By Lesley Rosenthal, John Wiley & Sons, 320 pages, $80
Numerous nonprofit organizations, both in New York and across the country, face legal issues every day but often do not have access to the sort of sophisticated legal advice that their for-profit counterparts receive. Moreover, non-profits often turn to lawyers on their board of directors, who, while they may be attorneys, lack the type of specialized expertise needed to provide wise counsel.
Lesley Rosenthal, general counsel of Lincoln Center, has answered many of these issues in her definitive work “Good Counsel: Meeting the Legal Needs of Nonprofits.”
Ms. Rosenthal, an incredibly active in-house lawyer, has taken the time to thoughtfully distill and lay out the key topics of interest to a wide range of people who interact with nonprofits. Her book is written in a fashion that brings simplicity to a complex arena. As a result, it is a true must-read for nonprofit lawyers, executives, board members and even law students.
“Good Counsel” is organized into three parts: Part I, “An Overview of Nonprofits’ Legal Needs,” describes what is unique about the legal profile of nonprofits, including corporate law, tax exempt status and nonprofit governance; Part II, “A Grand Tour of Nonprofits’ Business Law Needs,” contains a department-by-department survey of business law topics relevant to nonprofits, including the program, fundraising, finance, human resources, marketing, operations and government relations departments; and Part III, “For Good Counsel Only,” is addressed to lawyers who want to use their training to meet the legal needs of nonprofits.
The book’s primary focus is public charities having tax exempt status under Internal Revenue Code Section 501(c)(3) (e.g., hospitals, museums, and churches). The book’s intended audience includes executives in the nonprofit sector looking to gain legal perspectives; board members having governance and oversight responsibilities; volunteers assisting the organization; legal counsel in the nonprofit sector; law firm lawyers expanding their practices to serve nonprofits; and law students and others interested in learning more about this area.
The book contains some personal anecdotes from the author’s career and work at Lincoln Center, some illustrative cases (such as the Smithsonian Institution governance crisis of 2007), and practice pointers that would be of interest to attorneys and law students.
Focus questions help readers digest what they have read and test their knowledge. Work plans for Parts I and II give users tools to perform an organizational assessment of a nonprofit’s legal needs. Additional materials (including more detailed case studies and glossaries) are available on the book’s companion website, www.wiley.com/go/goodcounsel.
Chapter 1 surveys nonprofit organizations and describes the legal needs they have in common. It sets out some relevant terminology, describes the role and importance of a nonprofit’s mission, and explains the fiduciary duties of care, loyalty and obedience owed by those serving a nonprofit. Chapter 2 addresses some core concepts of corporate law, such as limited liability and the business judgment rule. It also outlines the requirements for incorporating a nonprofit and respecting the corporate form. Chapter 2 describes the process for obtaining exemption from federal income tax, and what a nonprofit must do to maintain such status (e.g., avoid private inurement and limit private benefit). Some governance best practices and policies (e.g., conflict of interest, whistleblower and document retention) are also touched upon here. Chapter 3 delves more deeply into nonprofit governance, starting with the role of the board of directors and various committees of the board, fixing reasonable compensation, and the role of the counsel in relation to the chief executive.
Part II’s Chapter 4 focuses on contracts and intellectual property, areas of law that are particularly important to program staff. It describes what program executives need to know about contract law, including how to form a contract; breaches and terminations of contracts; damages owed from a breach; and other common contract provisions. It also dissects a simple sample contract. On the intellectual property law front, the chapter sets out a basic overview of copyrights, trademarks, and patents, and then provides more detail about how copyright law applies in the nonprofit world.
Chapter 5 discusses the legal aspects of fundraising, focusing on restricted gifts, endowment funds, planned giving, the cy pres doctrine, registration requirements for charitable solicitations, donor privacy and security, gift acceptance policies and pledges, gaming and raffles, and corporate sponsorship. It also touches on handling disputes with donors.
Chapter 6 contains information on laws that matter to a nonprofit’s finance department. It begins with some basic financial and planning concepts such as the nonprofit’s strategic plan and budget, cash flow, internal controls, and the nonprofit’s relationship with the external auditor. This chapter then describes a year in the life of an organization’s finance department, using the annual cycle to alert counsel to its role at each stage. It also covers prudent investing, insurance and risk management, and the unrelated business income tax and other taxes applicable to nonprofits.
Chapter 7 analyzes employment law issues, including employment agreements, at-will employment, employee handbooks, minimum wage and overtime hours, volunteers and interns, and the classification of employees as opposed to independent contractors. The chapter ends with a look at some basic labor law, benefits, and immigration law topics.
Chapter 9 examines the legal needs of a nonprofit’s operations area, including real estate conveyances and leases, facilities management, purchases of goods and services, interactions with government, security and law enforcement, and construction planning and financing. It also advises on how to respond to investigations and lawsuits.
Chapter 10 discusses the prohibition on political activities that applies to §501(c)(3) organizations. It provides an example of impermissible intervention in a political campaign. It describes how to conduct a voter education and voter registration drive and how a nonprofit should invite political candidates to speak. It also discusses the limits on lobbying activities of §501(c)(3) public charities, distinguishing between taking a stand on public policy issues and lobbying, and describing the exceptions to lobbying, as defined in the Internal Revenue Code.
The chapters in Part III are directed at the needs of counsel at a nonprofit. Chapter 11 contains advice on cataloguing and prioritizing a nonprofit’s legal needs—e.g., maintaining a docket, managing contracts and managing litigation. It also includes a section on the “softer” skills needed by nonprofit counsel, i.e., building relationships and communicating, and “finding a responsible way to make the answer be yes.”
Chapter 12 outlines career paths for attorneys wishing to enter the nonprofit sector and provides some job search resources. Finally, Chapter 13 describes how counsel for a nonprofit can build a network of legal advisors.
In short, “Good Counsel” provides comprehensive coverage of legal issues affecting nonprofit organizations. If you interact with nonprofits, this is the book
Stephen P. Younger, the immediate past president of the New York State Bar Association, is a partner in Patterson Belknap Webb & Tyler.