Effective May 7, 2022, private-sector employers in New York State that monitor or otherwise intercept their employees’ electronic and internet usage and communications must provide notice about that monitoring to their employees. These provisions apply to non-profit and tax exempt organizations. Read the full text and details here.

On March 10, 2022, the Office of the New York Attorney General, Charities Bureau, submitted comments in response to IRS Notice 2021-56 (the “Notice”). The Notice, which was published on October 21, 2021, sets forth current standards that a limited liability company (“LLC”) must satisfy to be recognized as tax-exempt under 501(c)(3) of the Internal Revenue Code (the “Code”). Please click here to read our previous blog post on the Notice.

To assist the U.S. Treasury Department and the IRS in determining whether additional guidance is needed, the Notice requested public comments on the standards, as well as on specific issues relating to tax-exempt status for LLCs. The Notice also posed questions to state charity regulators regarding the interpretation of state LLC laws and the applicability of state charity laws to LLCs formed for charitable purposes. In response, the New York Attorney General suggested that the IRS should refuse to authorize section 501(c)(3) eligibility for LLCs in states like New York that bar the formation of charitable LLCs, and asked the IRS to consider anti-abuse rules in states where charitable LLCs are permitted.

The Texas Attorney General, Non-Profit Organizations/Public Charities Division (Charities Division) of the Office of the Massachusetts Attorney General, and the National Association of State Charity Officials have also submitted comments to the IRS in response to the Notice.

On October 21, 2021, the Internal Revenue Service (the “IRS”) published Notice 2021-56. The Notice sets forth current standards that a limited liability company (“LLC”) must satisfy to receive a determination letter recognizing it as tax-exempt pursuant to sections 501(a) and 501(c)(3) of the Internal Revenue Code (the “Code”).  While the IRS has provided informal guidance in the 2000 and 2001 Exempt Organizations Continuing Professional Education articles, the Notice represents the first formal guidance from the IRS for LLCs seeking to qualify for federal tax exemption.

Under the Notice, the IRS will issue a determination letter recognizing an LLC as exempt from tax and described in section 501(c)(3) only if both the LLC’s articles of organization and its operating agreement include:

  • Provisions requiring that each member of the LLC be either:
    • An organization described in section 501(c)(3) and exempt from taxation under section 501(a), or
    • A governmental unit described in section 170(c)(1) (or wholly owned instrumentality of such a governmental unit);
  • Express charitable purposes and charitable dissolution provisions in compliance with existing regulations under section 501(c)(3);
  • The express chapter 42 compliance provisions described in section 508(e)(1), if the LLC is a private foundation; and
  • An acceptable contingency plan in the event that one or more members cease to be section 501(c)(3) organizations or governmental units (or wholly owned instrumentalities thereof).

Any LLC submitting a Form 1023 after October 21, 2021 must meet the foregoing standards in order to obtain a favorable determination letter from the IRS.

To assist the U.S. Treasury Department and the IRS in determining whether additional guidance is needed, the Notice requested public comments on the standards, as well as on specific issues relating to tax-exempt status for LLCs. The laws governing LLCs vary by state and various Attorneys General and bar associations have been digesting the Notice and submitting their comments.

The Notice does not affect the status of organizations currently recognized as exempt under section 501(c)(3).


On November 8, 2021, New York Governor Kathy Hochul signed legislation that permanently allows New York nonprofit corporations with members and religious corporations to hold virtual membership meetings, and nonprofit corporations to hold hybrid meetings in which some members participate virtually while others participate in person.

Prior to the passage of this legislation, Section 603 of New York’s Not-for-Profit Corporation Law (“N-PCL”) and Section 28 of the Religious Corporations Law (“RCL”) required nonprofit corporations with members and religious corporations, respectively, to hold membership meetings in person.

In response to COVID-19, however, New York State implemented a series of temporary provisions to modify Sections 603 and 605 of the N-PCL to permit meetings of members to be held remotely or by electronic means. Under these temporary provisions, with Board approval, nonprofit corporations were allowed to hold membership meetings solely or partially through virtual or remote means, and religious corporations were allowed to hold congregant or membership meetings solely, but not partially, through virtual or remote means.

The new legislation permanently codifies into the N-PCL and RCL the option to hold virtual membership meetings, but nonprofit and religious corporations are treated differently.  N-PCL 603(a) now provides that a nonprofit corporation’s Board may elect to hold virtual or hybrid membership meetings “unless otherwise restricted” by its certificate of incorporation or bylaws, so long as certain “reasonable measures” are implemented to verify identity, to provide a reasonable opportunity to participate in real time, and to record actions.  Nonprofit corporations that wish to hold virtual membership meetings should review their certificates and bylaws to ensure they don’t currently restrict this right and, at the next opportunity and to avoid any doubt, may wish to amend their bylaws to explicitly track these new N-PCL provisions.

