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Highlights from the 2022 NAAG/NASCO Annual Charities Conference – Nonprofit Law Blog

by brookridgearcadia
October 13, 2022
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Highlights from the 2022 NAAG/NASCO Annual Charities Conference – Nonprofit Law Blog
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Denver Skyline and Mountains Beyond Lake

I had the pleasure of virtually attending the 2022 NAAG/NASCO Annual Charities Conference hosted by the National Association of Attorneys General and the National Association of State Charity Officials which included NEO Law Group’s Erin Bradrick as one of the presenters.

The conference is the only annual event at which charity regulators and nonprofit organizations and their attorneys, accountants, fundraisers, and advisers can meet, learn about, and discuss issues of interest to the charitable sector. The conference will provide an opportunity to hear from regulators and others in the nonprofit sector on current issues, including sessions on on Establishing an Effective and Healthy Board Culture in a Stress-Filled World and Challenges and Changes in Charitable Fundraising. Internationally-noted scholar Professor Una Osili, of the Indiana University Lilly Family School of Philanthropy, will provide the keynote address on Trends in the Philanthropic and Charitable Sectors and their Implications – What the Numbers Tell Us. Attendees will also hear from top state officials on regulatory priorities.

Some Highlights:

Charities in the Current Environment and Beyond: Where are We Now and Where are We Going?

Given recent world-shifting events, charities now sit at a crossroads, with new and renewed priorities, many demanding urgency in action. In our final panel, presenters will explore this newfound environment, the landscape of surface sector trends beyond that heard previously in the day’s panels, and consider how the role of charities is changing, with potential positive but also compromising impacts that could inform regulation of the sector. Panelists will highlight the changing relationships in cross-sectoral partnerships, concerning aspects of nonprofit and philanthropic corporate entities, and burgeoning issues of political activity intersecting with charitable forms. As charities seek to make transformational change happen through their work and commitments, panelists look forward to a discussion with regulators and practitioners to consider the fundamental work of charities as they help heal our communities.

https://www.naag.org/wp-content/uploads/2022/05/DRAFT-Public-Agenda-2022.10.3.pdf

This was the last session on Wednesday, but one I found incredibly interesting, in no small part because it featured Erin, my Co-Principal, and two of my favorite people in the nonprofit sector: Cindy Lott, Professor, Director, PhiID, Indiana University’s Lilly Family School of Philanthropy, and Jan Masoka, CEO of the California Association of Nonprofits. Cindy, as moderator, provided an introduction and overall context to the discussion, focusing on the regulators’ broader goals beyond individual enforcement actions.

Erin discussed the following trends: the increased use of fiscal sponsorship, the sufficiency of existing laws to govern fiscal sponsorship, but the need for greater education for the sector and for regulators; DAOs and the trend towards less formal governance structures and more technology-based solutions; 501(c)(4) organizations and the diverse and inconsistent state laws regarding whether they need to register as charities; seemingly deceptive ads that look like governmental communications targeting charities; state-federal law tensions (e.g., cannabis, abortion access) and their impact on a charity’s right to operate; and privatization of enforcement, which may be used to further private benefit.

Jan discussed the strong and emotional concern about donor advised funds (DAFs), emphasizing the time gap between the tax benefit derived by donors and the community’s receipt of the charitable benefit of the donated funds. Right now, the time gap is between 0 and infinity (since there are no laws mandating distribution of DAF funds), and she would like to see a defined time limit (presumably not one too far off into the future). See What’s happening with donor-advised funds? (CalNonprofits). Jan also noted the shrinking of the middle class and mid-class donors; the use of privacy arguments and laws to protect persons deriving prohibited private benefits from charities; and how the increasing complexity in collaborations with for-profits and facilitation of fiscal sponsorship and DAFs are also creating harm to the charitable sector that need to be balanced against their public benefits.

State Charity Officials’ Update

Regulators from several states, including California (Elizabeth Kim, Supervising Deputy Attorney General) and New York (Jim Sheehan, Chief, Charities Bureau, New York Attorney General’s Office), discussed highlights of their enforcement efforts and other regulatory activities, as well as developing issues. See, e.g., Public Notice, State of California; For two years, Attorney General Ellison’s office has held Feeding Our Future accountable (Minnesota).

Sheehan spoke about the need to consider the impact of potential regulatory actions on the charity’s beneficiaries and the nonprofit sector. He noted that in some cases monitorships and auditorships were more favorable actions than terminating a charity’s right to operate in the state, removing all the board members, and/or appointing a receiver (which can be very costly).

NASCO President Yael Fuchs also with the Charities Bureau, New York Attorney General’s Office, noted that the Restatement of the Law, Charitable Nonprofit Organizations made clear that the duty of loyalty is owed to the mission of the organization and not to the organization itself. This spoke to me as it’s consistent with Purpose-Driven Board Leadership, a framework I’ve advocated for in my capacity as a lawyer and as a board member of BoardSource.

KEYNOTE: Trends in the Philanthropic and Charitable Sectors and their Implications – What the Numbers Tell Us

Dr. Una Osili, a global expert on philanthropy and social innovation and Associate Dean with the Indiana University Lilly Family School of Philanthropy, provided the keynote. Citing date from Giving USA, she noted that 2/3rds of American households donated in 2000, but that percentage dropped to less than half by 2018. Her call to action to charities regulators: What can we do to rebuild the trust that has been declining? Osili noted that more than ever donors are motivated by the belief that their donation can make a desired impact. Donors also want to be engaged. She emphasized that virtual interactions, use of digital technology, and employee welfare were significant drivers of trust and engagement. Osili described three key findings: (1) generosity persists across diverse households; (2) technology is playing a growing role for diverse donors (40% have given by crowdfunding or social media); and (3) racial justice and social equity giving is increasing.

Establishing an Effective and Healthy Board Culture in a Stress-Filled World

In discussing board culture, Dr. Gerri King, President, Human Dynamics Associates, Inc., introduced the attendees to the five states of group development: Forming, Storming, Norming, Performing and Adjourning. This appears to be from a model created by Bruce Tuckman, which is further discussed in this resource from West Chester University. King also discussed creating a blame-free and gossip-free environment and multi-generational challenges.

Follow the Money: Challenges and Changes in Charitable Fundraising

Brian Armstrong, Deputy AG, California, discussed the new crowdfunding law (AB 488) in California set to take effect on January 1, 2023, and the proposed regulations, which will be revised for additional public comment shortly.

Ruth Madrigal, Principal, KPMG, discussed the tax treatment of cryptocurrency for charitable organizations.

Andrea Kramer, a partner with McDermott, Will & Emery, discussed NFTs and noted her white papers on the topic, available at Crypto and NFT Resources: What You Need to Know About the Taxation of NFTs.

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