Recent Updates from the Attorney General’s Nonprofit Division

by Foley Hoag LLP

Foley Hoag LLP

Several attorneys from the Non-Profit Organizations/Public Charities Division of the Office of the Attorney General (the Division) participated in an engaging panel discussion at the Boston Bar Association last week. The discussion covered a number of topics of interest to nonprofit organizations in the Commonwealth, including required and requested reporting related to “fundamental transactions,” probate issues, governance challenges faced by nonprofits, and an update regarding charitable fundraising in the Commonwealth.

Courtney M. Aladro (Division Chief) provided introductory remarks regarding the Division and introduced her colleagues: Jonathan Green (Deputy Chief), Eric B. Carriker, Philip Schreiber, and several attorneys who recently joined the Division: Argiro Kosmetatos Shapiro, Emily Gabrault, and Bernard Cuadra.

Fundamental Transactions

Certain transactions that signal a significant or fundamental shift in the governance, structure, assets or operations of a charitable corporation require notice to the Division and sometimes, court approval. Mr. Green and Ms. Shapiro took the lead discussing in some detail the notice requirements under M.G.L. Ch. 180 s. 8A(c) regarding a sale or transfer of all or substantially all of a charitable corporation’s assets. In this case, “substantially all” refers to transfers of 75 percent or greater. They noted that one issue the Division examines closely in this context is whether the Board of the transferring charity has managed conflicts of interest well and they encouraged organizations that may be contemplating such a transfer to refer to the Division’s published guidance (available here).

Mr. Green also stated that the Division is mindful of deadlines related to such transfers and suggested that providing the Division with advance notice helps to facilitate a more efficient review of such transactions.

Ms. Gabrault noted that a transfer of all or substantially all of the assets of a nonprofit acute-care hospital or nonprofit health maintenance organization requires a slightly amplified set of notice requirements under M.G.L. Ch. 180 s. 8A(d).

Another “fundamental transaction” involves a transfer for less than fair market value transfer of a large part of a charitable corporation’s assets (including gifts). This requires both notice to the Division and a filing of what is known as a Beede petition with the probate court or the Supreme Judicial Court (sitting in single justice session). Mr. Green and Ms. Gabrault encouraged charitable organizations that are contemplating a “more than de minimis” transfer to contact the Division to determine whether the contemplated transfer would be considered to involve a “large part” of the charity’s assets. It was noted that the Beede requirement did not apply to charitable trusts and that the Division had recently published guidance regarding Beede petitions (available here).

Although there is no regulatory or judicial notice requirement for a merger of charitable organizations or a governance shift whereby an unrelated organization becomes the sole statutory member of a Massachusetts charitable corporation, the Division considers these fundamental transactions as well and requests informal notice when such transactions are contemplated.

Probate Issues

Mr. Cuadra took the lead in discussing probate issues. He provided an overview of the types of probate-related matters handled by the Division in 2016, noting that the Division was involved in over 800 wills, over 1000 interim accounts, and over 600 final accounts and closing estate documents. He said that the primary issue of concern to the Division is whether charitable beneficiaries receive their fair share of the bequest, and to that end, the Division tends to focus on the fees – including attorney fees – that are charged in connection with settling an estate.

Governance Concerns

Mr. Carriker discussed governance challenges that face nonprofits. He noted that there are three primary duties with which boards and officers must comply: the duty of care, the duty of loyalty, and the duty to mission. While the duties of care and loyalty are described in M.G.L. Ch. 180 s. 6C, this latter duty to mission is not part of the statute and is more closely applicable to trusts and restricted funds under the Uniform Prudent Management of Institutional Funds Action (M.G.L. Ch. 180A).

The duty of care is breached when directors fail to exercise careful oversight and reasonable intelligence in managing the affairs of the nonprofit corporation. The duty of loyalty is breached in cases of embezzlement or private inurement by directors or officers. Mr. Carriker noted that the Division routinely investigates and prosecutes cases involving the breach of these duties. He also noted that the Division has taken the position, for example in the case Lifespan Corp. v. New England Medical Center, Inc., No. 06-cv-421-JNL (D. R.I. May 26, 2011), that the business judgment rule does not apply to charitable corporations.

Nonprofit corporations may take certain preventative measures to mitigate the possibility of a breach of these duties, including instituting internal controls over expenditures, establishing an audit committee of the board, regularly providing the financial to the board, and adopting a robust whistleblower policy. When financial mismanagement is discovered, organizations are encouraged to communicate promptly with the Division.

Fundraising Update

The Division periodically issues a Report on Professional Solicitations for Charity fundraising by the 27,000 charities operating in the Commonwealth. The purpose of the report is to help the public to make informed decisions when making charitable contributions and to promote transparency. The most recently released report focused on fundraising during calendar year 2015 (available here).

Mr. Schreiber provided an overview of some of the information from the 2015 report. A total of approximately $200 million was raised by professional fundraisers following traditional fundraising techniques. Consistent with previous years, on average charities retained 41 percent of the funds raised by these fundraisers. This means that the professional fundraisers retained approximately $119 million for their efforts.

If the percentage retained by the professional fundraisers seems surprising, that may be part of the reason why the Division considers transparency regarding fundraising so important. Donors who prefer that a greater percentage of their contribution be retained by the recipient of their generosity may find that the report contains helpful questions to ask and issues to identify when deciding to make a donation. Even so, the 2015 report states that “There is no requirement that a minimum percentage or amount of funds donated through professional solicitor campaigns be passed through to the charity on whose behalf the donations are given. In fact, the United States Supreme Court has held that charitable solicitation is a form of speech protected by the First Amendment and that states are not permitted to establish a requirement that a minimum percentage of funds raised through solicitors go to the charity.”

The 2015 report also noted identified fundraisers that followed certain “unconventional” fundraising strategies. These fundraisers raised approximately $380 million and on average retained a much smaller percentage of the funds raised. In one case, Network for Good, Inc., an online fundraising platform and donor-advised fund, raised $254 million of which 97 percent went to charity.


Toward the end of the hour, the panelists posed several questions that merit further consideration by the nonprofit community as well as by the Division, including:

  • Do charitable boards have a fiduciary duty to obtain a better deal from their professional fundraisers than an average of 41 percent of the funds raised?
  • How will proposed tax reform affect charitable giving in the Commonwealth?
  • How do the new Administration’s immigration policies affect universities and their foreign student populations?
  • What is the Attorney General’s role regarding transparency regarding tax-exempt organizations when there is less transparency at the federal level due to the widespread use of Form 1023-EZ and Form 990-N.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Foley Hoag LLP | Attorney Advertising

Written by:

Foley Hoag LLP

Foley Hoag LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.