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					                        2009 Iowa Nonprofit Legislative Update
           by Richard Koontz, Director, Larned A. Waterman Iowa Nonprofit Resource Center



There have been a number of recent changes to nonprofit law on the federal and state level. The
following pieces of new legislation and agency changes are discussed below.

Federal law

Federal economic stimulus bills and nonprofits
403(b) plan changes
Senate Finance Committee agenda – hospital charity care, endowments

Iowa law

New charities division at Iowa Attorney General’s office
Registration of charitable trusts
Grant Minority Impact Statements (House File 2393)
Uniform Prudent Management of Institutional Funds Act (“UPMIFA”)
Uniform Unincorporated Nonprofit Association Act – may be sent to Iowa legislature in 2009.

                                         Federal law
Federal economic stimulus bill and nonprofits

The American Recovery and Reinvestment Act (H.R.1) and the economic stimulus bill of 2008
have various provisions that will affect nonprofits in Iowa

Volunteer mileage

As part of the economic stabilization act of 2008, Congress provided for volunteer mileage in
driving related to the Midwest’s disasters. The volunteer mileage deduction was increased to 41
cents per mile. Mileage reimbursements from charities up to 58.5 cents per mile is not taxed.
Those 2008 figures were not for all volunteers, but the 2009 bill considers 24 cents per mile
deduction for all volunteers and exemption of mileage reimbursement of up to 55 cents per mile
from taxation.

IRA’s

In the predecessor economic recovery bill, the Emergency Economic Stabilization Act of 2008
provides for an IRA charitable rollover available through 2009 for individuals aged 70½ and
older. Donation can be made of up to $100,000 from their Individual Retirement Accounts
(Including Roth IRAs) to public charities without having to count the distributions as taxable

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                       2009 Iowa Nonprofit Legislative Update
         by Richard Koontz, Director, Larned A. Waterman Iowa Nonprofit Resource Center

income. This law extends the IRS charitable rollover provisions of the Pension Protection Act of
2006.

For more information on IRA Rollovers, see Indep endent Sector at
http://independentsector.org/programs/gr/IRArollover.html

Private foundation excise tax

The two percent tax on a private foundation’s investments under I.R.C. 4940 can sometimes be
reduced to a 1% tax on the investments (when the foundation’s percentage of distributions for
charitable purposes exceeds the average percentage of its distributions over the five preceding
taxable years.) The proposal is to have a simple 1% tax on private foundation investment
revenue. This has been attempted unsuccessfully in the last three congressional sessions.
Obama’s proposed budget calls for simple 1% tax.

For more information on the foundation excise tax, see Council of Foundations at
http://www.cof.org/Action/content.cfm?ItemNumber=9929


Recovery funding for nonprofits

As of February 9, Americorp funding is $200 million in both the House and Senate version of the
economic recovery bill. Iowa’s Americorp program may increase if this funding is approved.
Among the funds in the bills that may be available to nonprofits are the Community
Development Fund ($1 billion, House; $0, Senate), Compassion Capital Fund ($100 million,
House; $0, Senate), Child Care and Development Block Grants ($2 billion, both House and
Senate), and Food Banks ($150 million, both House and Senate)

The “Coburn Amendment” prohibits museums, theaters and art centers from getting economic
recovery spending. This is only in the Senate bill. The House bill does not prohibit museums
from receiving economic recovery funds. But aquariums and zoos are in both bills.

403(b) plan changes

Nonprofit organizations have a number of retirement benefit options to offer employees that
include payroll deductions to an IRA (individual retirement account), SEP (simplified employee
pension), 401(k), 457(b) and 403(b) plans. 403(b) plans without employer contributions are the
most popular among small nonprofit organizations because they are relatively simple. In 2007
the IRS adopted new regulations affecting 403(b) plans that went into effect January 1, 2009.
The new regulations provide that 403(b) programs must maintain a written contribution plan that
“satisfies 403(b) in both form and operation and contains all the terms and conditions for
eligibility, limitations, and benefits under the plan.” Prior to the new regulations an employee
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                        2009 Iowa Nonprofit Legislative Update
          by Richard Koontz, Director, Larned A. Waterman Iowa Nonprofit Resource Center

could make monthly salary deferrals while the employer could make a single cumulative annual
payment to the 403(b) plan. The new regulations require that an employer pass salary deferrals
to the 403(b) plan within an “administratively feasible period.” Exclusion to the universal
availability rule are now gone. Small 403(b) plans with less than 100 employees, now must file
Short Form 5500 annually. Smaller 403(b) plans can often get out of the audit requirement.

For more detail on changes to 403(b) plans, see the IRS summary at
http://www.irs.gov/retirement/article/0,,id=172431,00.html and a more extensive discussion at
http://www.irs.gov/pub/irs-tege/td9340.pdf

Senate Finance Committee agenda – hospital charity care, endowments

The Senate Finance Committee has spent several sessions discussing significant nonprofit issues,
two of which are hospital charity care, and university endowments.