Section 28 of the RCL now provides that, notwithstanding any provision of their certificates or bylaws to the contrary, a religious corporation may hold virtual meetings if the Board is authorized to determine the place of membership meetings by the organization’s certificate or bylaws. Religious corporations are not allowed to hold hybrid meetings.

The new legislation took effect on November 8, 2021.

On March 20th, 2022, Carter Ledyard Tax-Exempt Organizations Chair Pamela Mann will participate in a panel discussion at the Jewish Theological Seminary following a staged reading of The Spanish Prayer Book, a play inspired by Abrams v. Sotheby’s, a case that Ms. Mann litigated when she was Chief of the Charities Bureau of the New York Attorney General’s office under former AG Robert Abrams. The case challenged the sale at auction of rare Hebrew books and manuscripts that had belonged to a Berlin rabbinical seminary closed by the Nazis in 1942. The case ultimately settled, facilitated by a substantial infusion of cash from two anonymous donors, and all of the books and manuscripts were returned to public institutions.

For more information, or to register to attend this free event, click here.

On Friday, November 12, Governor Hochul signed S4817A, repealing certain recently enacted amendments to N.Y. Exec. Law § 172-b that  (a) imposed duplicative and burdensome filing requirements on charitable organizations and (b) required public disclosure of previously confidential information about their donors.

Charities that were required to register and file an annual statement on Form CHAR 500 with the New York Attorney General’s Office (Charities Bureau) are still required to do so.  However, for most charitable organizations, S4817A eliminates the redundant requirement that they also file their annual statement with the New York Department of State.

501(c)(4) organizations must still file a Financial Disclosure Report with the New York Department of State if they spend more than $10,000 in a calendar year on one or more written lobbying communications, conveyed to 500 or more people. Similarly, 501(c)(3)s that make in-kind donations worth $10,000 or more to certain 501(c)(4)s will also be required to file a Funding Disclosure Report with the New York Department of State, though this scenario seems quite rare.

The bill also repeals the recently enacted requirement that the New York Department of State publish on its website donor information contained on Schedule B of the IRS Form 990, and codifies that Schedule Bs provided to the state as part of the above reporting requirements are not a public record.

S4817A had the strong support of many nonprofit and advocacy organizations throughout New York.

Click here to read our previous blog post on A1141A/S4817A.

The National Association of State Charity Officials (“NASCO”) recently published the Survey of State Laws Governing Registration of Charities as of July 2021.  In general, prior to soliciting donations from the residents of any state, and, in some cases, simply by virtue of holding assets or conducting activities in a particular state, charities must register and make annual filings with that state, and this survey is a useful reference chart for understanding each state’s requirements and exceptions.

NASCO is an association of the state agencies responsible for overseeing charitable organizations and charitable solicitation in the United States.  The requirements and procedures for forming charitable organizations differ from state to state, as do the registration and filing requirements for organizations that conduct charitable activities or solicit charitable contributions.

The survey is intended to assist charities in navigating state registration requirements, and provides state-specific information including: state agency contact information; initial registration requirements; annual registration and renewal requirements; and whether registration can be completed online.

Charities should work with counsel as needed to understand the requirements of each state in which they solicit donations, hold charitable assets, or conduct activities, to ensure a compliance program is in place to satisfy those requirements.  For each donation received, charities should keep track of the amount of such donation and where the donor resides, among other information, so that they can determine if and when registration in a particular state may be required.

Effective July 30, 2021, the New York Attorney General’s Charities Bureau has suspended its collection of Schedule B to IRS Form 990 while it reviews possible amendments to its forms, policies, or procedures that may be necessary in order to comply with the U.S. Supreme Court’s recent decision in Americans for Prosperity Foundation v. Bonta.

The notice posted to the Charities Bureau’s website states that “charities’ annual filings will no longer require disclosure information that identifies donors. Any notices that charities have received regarding any deficiency due to missing or incomplete Schedule Bs are no longer operative as to such deficiency, and annual filings will no longer be considered deficient in such regard.”

The July 1 Supreme Court ruling in Americans for Prosperity Foundation v. Bonta held that California’s requirement that charities operating or fundraising in California file Schedule B to their IRS Form 990, which discloses the names and addresses of their major donors, with the California Attorney General unconstitutionally infringes on charities’ and donors’ free speech and association rights in violation of the First Amendment. Click here to read our previous blog post on the Supreme Court decision.

