Rules and Regulations for Nonprofit Associations in Pennsylvania

By Lee Hall, J.D.

Rules and Regulations for Nonprofit Associations in Pennsylvania

By Lee Hall, J.D.

Nonprofit associations in Pennsylvania operate according to the Nonprofit Corporation Law of 1988, as amended, 15 Pa. C.S.A. §§ 5101 – 6146 (Nonprofit Law) of the Commonwealth of Pennsylvania. These entities serve to benefit the community, pay no federal income tax, and enable supporters to make tax-deductible donations to their missions.

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Officers and Directors

A Pennsylvania nonprofit corporation must have a president, secretary, and treasurer. The bylaws may outline their necessary qualifications. Under the Nonprofit Law elections happen annually unless the nonprofit's bylaws specify other term lengths.

Board members and senior managers of nonprofit organizations may be volunteers. The bylaws should state whether any individual will receive compensation, which must be reasonable.

Fiduciary Duties

Board members, senior managers, and committees have fiduciary duties, primarily:

A duty of care

They must act and handle finances and investments in the best interests of the nonprofit corporation and may incur personal liability to the corporation if they harm the nonprofit financially.

A duty of loyalty

Self-dealing is a breach of fiduciary duty and can subject the individual to personal liability. Board members, senior management, and trustees should take care to avoid even the appearance of impropriety. Individuals may be liable for financial gains made at the nonprofit's expense.

Board members and management must understand the further conflicts of interest that can arise for a stock-based nonprofit corporation. Shareholders may never receive dividends, whether direct or indirect. They are not entitled to any part of corporate assets or earnings, even in dissolution.

Key Requirements in Pennsylvania

The Bureau of Corporations and Charitable Organizations requires the nonprofit to complete registration, including the nonprofit's articles of incorporation and a docketing statement. This filing identifies and establishes the entity under the Nonprofit Corporation Law. It sets forth the nonprofit purpose (charitable or not), members' voting rights, and whether or not the nonprofit will issue stock.

Pennsylvania requires a public advertisement of the filing or the intent to file for incorporation in a newspaper and a legal journal or in two newspapers if advertisement in a legal journal is not possible. The advertisement should name the proposed nonprofit and state that it will be or has been incorporated pursuant to the Nonprofit Corporation Law of 1988.

Key Federal Requirements

Nonprofits file an Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code (Form 1023) to become exempt from tax by the Internal Revenue Service (IRS). This filing includes the articles of incorporation, bylaws, nonprofit purpose, and financial information.

Bylaws define, among other things, the board members' and senior management's authority, the number and frequency of meetings, and rules for calling for special meetings. Notably, bylaws accompany Form 1023 that becomes a public document, available to a member of the public upon request. The IRS website lists all records the entity must keep subject to public disclosure.

Key Provisions Pertaining to the Nonprofit with a Charitable Purpose

The Solicitation of Funds for Charitable Purposes Act (Charities Act) and the Unfair Trade Practices and Consumer Protection Law (Consumer Protection Law) regulate Pennsylvania fundraisers. Bingo, prize raffles, and other small gambling games must also comport with any local and county regulations. Unless a charity raises under $25,000 annually and does not pay a fundraiser, fundraising within Pennsylvania requires advance event registration with the Pennsylvania Bureau of Charitable Organizations.

If necessary to protect the public interest, Pennsylvania's attorney general may intervene in bequests, trusts, or the nonprofit's final disposition of assets. A nonprofit holding charitable assets acts as trustee. Individuals acting through a charity may have individual liability for loss of assets, even though the entity is incorporated.

For further information, contact the Commonwealth of Pennsylvania Office of Attorney General Charitable Trusts and Organizations Section.

This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of author, not LegalZoom, and have not been evaluated by LegalZoom for accuracy, completeness, or changes in the law.