Bromberger Law

07/01/2022

Wishing you a great holiday weekend! Enjoyed NFT.NYC with Deepak Chopra for The CityKids Foundation and Banner. Thank you again .xyz and .love. The artwork commemorated 100 years of the Statue of Liberty and captured the essence of what liberty and freedom meant to these kids—so timely. Learn more and see how you can support this work at goodartdao.org.

06/14/2022

In light of the shootings in Uvalde, Buffalo, and around the country, American Sustainable Business Network is encouraging business leaders to join a sign-on letter urging the Senate to take action to reduce gun violence in America. Organized by Everytown for Gun Safety in conjunction with ASBN member Patagonia, the “CEO’s for Gun Safety” letter is available at:

06/06/2022

TedxPortland likely violated IRS rules prohibiting charities from supporting political candidates, when it featured Oregon gubernatorial candidate Betsy Johnson at its event last Saturday. The Oregon Department of Justice received several complaints from event attendees, which it will forward to the IRS for review. 501(c)(3) charitable organizations are absolutely prohibited from supporting or opposing candidates for political office – by doing so, they risk incurring excise taxes, as well as the loss of their tax-exempt status.

The nonprofit event organizer could face scrutiny of its tax-exempt status after featuring gubernatorial candidate Betsy Johnson on Saturday.

05/13/2022

NYS Annual Reporting Update: From our friends at Venable: NYS just adopted regulations impacting organizations that file CHAR 500 with the New York Attorney General’s Charities Bureau, which includes almost all charities raising funds in New York State. Effective as of March 16, 2022, the new regulations make clear that the names and street addresses of donors to public charities and other nonprofits do NOT need to be disclosed to the state as part of the annual report. Private foundations still have to provide an unredacted Form 990 Schedule B listing their significant donors. This change comes as a result of Americans for Prosperity Foundation v. Bonta, a recent US Supreme Court case that invalidated a California state law requiring charities to disclose the names and addresses of their donors.

New York recently adopted regulations impacting charitable organizations that are registered and required to file annual financial reports (the CHAR 500)

04/05/2022

The IRS announced it cannot process all of the paper annual reports it received from charities and other tax-exempt entities since the pandemic started. It also cannot tell who has filed and who has not, so it has suspended sending out notices of delinquency. However, it has not stopped the auto-revocation process for groups that do not file their returns for three consecutive years. With this development, by the time a group gets a notice, it may be too late to correct the deficiency. We do not know if the Service will provide relief to groups in this situation, so stay tuned. Remember, every charity has to report to IRS every year, so if your charity has not filed its annual report for every year, it should do so soon, even if it is late.

03/17/2022

Join our latest ESG, impact finance webinar—Global Alliance of Impact Lawyers (GAIL)'s UK Chair and McDermott Partner Ranajoy Basu will lead a discussion with Education Outcomes Fund Co-Founder and Chief Program Officer Jared Lee, Former UNICEF General Counsel Peter Mason, Red Cross Innovative Finance Specialist Simon Meldrum and British Asian Trust Executive Director of Social Finance Abha Thorat-Shah. Key themes will include:
-Impact bonds and lessons learned through the pandemic
-Capital aggregation towards humanitarian interventions
-Case studies of recently raised impact bonds and how they can catalyze change
-Payment models, scalability and replication

02/07/2022

To celebrate the launch of GAIL, the Global Alliance of Impact Lawyers, we are highlighting the Luxembourg société d'impact sociétal or Societal Impact Company (SIS):

An SIS, available in Luxembourg since 2016, is a traditional business entity formed for a recognized socially beneficial purpose. There are two types of socially beneficial purposes. The first type is support of persons in “fragile situations” due to their state of health or need for social or medical and social support—this includes stakeholders such as employees, customers, clients, members, followers, or beneficiaries of the SIS. The second type of social benefit is contributing to one or more of the following social goals: preserving social ties; fighting inequality in health, social, cultural, economic; fighting gender inequality; maintaining and reinforcing territorial cohesion; protecting the environment; and promoting arts & creativity, and developing educational activities.

The charter of an SIS must specify a method by which to “effectively and reliably” verify the accomplishment of its socially beneficial purpose purposes, which can include international benchmarks like B Corp certification. The SIS is then required to publish an annual report detailing its impact and achievement of its socially beneficial purposes using the performance indicators specified in the charter. The report must be submitted to the Minister of Labor, Employment & the Social and Solidarity Economy within 2 weeks of the company's annual general meeting, at which the report is presented to all shareholders. The law also sets out a process for existing companies to convert to SIS status.

