A Break for Massachusetts Nonprofits: Lowering the Demand for Financial Reporting and Providing Incentives for Board Members to Serve

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The Massachusetts legislature and Governor Healey recently passed into law An Act Relative to Strengthening Massachusetts’ Economic Leadership (the “Act”)[1].  The Act provides significant changes in the nonprofit space which will alleviate financial reporting requirements for small and mid-sized Massachusetts nonprofits as well as provide incentives and protections for individuals serving as board members.[2]  The Act is designed to increase employment and growth in Massachusetts and promote activities of nonprofits throughout the state.[3]

One of the key provisions of the Act is the adjustment of financial reporting thresholds for small and mid-sized nonprofits.[4]  Now, nonprofits are only required to submit reviewed financial statements if the entity has an annual gross revenue of $500,000 or more, as opposed to the previous lower threshold of $200,000.[5]  Similarly, nonprofits are only required to submit audited financial statements if the entity has an annual gross revenue of over $1,000,000, as opposed to the previous lower threshold of $500,000.[6]  These reporting requirements should have a significant impact on small and mid-sized nonprofits in the state.  The changes are expected to reduce administrative burdens on small and mid-sized nonprofits which will allow them to focus their efforts and resources on their missions.[7]

In addition to the financial reporting changes, the Act also allows board members to receive modest stipends for serving as board volunteers while reserving their personal civil liability protections.[8]  Prior to this change, any board member who received compensation in any amount would lose the personal civil liability protections afforded under Massachusetts General Law Chapter 231 Section 85W.[9]  This change should expand opportunities for individuals to serve as board members and ultimately has the potential to substantially increase representation and diversity on Massachusetts nonprofit boards.[10]

[1] An Act Relative to Strengthening Massachusetts’ Economic Leadership: Overview, Mass.gov, Bill Summary Formatted (1).pdf.

[2] Massachusetts Allows Stipend for Charitable Board Representation and Amends Nonprofit Financial Statement Requirements, Massachusetts Nonprofit Network, Recent Legislative Accomplishments – Massachusetts Nonprofit Network.

[3] Id.

[4] Id.

[5] Id.

[6] Id.

[7] Id.

[8] An Act Relative to Strengthening Massachusetts’ Economic Leadership: Overview at 4.

[9] Massachusetts Allows Stipend for Charitable Board Representation and Amends Nonprofit Financial Statement Requirements.

[10] Id.

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. Attorney Advertising.

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