Hospital charity care

Hospitals that are exempt under 501(c)(3) must give “charity care.” Hospital “charity care,”
includes free or discounted health services provided to persons who meet the organization’s
criteria for financial assistance and are thereby deemed unable to pay for all or a portion of the
services. “Charity care” does not include (i) bad debt or uncollectible charges that the hospital
recorded as revenue but wrote off due to failure to pay by patients; (ii) the difference between the
cost of care provided under Medicaid or Medicare and the revenue derived therefrom. There
remains a debate about how “charity care,” and community benefit should be defined for
hospitals. Senator Grassley attempted to include provisions about charity care in the Economic
stimulus bill passed by the Senate in February 2009.

See Grassley 2/5/09 press release at http://finance.senate.gov/press/Gpress/2009/prg020509e.pdf

University Endowments

The Senate Finance Committee contrasted multi-billion dollar endowments at some universities
with ever-rising tuition prices, something that could be seen as inadequate spending from
endowments. The Committee in 2008 sent 136 U.S. colleges with endowments of $500 million a
questionnaire about their endowments. In the face of the current market falls and loss of
considerable endowment funds, there may not be much activity in Senate Finance in 2009.
However, Senate Finance Committee member Grassley, said recently "Contrary to what colleges
might argue, the weak economy makes a strong case for more endowment spending on student
aid. If an endowment is a rainy-day fund, it's pouring."


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                        2009 Iowa Nonprofit Legislative Update
          by Richard Koontz, Director, Larned A. Waterman Iowa Nonprofit Resource Center

For more on university endowment issues, see
http://finance.senate.gov/press/Gpress/2008/prg012408f.pdf



                                            Iowa law
New charities division at Iowa Attorney General’s office

The Iowa Attorney General’s office has created a charities division, staffed by John
McCormally, Assistant Attorney General. The office will focus on consumer protection
(including the fundraising regulation in Iowa), protecting nonprofit integrity, and give the AG’s
office increased focus on nonprofits and charities.

John McCormally can be reached by email at john.mccormally@iowa.gov

Registration of charitable trusts

Under a proposed provision in the Iowa Trust Code (Iowa 633A.5106), on creation of a
charitable trust, the trustee will register the trust with the attorney general This bill was approved
in subcommittee in early February.

Grant Minority Impact Statements (House File 2393)

       The Grant Minority Impact Statement was passed by the General Assembly and is
applicable to grants from any state agency beginning January 1, 2009. Grant applications to state
agencies after that date must include information on

   a. Any disproportionate or unique impact of proposed policies or programs on minority
persons in this state.
   b. A rationale for the existence of programs or policies having an impact on minority persons
in this state.
   c. Evidence of consultation of representatives of minority persons in cases where a policy or
program has an identifiable impact on minority persons in this state.

For more information on the Grant Minority Impact Statement legislation, see
http://iowahouse.org/wp-content/uploads/2008/03/bill-summ- minority- impact-statements.pdf


Uniform Prudent Management of Institutional Funds Act (“UPMIFA”)

Iowa’s former law on investment of endowment type funds, the Uniform Management of
Institutional Funds Act (UMIFA, Iowa Code 540A) was replaced with a new version called the
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                       2009 Iowa Nonprofit Legislative Update
          by Richard Koontz, Director, Larned A. Waterman Iowa Nonprofit Resource Center

Uniform Prudent Management of Institutional Funds Act (UPMIFA). The definition of
“endowment fund” provides that the term “does not include assets that an institution designates
as an endowment fund for its own use.” The standard of conduct for the management of
institutional funds has been changed from one of ordinary business care to that of the conduct of
a prudent investor. UPMIFA includes a rebuttable presumption of imprudence. UPMIFA
expands upon the ability of an institution to release restrictions on funds.

For those interested in the changes attend the investment policy panel at 10:30 to hear Bill
Boyd’s presentation on UPMIFA. His overview of UPMIFA is available in the Spring 2008
INRC Quarterly at http://inrc.continuetolearn.uiowa.edu/updates/Spring08Web.pdf

 Uniform Unincorporated Nonprofit Association Act – may be sent to Iowa legislature by ISBA
in 2009.

The Uniform Unincorporated Nonprofit Association Act (“UUNAA”) was drafted in 1996 and
revised in 2007. Iowa has not adopted either version of the act to this point, and the Iowa State
Bar Association nonprofit committee is contemplating introduction of the revised version to the
General Assembly in 2009. When a nonprofit functions without incorporating it is an
unincorporated association There is the potential for greater liability of participants in an
unincorporated association than there would be in a corporation, something the UUNAA
addresses. In addition, it is hard to hold title to real estate in the name of an unincorporated
association. UUNAA would resolve this difficulty also.

To review the text of the revised UUNAA, see
http://www.law.upenn.edu/bll/archives/ulc/hunaa/2008am_approved.pdf




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