An SIS can issue two kinds of shares: “impact” shares and “performance” shares. Impact shares may vote, but the holders are not entitled to any share of profits; performance shares do receive a share of profits but are subordinate to the impact shares. A person can hold both types of shares. At least half of the SIS’s shares must be impact shares, and the company must use the pro-rata profits for those shares to accomplish its social and beneficial purposes. If 100% of the shares are impact shares, the company may qualify for certain tax exemptions, including exemption from corporate income tax. SIS also enjoys some government procurement preferences. A decision to terminate SIS status requires approval of the impact shareholders.

Priority must be given to mission when determining whether the SIS will pay dividends to the performance shareholders. Dividends may not be paid if—in the good faith judgment of the board—it would impair the SIS’s ability to accomplish its social and beneficial objectives. Compensation in an SIS is also capped at 6 times the minimum social wage set by law. The SIS governing board may be compensated if approved by the impact shareholders. In the event of dissolution, the company’s surplus assets have to go to another SIS or a nonprofit with similar socially beneficial purposes.

02/04/2022

Impact Investing Lawyers Wanted!
If you are a lawyer, law student, or someone working in a legal function (like a CCO) who is working in or interested in working in impact investing, the Impact Investing Lawyers Working Group (IILWG) is looking for you! IILWG is an informal network of legal professionals in the space. No fees, no obligations. Just sign up on Mailchimp, join the LinkedIn group, and participate: https://mailchi.mp/f8604064469e/iilwg

01/24/2022

Can a DAF Own a Business?
Under the Internal Revenue Code, the excess business holdings rule applies to donor-advised funds as if they were private foundations. That is, a donor-advised fund and its insiders may not collectively hold more than 20% of the voting stock of a corporation or profits interest in a partnership or joint venture, unless the holding falls within one of the exceptions to the rule, such as a program-related investment, or the “Newman’s Own” exception for certain wholly-owned businesses. Donor-advised funds that receive excess business holdings have five years to divest the excess, with the possibility of a five-year extension if approved by IRS. In some situations, it makes sense to structure the gift to avoid this problem, using profits interests, non-voting shares, tax blockers, and similar techniques.

01/17/2022

Can an LLC be a charity?

IRS recently issued IRS Notice 2021-56, which says that LLCs can qualify for 501(c)(3) charitable status if they include the following provisions in their articles of organization and operating agreement:

- A requirement that each member of the LLC be either a Section 501(c)(3) organization, governmental unit, or wholly-owned instrumentality of a governmental unit;

- A statement that the LLC is organized and operated exclusively for exempt purposes and the LLC’s assets will remain dedicated to an exempt purpose and will not inure to private interests;

- If applicable, a statement that the LLC will comply with the private foundation regulations in any year in which the LLC is treated as a private foundation; and

- A provision addressing the situation where one or more members cease to be exempt, such as suspension or termination of membership.

The LLC must also include a statement that all of the foregoing provisions are consistent with its state law and are legally enforceable.

Many charities use “pass-through” LLCs to hold assets and conduct activities, and that generally works quite well. But there are situations, such as when multiple charities are doing a joint venture that will generate UBIT for some or all of the charities, or where potential tax liability could put the charities’ financial position at risk, where it would be useful to use the LLC as a tax “blocker” as well as a liability blocker. Using an LLC taxed as a corporation but exempt under 501(c)(3) would accomplish this and protect all the charities involved.

01/06/2022

To connect children and families with outside-of-school opportunities, we are thrilled to support VILLAGE & CEO Noah Plewa in creating their hybrid social venture structure. The for-profit side allows access to investment that will allow VILLAGE to develop its software, while the nonprofit side allows VILLAGE to accept donations (from organizations, foundations, or individuals) to help lower-income families access programs. In fact, VILLAGE received a $25,000 grant earlier this year from Mayo Clinic Health System to build its capacity. Read more about VILLAGE's latest news and capital raise:

Noah Plewa knows better than many the lifelong value that out-of-school activities – from summer camps to sports teams – have on young learners. The Eau Claire native followed ...

01/05/2022

Happy New Year from the IRS!
In its first published guidance of the year, Rev. Proc. 2022-1, IRS has announced that requests for rulings or determinations filed electronically should be accompanied by a scanned signature or a signature digitized using encryption techniques to provide proof of integrity. The Service will accept electronic signatures in any of the following formats: tiff, jpg, jpeg, pdf, Microsoft Office Suite, or zip. These rules also apply to Form 2848, often submitted directly to agents to discuss an application. Believe it or not, this is progress!