Tuesday, December 20, 2011

Dispatches From the World of Nonprofit Law Clinics

As I have mentioned before on this blog, I supervise my law school's Community Development Law Clinic, which really should be called a Nonprofit Law Clinic.  As the semester ends, I have been engaging in my usual practice of reviewing our progress, and it occurs to me that, in this season of religious celebration, we have taken on several projects for religious organizations.

One project is for a well established religious organization in North Carolina that is concerned about liabilty and wishes to explore incorporating under state law.  The interesting challenge for the clinic students is that the congregation is strictly committed to non-hierarchical decision making on all aspects of its governance.  The legal question, then, is how to devise a board comprised of any congregant who feels moved to show up to the business meeting and express his/her opinion in any given month, and where corporate actions will only be taken when the congregation arrives at "consensus," which is defined vaguely.  As nonprofit law folks can imagine, this led to a close analysis of the North Carolina General Statutes on nonprofit governance and to some interesting and precise custom language in the organization's bylaws.  Rather than describe the solution we devised, I will leave it up to you imagination. 

(The tax folks in the crowd may be interested to hear that the same congregation was renting parking spaces for weekend football games and was completely unaware that UBIT might apply.  A clinic student, upon discovering this, correctly pointed out that these exact facts are one of the examples in the IRS UBIT regs.)

Another project involves a group of nuns who wish to establish a 501(c)(3) nunnery.  At first blush, the legal issues looked straight-forward, but as we dug in, we realized that we had a potential private inurement/benefit issue.  The problem is that the nunnery would be formed by, and would initially house, a small group of nuns.  To avoid the inurement issue, we advised that they populate the board with people who will not participate in or benefit from the nunnery's programs.  This proved difficult, however, because their religious principles require that organizational decisions be made only by ordained (not sure that's the correct term) nuns, and they are the only ones in the region.  Resolving that problem required significant creative, collaborative work between the students and the nuns.  The private benefit issue was easier, since the client had no problem making its benefits available to an indefinite class.

TAK

http://lawprofessors.typepad.com/nonprofit/2011/12/dispatches-from-the-world-of-nonprofit-law-clinics.html

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