What did we (NY charities) get ourselves into? More NYPMIFA issues!

I was part of an effort to push for enactment of NYPMIFA – sending notices about calling legislators, etc…  NY nonprofits were hurting with underwater endowments and NY needed to update its law (to conform with all of the other states).  Get us access to our endowments – that was the feelings in 2009.

Oh boy, did we get it.  NY legislators passed their own unique version of NYPMIFA, with a lot of extras that other states DON’T have.  See older posts for general info on NYPMIFA.

But, now we finally have a “Practical Guide” (click here to download: NYPMIFA-Guidance-March-2011) from the New York Attorney General’s office to answer nagging questions.  Some of the answers are welcome, some are not.

Here are some of the welcomed answers:

  • No NYPMIFA notice needed if gift doc already permits spending below historic gift value;
  • No NYPMIFA notice needed if language in gift agreement already corresponds to NYPMIFA;
  • No NYPMIFA notices needed for donors who just responded to an “institutional solicitation” but didn’t sign an agreement themselves (any donors who sign an agreement should get the notice!)
  • If donor to a fund is deceased, you DON’T need to notify an executor or heirs when applying to a Court to modify a restriction on use, management or investment of a fund (this is for the over $100,000, less than 20 year old funds).
  • Multiple, similar endowment funds CAN rely on a grouped prudent analysis!  As long as the board determines a sensible policy on how to decide which funds are similar.
  • Also, for similar funds, a SINGLE CONTEMPORANEOUS record is fine!  You don’t need to create a separate board statement for each similar fund.

Here is the not so welcomed news from the AG:

  • The AG thinks that every pre-9/17/10 permanent endowment fund with living/available donors requires a NYPMIFA notice EVEN if the nonprofit has no intent on ever dipping into historic gift principal.
  • The AG also thinks that without sending a NYPMIFA notice, charities aren’t supposed to spend at all even if the fund is above water!

This last part is going to set off a lot of nonprofits who don’t want to be sending confusing NYPMIFA notices to older donors – whose funds are above water and where the board never plans on going into principal anyway!

My advice:  let your counsel make the call.  Legal counsel has every right to disagree with the NY AG’s opinion on these last two points. Especially since it is not clear at all in the law and there is no reason to believe the legislature intended this consequence (my opinion on the matter – for what it is worth).

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