The previous post went over many of the startling new challenges that nonprofits in New York have to address as a result of the passage of NYPMIFA. I based almost everything in that article on the three prominent law firm memos linked towards the end of the piece – and was intended to give readers an overview of what the top attorneys are saying.
But, as I get more involved in fleshing out questions on NYPMIFA, I have to add a correction – or at least a change of opinion – on one particular aspect of NYPMIFA.
It is on the required disclosure verbiage for solicitations. One of the firm memos stated that you need to include the specific language included in the statute – so I wrote that.
But, I heard through other colleagues that this was not necessarily the case. And, upon reading the statute myself carefully, I am concluding that NY nonprofits can write their own version of disclosure for permanent endowment solicitations, as long as the main points mentioned in the statute’s version are clearly communicated. Mainly, you need to tell your donors that your nonprofit has the ability to spend principal on their endowment gifts.
Clearly, that statement alone is a problem for most fundraisers working on permanent endowment gifts. My advice is to craft a well written explanation of the new law, why it was needed, the various prudent factors involved in making spending rate decisions, and the fact that it is the intention of the institution to maintain and grow the principal of the fund.
Lastly, NYPMIFA as a law is not well drafted. On the one hand, it clearly states that standard endowment agreements with standard endowment language (like income only), fall under NYPMIFA – no need to include special NYPMIFA language in the contract.
But, later in the statute, there is this vague requirement to have a NYPMIFA disclosure in all “solicitations.” What does that mean? Solicitation materials? Contracts?
The place for the disclosure language really should be in the endowment agreement itself – as that is the document that should outline how the nonprofit is going to handle this endowment and the one that should put donors on notice of how the endowment law works. So, I have no problem encouraging counsel for nonprofits to add a NYPMIFA disclosure to their permanent endowment agreements.
Next up – samples of disclosure letters and disclosure language.