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Non-Profit Corporation Act slips under the radar of those most affected

Overhaul of non-profit corporation law goes unnoticed

I admit I was caught flat-footed. The Washington, D.C., legislature passed a new Non-Profit Corporation Act that went into effect in January, and it was news to me. I’m the kind of guy who is supposed to know things like this, not just because I’m a non-profit lawyer in D.C., but also because I’ve been tracking legislation at all levels of government since I was in high school. Even a casual observer would have to be blind to miss something as significant as a complete rewrite of the state statute governing thousands of non-profit organizations, many of which are household names in America.

So, how did I miss this?

Part of the reason is that the overhaul of the non-profit corporation law was something of an afterthought to a broader effort to make D.C. a “friendlier” place for businesses. This business-centric approach to reform of the law meant the usual non-profit/charity actors I would have expected to hear from via weekly email updates and such were not in the forefront—they were playing catch-up once they realized the statutory train was leaving the station.

About five years ago, a D.C. legislator (who, by the way, is a law professor at George Washington University) decided the city might attract more businesses if its laws were made “business friendly.” An assistant attorney general, who happened to be on the U.S. Uniform Law Commission, also got involved. A working group decided to adopt a uniform law approach that covered all business organizations, not just the for-profits. At some point in the then still low-profile process, it was decided to address the non-profit corporation issues with something called the Model Non-Profit Corporation Act, which sounded like a good and credible idea because it came out of the American Bar Association (ABA). Therein, it turns out, lay the seeds of my surprise.

An informal group of D.C. non-profit law practitioners became involved in the drafting process when it got wind of the overhaul effort. One of the group’s objections was to the use of the Model Act as a basis for the new law. They pointed out that it was not a product of the whole ABA; that it had come out of only the ABA’s Business Law Section, and then from just its Committee on Non-Profit Corporations; and even then that it was drafted by just a task force of the committee with the barest of public comment. Finally, they said, many non-profit lawyers inside and outside of the ABA had objected to both the process leading to and the merits of the so-called Model Act.

I would have expected my non-profit peeps in the ABA, the Exempt Organizations Committee of the Tax Section, to have been the most credible source of any large-scale rethinking of state non-profit law. But when I asked the current chair of the committee about the D.C. effort, she said she was not aware the ABA Tax Section or her committee had any role whatsoever in it. That explains why I wasn’t getting email updates on it during the past few years.

Peter C. Wolk, a well-regarded lawyer for many D.C. non-profits who testified at the single day of hearings on the Act, told me that there was enough opposition from the non-profit sector that the only substantive amendments to the overall corporation bill were to fix problems in the non-profit title. Even so, he said the lawyers and entities who most identified with the non-profit sector were not significantly involved in the new law. More generalist, corporate people were the drafters, which meant the non-profit sector’s radar didn’t pick up on it as it might have otherwise. He assured me I was not alone in my ignorance. When the D.C. Bar organized a session on the new non-profit law, it quickly sold out, and a second session, also sold out, had to be organized.

Seems I wasn’t the only one out of the legal loop.

Bruce D. Collins is corporate vice president and general counsel of C-SPAN, based in Washington, D.C. Email him at collins@c-span.org.

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Bruce D. Collins

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