Legal guidelines your nonprofit should be aware of: MNCA and RUUNAA
Other than tax laws, there are very few federal laws in the United States that apply specifically to nonprofit organizations. Most laws governing nonprofits fall under state jurisdiction, and the law can vary greatly between states. This often leaves small nonprofits, who can't necessarily afford to have legal advisers at the ready, on their own to make good legal choices.
That's why some well-informed groups have come up with legal guidelines for nonprofits based on relevant case law, and many states have adopted these guidelines as official law. The most prominent of these are the Revised Model Nonprofit Corporation Act (MNCA) and the Revised Uniform Unincorporated Nonprofit Association Act (RUUNAA).
The two acts vary in the type of organizations they serve: the MNCA covers nonprofit corporations and the RUUNAA covers unincorporated nonprofit associations. They also vary by sphere of influence, with the MNCA more widely adopted than the RUUNAA.
What is the Revised Model Nonprofit Corporation Act?
The MNCA is legislation drafted by the Nonprofit Organizations Committee of the Business Law Section of the American Bar Association to provide legal guidelines for nonprofit corporations. The purpose of the legislation is to propose a framework for state guidelines.
Since the MNCA comes out of the Business Law Section, it's no surprise that it focuses on corporate law relevant to nonprofit corporations. As laws governing corporations change, the MNCA is revised. States vary in whether these changes are adopted as they occur.
To date, 37 states have adopted a version of the MNCA — including eight that have adopted the law in its entirety: Arkansas, Indiana, Mississippi, Montana, North Carolina, South Carolina, Tennessee and Washington.
States that haven't adopted the MNCA — Florida, Illinois, New York, Pennsylvania and a few others — instead follow for-profit business law for their state. Often the laws governing corporations in these states lack the nuance that protects nonprofits in states that have adopted the MNCA.
A handful of states have explicitly rejected the MNCA outright — Wyoming, Georgia and Ohio — preferring to draft their own laws for nonprofits.
What is the Revised Uniform Unincorporated Nonprofit Association Act?
The RUUNAA serves a similar purpose to the MNCA, but covers nonprofits that have chosen not to incorporate.
Individual members of unincorporated nonprofits are vulnerable to personal legal liability should a lawsuit arise. While RUUNAA doesn't replace existing state laws, it offers more protection for unincorporated associations by asserting that these groups are legal entities, not simply individuals who can be held accountable for group actions.
RUUNAA has been adopted only in the District of Columbia and Arkansas, Iowa, Nevada and Pennsylvania, while the original version (UUNAA) has been adopted in the District of Columbia and the following states: Alabama, Arkansas, Colorado, Delaware, Hawaii, Idaho, Illinois, Louisiana, North Carolina, Texas, Wisconsin, Wyoming.
What if my state hasn't adopted either of these acts?
Laws governing nonprofits are clearer in states that have enacted legislation based on the MNCA. However, some of the states that haven't still have laws that strictly outline expectations of nonprofits. New York, for example, has robust laws governing charities and trusts, even though it hasn't adopted the MNCA. In states where laws governing nonprofits aren't as obvious, expect to adhere to all laws related to corporations (if you're incorporated) and any relevant employment and tax laws.
What does the MNCA tell me about how to run my organization?
Many articles of the MNCA should look familiar if you've followed guidelines for starting a nonprofit, filing tax reports or maintaining tax exempt status. The third and most recent revision of the MNCA includes detailed sections on:
- What to include in your articles of incorporation
- How to manage your finances
- How to handle board or director misconduct
In addition to these broad guidelines, the MNCA also lays out what you can and can't name your nonprofit, rules about how and whether you admit members, and how frequently and in what manner you need to hold board meetings.
If you've ever worried about how to choose board members, executive officers or committees, MNCA has you covered. With extensive sections on composition of boards and committees and voting rights and procedures, the MNCA provides ample guidance.
This article draws on the expertise of Grace Davies, a Minneapolis-based attorney with special interest in product liability, medical malpractice and employment discrimination.
CharityLawyer: Choice of domicile for nonprofit corporations by Ellis Carter (2014)
Cornell University Law School: Non-profit organizations
Understanding nonprofit and tax exempt organizations by Nicholas P. Cafardi and Jaclyn Fabean Cherry (2012)
Uniform Law Commission: Why states should adopt RUUNAA