Nonprofits see win over red tape in updated law

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Many believe a long-awaited update of a law regulating nonprofit organizations will ease unnecessary and costly regulation that has crippled the effectiveness of some groups, but the weeks and months ahead may determine if even more red tape needs to be cut.

The Nonprofit Revitalization Act, which Gov. Andrew Cuomo recently signed into law, is the first substantial update of legislation regulating nonprofit organizations since before President Richard M. Nixon resigned from office after the Watergate scandal.

Michael J. Cooney, partner at Nixon Peabody LLP in Rochester, has not worked on the bill that long, but was a charter member of the state bar association subcommittee that first brought the bill to the Legislature in 2007 and served on leadership committee for the current legislation that was convened in 2011.

“As a whole, I think folks are pretty excited we got attention to amend and modify this statute,” Cooney said. “Work needs to be done, but it’s good legislation. New York finally gets it right.”

Over time, the heads of nonprofit groups have said burdensome regulations have hampered their ability to provide services to those who need it.

The revitalization act allows nonprofits to incorporate, dissolve and merge more easily, and enter transactions without having to go to court, according to state Attorney General Eric T. Schneiderman.

“For too long, outdated laws have burdened the sector in some areas, while providing too little oversight in others,” Schneiderman said in a statement.

Previously, nonprofits looking to incorporate were encouraged to do so out of state in order to speed the process.

Several local nonprofit leaders, including Peter Carpino, president of the United Way of Greater Rochester, and Jennifer Leonard, president and CEO of Rochester Area Community Foundation, testified in support of legislation earlier this year during a hearing in Rochester of the state Senate Standing Committee on Corporations, Authorities and Commissions.

They cited the critical need of easing regulations as well as strengthening accountability to help smaller nonprofits survive.

While loosening restrictions in some areas, the legislation also allows for better oversight of insider deals and gives the attorney general’s office more power to hold insiders accountable. Legislation also requires adoption of tougher financial oversight requirements, conflict-of-interest policies and whistleblower policies to protect nonprofit employees from retaliation.

“New York taxpayers and charitable donors are well served by this new law,” Leonard in a statement.

The legislation was long overdue, according to state Sen. Michael H. Ranzenhofer, R-Amherst, Erie County, who is chairman of that standing committee.

“Millions of New Yorkers depend on not-for-profits to respond in times of emergency, provide health care and offer vital community assistance, among many other services,” said Ranzenhofer, whose 61st District includes parts of Monroe County.

The impact of the legislation will be felt almost immediately, as certain enhanced requirements for reporting in the nonprofit sector begin to take effect, Cooney said. Some aspects of the legislation — such as streamlining the designation and distinction among statutory types of nonprofit corporations — year.

The bottom line, according to State Bar Association President David M. Schraver of Rochester, is helping nonprofits thrive.

“By removing costly and unnecessary burdens, it lowers operating costs for charities and reduces incentives for them to incorporate in other states,” Schraver said.

Just how effective the new legislation will be won’t be known for some time, but Cooney said he is hopeful that if there are concerns from the nonprofit sector, they will be addressed in a timely manner.

“So if changes are necessary, changes will be made,” Cooney said.