A great deal of wealth in our society is controlled by the institutions that are the subject of this Restatement. The rules governing these institutions have traditionally received less scrutiny than those governing for-profit corporations. And volunteer nonprofit boards are often much less knowledgeable about their responsibilities than their paid, for-profit counterparts. This project is designed to fill an important gap. (Excerpted from the Forward of Tentative Draft No. 2 by ALI Director Richard L. Revesz)
I can’t imagine a better subject for a Restatement. Nonprofit and charity law specifically comes from all different areas of law. The substantive law draws from trusts; draws from common law going back to the sixteen hundreds. It draws from state corporation statutes, tax regulations. It’s very hard for somebody who hasn’t worked in the field to draw from all these sources. The law in this area is so hard to manage. In addition to the many substantive areas that nonprofit law draws from, you have to be an expert in state law and federal law, and even English common law. You need to be comfortable managing source to source. I think when you put together the different levels of authority, the different sources of substantive law, it can be quite a tricky area. – Jill Horwitz, Project Reporter
The Restatement of the Law, Charitable Nonprofit Organizations is expected to have six Chapters.
Chapter 1, Definition and Choice of Form, will include Sections on Definition of a Charity, Choice of Legal Form, and Charities with Members.
Chapter 2, Governance, addresses legal questions related to governing the charity once it is formed. Sections include Duty of Loyalty, Duty of Care and the Business Judgment Rule; Management and Expenditure of Investment Asset; Delegation to Board Committees; and Immunity, Indemnification, and Insurance; among others.
Chapter 3, Changes to Purpose and Organization, contains descriptions of the laws governing major changes in the life of a charity, starting with changes in a charity’s purpose and ending with the termination or dissolution.
Chapter 4, Gifts: Solicitation, Restrictions on Charitable Assets, and Enforcement of Pledges, currently include five sections on Restrictions on Charitable Assets; Creation and Interpretation of a Specific Restriction on a Charitable Asset, Release or Modification of a Specific Restriction on a Charitable Asset; Enforcement of Donor Pledges; and Solicitation of Charitable Assets.
Chapter 5, Government Regulation of Charities, examines the role of State Attorneys General, State Courts, and the Internal Revenue Service on charities, including remedies and sanctions.
Chapter 6, Standing of Private Parties, sets forth the requirements for a party to be granted standing to bring or intervene in four types of suits: 1) direct suits against a charity, 2) derivative suits on behalf of a charity, 3) suits to enforce the purposes to which charitable assets must be devoted or the administrative terms governing those assets; and 4) suits to modify the purposes to which charitable assets must be devoted or the administrative terms governing those assets. This Chapter also defines a private party with special interest standing for the purposes of the latter three types of actions.
Jill R. Horwitz
Reporter, Charitable Nonprofits
Jill Horwitz, Professor of Law at UCLA Law, is a legal scholar and health policy expert who is addressing some of the most pressing law and policy issues of our day, including the Affordable Care Act, Medicare, and the impact of hospital ownership on the delivery of medical services. Her scholarly interests focus on the legal regulation of health care organizations, nonprofit organizations, law and economics, and tort law.
Nancy A. McLaughlin
Associate Reporter, Charitable Nonprofits
Nancy A. McLaughlin is the Robert W. Swenson Professor of Law at the University of Utah , S.J. Quinney College of Law. Her research focuses on conservation easement, tax, and nonprofit governance issues and she writes and lectures extensively on these issues. She is a member of the Board of Directors of Utah Open Lands, a member of the Habitat Protection Advisory Committee of the Wildlife Land Trust, and a member of the Lands Protection Committee of Vital Ground, which works to protect grizzly bear habitat. She consults with land trusts, landowners, government entities, federal and state regulators, and others regarding conservation easements and nonprofit governance issues.
Marion R. Fremont-Smith
Consultant, Charitable Nonprofits
Marion Fremont-Smith has been associated with the Hauser Center for Nonprofit Organizations at Harvard University’s John F. Kennedy School of Government since 1998, where she directs research on governance and accountability of nonprofit organizations. She is the author, most recently, of Governing Nonprofit Organizations: Federal and State Law and Regulation, Belknap Press of Harvard University Press, 2004. She has published two other books and numerous papers on government regulation and taxation of nonprofit organizations.