Maine Nonprofit Law E-Bulletin November 2010

In this Issue:

• Introduction
• Proxy Voting
• Update on Health Care Credit for Nonprofits
• Upcoming Event: Recent Changes in Nonprofit Law

Introduction

Welcome to the latest issue of the Maine Nonprofit Law E-Bulletin.  I send E-Bulletins 3 or 4 times per year to provide updates and analysis on legal and policy matters respecting Maine nonprofit organizations.  I do my best to keep the messages brief, timely, and useful to nonprofit staff, board members, volunteers, advisors, and donors.  At the same time, no one may rely on these E-Bulletins as legal advice, and I encourage you to consult a qualified attorney for advice on any particular situation.

If you find this free E-Bulletin to be valuable and interesting, please share it with a friend or colleague.  Subscriptions remain free, and I respect my subscribers’ privacy.  Anyone who would like to receive this E-Bulletin or the Maine Land Conservation Law E-Bulletin can e-mail me at rob [at] roblevin.net.  If you’d like to be removed from the distribution list, simply drop me a line at that same address.

Proxy Voting

There is much uncertainty in the nonprofit world about proxy voting.  What is it?  Is it permitted under Maine law?  Should our bylaws prohibit proxy voting or allow it?  This segment attempts to shed light on this issue, although readers are strongly encouraged to contact an attorney for advice specific to their organizations.

Proxy voting occurs when an individual who does not attend a meeting signs her name to a document that transfers her right to vote to another individual who does attend the meeting.  Under Maine’s Nonprofit Corporation Act, proxy voting is permitted for membership votes, unless the bylaws or articles of incorporation provide otherwise.  See Title 13-B MRS Section 604(2).  However, there is no similar provision allowing for proxy voting by Board Directors, and another provision of the statute provides that the “act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the board of directors…” (Emphasis mine).  See 13-B MRS Section 706(1).  Note that another provision allows for a person attending by conference call to be deemed present at that meeting, thus physical presence is not required.

Thus, under Maine law, proxy voting for nonprofit corporations is not permitted for Board Directors, but is permitted by members for those organizations that have voting members.  And unless proxy voting is prohibited by the bylaws or articles, then it must be allowed for members.  In other words, if the articles and bylaws are silent on the issue, then proxy voting by members cannot be prohibited.  However, many bylaws provide that Robert’s Rules of Order is the official parliamentary authority for the organization, and Robert’s Rules are not fond of proxy voting.  In fact, Roberts Rules themselves say that  if the relevant state statute allows for the prohibition of proxy voting in the bylaws or articles (as Maine’s statute does), then the citing of Robert’s Rules as the parliamentary authority in the bylaws or articles “should be treated as sufficient provision to accomplish that result.” (RONR 10th ed. pp. 414–415, l. 33-2)  That is to say, if your organization’s bylaws cite to Robert’s Rules as the parliamentary authority, then proxy voting by members should not be permitted, or the bylaws should be amended accordingly.

The reason that Robert’s Rules, as well as most experts who have considered the issue, recommend against proxy voting in the nonprofit context is because it is not consistent with the decision-making ideal of a board or membership gathering to discuss an issue, weighing various points of view, and then voting.  A proxy’s vote is usually granted before the meeting, before different points of view have been aired.  On a related note, proxy voting often leads to much procedural confusion or controversy, and it discourages attendance at meetings.  Although proxy voting was more useful in bygone days when attending a meeting was more difficult, these days it is usually relatively easy to participate by conference call.  For all of these reasons, the advice of most nonprofit experts is to expressly prohibit proxy voting in the bylaws, both for Board directors and members.

Update on Health Care Credit for Nonprofits

As part of the Affordable Care Act passed by Congress and signed by President Obama in March, nonprofit organizations are now eligible for a credit against their payroll taxes for certain health insurance expenses covering employees.  The details of this credit have been slowly revealed by the IRS over the past several months, and certain questions remain.  At the very least, however, there is now a draft Form 8941, to be used in conjunction with Form 990-T.  Brenda Paluso at the Maine Association of Nonprofits has been particularly dogged in tracking down information about the credit, and how to claim it.  For more information, see here two latest blog posts on the issue at:  http://blog.nonprofitmaine.org/2010/09/17/update-on-the-health-care-tax-credit-for-nonprofits/ and http://blog.nonprofitmaine.org/2010/11/09/more-information-on-the-small-business-health-care-credit/.

Upcoming Event: Recent Changes in Nonprofit Law

Date: Wednesday, January 12, 2011, 9:00 am. – 12:00 p.m.
Location: Unum Learning Center, South Portland

Sponsor:  Maine Association of Nonprofits

The past few years have been very busy in the nonprofit legal world, with significant changes occurring at the federal and state level. Start 2011 off on the right foot by catching up on these changes. Presented by Attorney Rob Levin, but designed for non-attorneys, this workshop will be valuable to the novice as well as the skilled nonprofit veteran.

This program will cover:

• What the IRS is focusing on in the nonprofit world
• Maine’s new Low Profit Limited Liability Company law
• Changes to the federal estate tax and how they affect nonprofits

To register, visit http://nonprofitmaine.org/skillbuilders.asp.

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              CIRCULAR 230 DISCLOSURE: Any federal tax advice contained in this communication or attachment is not to be used for the purpose of avoiding penalties under the Internal Revenue Code or promoting, marketing or recommending any transaction or matter addressed in this communication.

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