New York and New Jersey are now facing a similar legal challenge to their Schedule B collection. On July 14, the Liberty Justice Center sued the New York and New Jersey Attorneys General, arguing that the states’ laws that require nonprofits to disclose tax documents that contain private information about their donors is unconstitutional. The suits were filed in the U.S. District Court for the Southern District of New York (available here) and the U.S. District Court for the District of New Jersey (available here).

On June 9, 2021, U.S. Senators Angus King (I-Maine) and Chuck Grassley (R-Iowa) introduced the Accelerating Charitable Efforts Act (the “Act”) which, if adopted, would revise current laws dictating the pace and transparency of resources flowing from private foundations and donor advised funds (“DAFs”) through a series of incentives and penalties. A joint press release states that the purpose of the Act is to ensure that “philanthropic funds are made available to working charities within a reasonable period of time.”

Generally, the Act would impose: limitations on the deductibility of certain contributions to DAFs; excise taxes on portions of contributions not distributed by certain types of DAFs within a requisite period of time; restrictions on what may be treated as a qualifying distribution for private foundations; and, for purposes of the public support tests for public charities, limitations on when a public charity may treat support from a DAF as so-called “public support.”

Donor Advised Funds

A DAF is a fund or account that is maintained and operated by a section 501(c)(3) organization referred to as a sponsoring organization. Each account is composed of contributions made by individual donors. Once the donation is made, the sponsoring organization has legal control over it, but the donor retains advisory privileges with respect to the distribution of funds and the investment of assets in the account. Under current law, there is no time limit on a donor’s advisory privileges and a donor can generally claim a charitable contribution deduction in the tax year in which they make a contribution to a DAF. Unlike private foundations, DAFs are not required to meet annual distribution requirements.

The Act would divide DAFs into three different categories: (1) Qualified DAFs, (2) Qualified Community Foundation DAFs, and (3) Nonqualified DAFs. DAFs would fall under one of these three categories based on factors established in the Act, including the duration of advisory privileges conferred upon donors by the DAF sponsor and whether the sponsoring charity is a geographically limited community foundation or a DAF sponsor with a national issue area focus.

The Act would create varying restrictions on the deductibility of contributions to each of the three types of DAF. For example, contributions to a Qualified DAF would be deductible only if the donor identifies a preferred organization to receive contributions before the donor’s advisory privilege terminates, and a contribution to a Nonqualified DAF would not be deductible as a charitable contribution until the DAF distributes the amount of the contribution and, in the case of a contribution of a noncash asset, until the contributed asset is sold for cash.

In some circumstances, the Act would also create a new excise tax in an amount of 50% of any portion of a contribution not distributed within a requisite period of time.

Private Foundations

Under current law, a private grant-making foundation is required to distribute annually, through grants and grant related expenses, at least 5% of the total fair market value of its noncharitable-use assets from the preceding year in order to avoid excise taxes.

The Act would modify the rules applicable to private foundations, disallowing distributions made to DAFs and administrative expenses that are paid to disqualified persons of the private foundation from being treated as qualifying distributions, with some limited exceptions.

The Act would also exempt from the annual 1.39% excise tax those foundations with a limited duration or which make distributions in excess of 7%.

Public Charities

There are two public support tests for public charities: one for organizations described in sections 509(a)(1) and 170(b)(1)(A)(vi) of the Internal Revenue Code, and one for organizations described in section 509(a)(2). Both tests measure public support over a five-year period.

Generally, the 509(a)(1) test requires that the organization receive at least one-third of its support from contributions from the general public, and the 509(a)(2) test requires that the organization receive more than one-third of its support from contributions from the general public and/or from gross receipts from activities related to its tax-exempt purposes. For purposes of these tests, contributions to a public charity from a DAF constitute support from the general public. Furthermore, under current law, a DAF can be used to facilitate anonymous gifting, as the ultimate distribution comes from the charitable organization sponsoring the DAF, which does not have to disclose the details regarding the source.

Under the Act, for purposes of applying the public support tests of section 509(a)(2) and section 170(b)(1)(A)(vi), when a contribution is made by a DAF sponsoring organization, and the original donor is not identified by the sponsoring organization, the support would not be treated as public support. Instead, the support would be aggregated with all unidentified amounts coming from all DAF sponsoring organizations as if a single person provided such support, lessening the impact of these contributions on the public support test. If the sponsoring organization identifies the original donor, then the support would be treated as provided by such donor.

Effective Date

The proposed rules for restrictions on the deductibility of contributions to DAFs would be effective after the date of enactment of the Act. The effective date for reforms relating to entities, including DAF sponsors, private foundations, and public charities, are with respect to tax years beginning after December 31, 2021.


