State Legislative Developments Affecting Charitable Organizations

The attorneys general in certain states – including New York and Massachusetts – have begun to focus increased scrutiny on the corporate governance and fundraising practices of non-profit organizations, in line with similar attention by the U.S. Congress. This trend has been driven by some high-profile cases of misconduct by charity officials, and by concerns over corporate governance generally. As a result, several states have begun to consider special legislation to ensure greater accountability for non-profit organizations and to address perceived abuses in the charitable sector.

These legislative proposals vary greatly, ranging from those that are likely to have only minimal impact to the more rigorous legislation recently adopted in California and currently pending in New York and Massachusetts. Key provisions of the proposals in New York and Massachusetts are highlighted below (a guide to the California legislation as well as frequently asked questions are available on the attorney general’s website). In general, these proposals will apply to organizations incorporated and qualified to do business in the relevant state, and we anticipate that the final legislation (or administrative guidance) will address to what extent they will apply to organizations that solicit contributions but do not conduct other business in state.

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