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5 Laws Anyone Working in the Nonprofit Industry Should Know

Nonprofit board governance is incredibly rewarding for leaders overseeing a 501 (c) 3 organization. It allows you to grow as a professional while contributing meaningfully to a cause that is near and dear to your heart.

However, with great benefit, there comes great responsibility. State-specific and federal laws for nonprofits apply at every critical point of operation.

In this post, KC cares shows you the top 5 nonprofit laws that everyone working in or with a nonprofit should know. We address issues related to charitable tax laws, employment, accessibility, governance, and intellectual property.

While the laws presented below are general, we highly recommend reviewing the rules that are specific to your state or by speaking with a lawyer who is knowledgeable in this area.

1. 501 (c) 3 Nonprofit Tax Laws Carry Implications and Trade-Offs

Nonprofit organizations appreciate the benefits of receiving tax-exempt status. Not only does it allow you to access tax-savings benefits, but it also helps you create more value for the public you serve.

However, there are tradeoffs of which you must be aware. Meetings, programs, initiatives, and fundraising efforts are all part and parcel of filing as a 501 (c) 3 nonprofit.

Without engaging in these activities, nonprofit leaders put the tax-exempt status at risk. Paying attention to tax laws and their compliance requirements strengthen public policy and demonstrate the credibility of nonprofit organizations as a whole.

2. Employment Laws Apply to Nonprofits Using Contractors

Human capital is easily the most expensive aspect of running a nonprofit organization. It is for this reason that most of us utilize volunteers and contractors strategically.

However, you must be careful with how you use your staff members by not stepping over the lines of worker classification laws. If you are hiring contractors, you must treat them as such. In general, you cannot micromanage them or direct their activities outside of their contractual obligation.

Managing contractors like workers to save money violates most employment laws and can open you up to legal exposure. You either hire someone that you can direct, or you put a contractor in place that you trust. There are no exceptions.

3. There Is a Fiduciary Duty Among Leaders

Board members, officers, and directors have a financial responsibility toward the nonprofit organizations they lead. This concept means that everyone must act in good faith and fair dealing when it comes to fulfilling a duty of care.

By receiving public funds and donations, you have to exercise vigilance with how you use the money, pay taxes, and create new initiatives.

In short, bringing value to every decision requires leaders to live up to their responsibility. Otherwise, serious consequences are on the horizon for individuals and organizations who fail to recognize them.

4. ADA-Compliance Is Not an Option

Understanding the Americans with Disabilities Act (ADA) and accompanying laws applies to nonprofits. As an organization that provides public services, you must ensure that they are accessible to everyone, including disabled Americans.

Therefore, it is unlawful to take actions that may exclude these populations. Your communications, facilities, and policies must accommodate all people.

Forgoing this element is wrought with liability and can result in rescinded funding or losing your 501 (c) 3 tax-exempt status. Nonprofit leaders should make it a regular practice to review their ADA-compliance measures and make changes as necessary.

5. Intellectual Property Laws Apply to Nonprofit Organizations

As nonprofits, we are used to private parties, government organizations, and other stakeholders, giving us every tool we need to succeed. However, that notion may bleed over into relevant intellectual property laws.

For example, a less-aware employee may decide that borrowing images or recycling web content is a great way to save time and maximize value. However, that is not always the case.

Nonprofits must supply their original works internally or obtain permission from the author or designer to use protected material lawfully. It is a great way to protect those who are interested in advancing your organization’s mission while ensuring that other’s works receive credit where credit is deservingly due.

Final Thoughts and Considerations

As you can see, nonprofit organizations have a lot to consider from a legal standpoint. Failing to meet these requirements means that you can lose your tax-exempt status and subsequent future funding.

Consider discussing your needs with a nonprofit lawyer in your state or bringing a legal professional to your board of directors. He or she can guide and execute the necessary compliance measures that keep you and your team on the right track.

For more information, check out KC Cares online.