Americans for Prosperity Foundation v. Bonta, No. 19-251, consolidated with Thomas More Law Center v. Bonta, No. 19-255. The Court’s opinion is available here.

On July 1, 2021, the Supreme Court held (6-3) that California’s requirement that charities operating or fundraising in the state file Schedule B to their IRS Form 990, which discloses the names and addresses of their major donors, with the state Attorney General (AG) unconstitutionally infringes on charities’ and donors’ free speech and association rights in violation of the First Amendment.


Currently, charities operating or fundraising in California must register with the California AG and renew their registrations annually by filing with the California AG their IRS Form 990, including Schedule B thereto. Schedule B contains the names and addresses of donors who have contributed more than $5,000 or 2% of an organization’s total contributions in a particular tax year. The State claimed that the disclosure requirement furthers its interest in policing misconduct by charities. It is worth noting that the AG does not publish this information publicly, but, in at least one instance, inadvertently posted this information publicly on a massive scale.

In 2018, Americans for Prosperity Foundation, a public charity, and Thomas More Law Center, a public interest law firm, each challenged the disclosure requirement in federal court in the Central District of California, alleging that the AG had violated their and their donors’ First Amendment rights.

In each case, the District Court granted a preliminary injunction prohibiting the AG from collecting their Schedule B information. The Ninth Circuit reversed, holding that “exacting scrutiny,” and not the more stringent “strict scrutiny” standard applied; and that California’s disclosure requirement satisfied the exacting scrutiny standard because it was sufficiently related to an important government interest in policing charitable fraud, and that it promoted investigative efficiency and effectiveness.

Supreme Court Holding

In an opinion by Chief Justice John Roberts, the Supreme Court reversed the Ninth Circuit, finding California’s disclosure requirement unconstitutional, and effectively prohibiting the AG from collecting Schedule B information.

The Court considered the following two issues: (1) whether the exacting scrutiny or strict scrutiny standard applies to disclosure requirements—such as the one in California—that burden nonelectoral, expression association rights; and (2) whether California’s disclosure requirement is unconstitutional on its face (i.e., it violates all charities’ and their donors’ freedom of association and speech) or solely as applied to the petitioners in this particular case.

Regarding the first issue, in a part of his opinion joined by Justices Kavanaugh and Coney Barrett, Roberts rejected the petitioners’ argument that the most stringent constitutional test, strict scrutiny, should apply. The three-Justice plurality stated that courts should instead use exacting scrutiny, which requires a substantial relation between the disclosure requirement and a sufficiently important government interest. While exacting scrutiny does not require that disclosure regimes be the least restrictive means of achieving their ends, it does require that they be “narrowly tailored to the government’s asserted interest.”

Roberts acknowledged that California has an important interest in preventing wrongdoing by charitable organizations, but noted the dramatic mismatch between the desire to prevent fraud and California’s donor-disclosure requirement: the state requires nearly all 60,000 charities that do business in the state to file their IRS Form 990s, including Schedule B, but that information “will become relevant in only a small number of cases.” Because the state does not rely on those forms to initiate investigations, Roberts concluded, California’s “interest is less in investigating fraud and more in ease of administration.”

 Regarding the second issue, the Chief Justice concluded that the disclosure requirement was invalid in all circumstances, rather than only in the petitioners’ case. In First Amendment cases, he explained, the Court has allowed challengers to seek to invalidate a law in its entirety if a substantial number of its applications are unconstitutional. Roberts concluded that that was the case here as the problems in the State’s disclosure requirement would be present in every scenario. Every demand for information that might “chill association,” Roberts concluded, is therefore unconstitutional.


  • The Court’s ruling protects sensitive donor information from compelled disclosure. Charities operating or fundraising in California will no longer be required to file an unredacted version of Schedule B to their Form 990s with the AG.
  • Several other states’ AGs collect Schedule B information from charities, and this ruling calls into question the constitutionality of the laws of those states.
  • The decision continues the Court’s trend of affording robust constitutional protection to non-profit organizations, but leaves some uncertainty around the standard of review for compelled disclosure cases.
  • Outside of the context of charities and donor disclosure, the Court’s holding suggests that other compelled disclosure regimes that lack narrow tailoring could be challenged under the First Amendment. In her dissent, Justice Sotomayor asserted that the ruling placed a “bull’s eye” on reporting and disclosure requirements. How the Court will apply this decision to other compelled disclosure contexts remains unclear.

All quotations are from Americans for Prosperity Foundation v. Bonta, No. 19-251, consolidated with Thomas More Law Center v. Bonta, No. 19-255.