Frequently Asked Questions (p. 2)

 

Is there a need for liability insurance for Board members of Michigan non-profit organizations such as Friends of the Library groups?

In general, the officers, directors and members of nonprofit corporations which have been incorporated in accordance with the Michigan Nonprofit Corporation Act (the Act), 1982 PA 162, MCL §450.2101 et seq., are not personally liable for the acts of the corporation or each other. Any liability is generally limited to the assets of the corporation. The Act authorizes nonprofit corporations to assume much of the liability of their directors and to indemnify their officers and directors for certain acts.

The personal liability of members of unincorporated associations on contracts made by, for and on behalf of the association is "joint and several." This means that all the members, collectively, or any one member may be liable for the entire value of the contracts of the association.
Based on this, it may be a sound decision for an unincorporated friends group to seek liability insurance.

Can the Friends of the Library be the organizer/proponent for a millage request? Or, because the Friends is a 501c3, does the millage advocate have to be a separate group?

The ballot question committee must be a separate legal entity. Friends groups can advocate as citizens and donate money as provided by the law. Friends possessing 501 (c)(3) status can donate to the campaign fund as described at http://www.irs.gov/charities/article/0,,id=163394,00.html. The formula is based on yearly expenditures made for an exempt purpose. Translation: yearly expenditures made doing normal Friends’ business. Charitable nonprofits that possess 501(c)(3) status can donate .2 (x) yearly exempt expenditure = _______ (x) .25 = amount they can donate every year.

The following guidelines should be noted:

1. Any group which receives or spends $500 or more in a calendar year to influence voters must form a campaign finance committee in accordance with the Michigan Campaign Finance Act, 1976 PA 388, MCL 169.201 et seq.

2. In general, no organization qualifies for section 501(c)(3) status if a substantial part of its activities is attempting to influence legislation (commonly known as lobbying). A 501(c)(3) organization may engage in some lobbying, but too much lobbying activity risks loss of tax-exempt status

3. Under the Internal Revenue Code, all section 501(c)(3) organizations are absolutely prohibited from directly or indirectly participating in, or intervening in, any political campaign on behalf of (or in opposition to) any candidate for elective public office.

This is meant for informational purposes only and is not intended as legal advice. Please consult with your own legal counsel.

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If you have questions you would like to have responses to, please e-mail them to information@foml.org