 speech, IRS Director of Exempt Organizations Lois Lerner referred to tax exempt status as a 'huge gift' given to organizations by the public – a comment which underscores the IRS’s interest in compliant organizational behavior."

"The [IRS Exempt Organization] work plan [for 2011] notes that the volume of 'traditional' (i.e., 'boots on the ground') examinations – as opposed to 'compliance checks' – has almost doubled since 2004 . . . [and] (t)he percentage of exempt organization returns examined by the IRS has more than doubled over the last nine years, from 0.61 percent in FY 2001 to 1.47 percent in FY 2010."

"In two . . . 2010 instances, a controversy between a reputable nonprofit health care organization and its CEO served to shine a bright (and unfavorable) light on the subject of board oversight of senior management, and board responsiveness to suspicious conduct or events."

"Nonprofit boards came under substantially increased pressure in 2010 to address and resolve issues related to conflict of interest and director independence."

"A(n) . . . ominous governance trend emerging in 2010 was the increased willingness of regulators to hold health industry officers and directors strictly accountable for certain types of alleged corporate misconduct, even in situations where the alleged misconduct was removed from the officers/directors’ oversight and where they should not reasonably have been expected to have been aware of the alleged misconduct."

The analysis is clearly focused on nonprofit health care organizations, but there is a lot of eye-opening utility to nonprofits of all kinds in the report.—Rick Cohen