Non Profit Report - August 2011

Date: August 10, 2011

What Your Association Needs To Know About Job Boards
By: Eileen Morgan Johnson
Q.  My association is considering launching a job board.  What potential legal issues should I be concerned about?
A.  Job boards have become more popular as associations look for additional sources of nondues revenue. A job board can be as basic as a place on an association’s website where employers can post job openings, or it can be more robust by offering online career-resource centers that include resumes of prospective employees, posted job openings, resume critiquing and writing services, compensation and negotiations, and other services related to the job search. When considering a job board, consider the following issues:

One of the first decisions when launching a job board is whether the job board will be open to the general public, open to everyone in a particular profession or industry, or limited only to those who are members of the association and can access the job board by using a member login.

Intellectual Property Rights
Employers that post jobs on the association’s website will likely want to use their companies' logos or other trademarks in the job posting.  The posting agreement should include a limited license to the association, authorizing the use of an employer’s marks on the association’s website for purposes of promoting the employer’s job openings.

User Conduct
Employers and job seekers should both agree to terms of use for the job board.  Typical terms of use include:

  • Refraining from posting untruthful, defamatory, or profane material;
  • Using information provided on the job board only for its intended purpose
  • Maintaining the confidentiality of certain information;
  • Payment of any required fees to access the job board. 

In our litigious society, an association might be concerned about the potential liability posed by a job seeker who found work through an employer's job-board advertisement but for whom the employment relationship did not work out.  This is less likely to be of concern with job boards that only provide a place to post the job listing with no prescreening of those who respond to the posting.  But some associations limit access to their job boards to members who have met minimum qualifications such as education, ethics compliance, or certifications.  In those cases, is there any representation to employers who post on the job board that association members who might respond are minimally qualified for the posted positions? 

To avoid these problems, a click-through agreement with terms of use should be used to clearly set forth the expectations of those who post positions on the job board and to those who apply to posted positions.
A job board disclaimer can include the following statements:
The association does not:

  •  Guarantee job placement for anyone using its job board;
  • Guarantee that an employer will fill the vacancy by advertising on the job board;
  • Guarantee the validity of any job vacancy submitted;
  • Make recommendations regarding potential employers or employees;
  • Perform background checks on job applicants or employers;
  • Assume any responsibility for wages, benefits, safety, working conditions, or any other aspect of employment.

The disclaimer should be posted so that its terms must be read and agreed to by anyone using the job board.

For associations that charge fees to employers who post job listings on their website or to job searchers, the revenues they receive are basically fee-for-service or advertising income, which is subject to unrelated business income tax (UBIT).

The association might be able to identify corporate sponsors to cover some of the costs of operating the job board.  In such cases, the corporate-sponsorship fees would not be taxable as UBIT if the association complies with the IRS requirements for qualified-sponsorship payments. A qualified-sponsorship payment is any payment made by a person engaged in a business for which the person will receive no substantial benefit other than the use or acknowledgment of the business name, logo, or product lines in connection with the organization's activities. This does not include advertising the sponsor's products or services.

Job boards are often a way to add non-dues revenue to your association while providing a benefit to the association’s members.  By carefully identifying and addressing potential legal issues prior to the rollout of the job board, your association can minimize or eliminate potential legal problems.

Organization Failed to Qualify as a Public Charity because its Supported Organizations were not Easily Identifiable
By: Megan C Spratt

D.C.’s federal appellate court recently affirmed a trial court’s decision that a Section 501(c)(3) Maryland nonstock corporation did not qualify as a public charity under Section 509(a)(3) of the Internal Revenue Code because the foundation’s “supported organizations” were not identified sufficiently.

The foundation in question was formed originally to support the activities of organizations promoting public health and/or Christian objectives. The foundation sought tax-exempt status under Section 501(c)(3) and recognition as a public charity under Section 509(a)(3).  After lengthy correspondence with the IRS failed to produce a determination, the foundation went to court seeking a determination that it was tax-exempt and that it qualified as a public charity.  Though the foundation’s tax-exempt status was not disputed at trial, the court rejected the foundation’s claim for recognition as a public charity. 

The appellate court agreed with the trial court and found that the foundation, which claimed it was a Type II supporting organization under Section 509(a)(3), failed to satisfy the organizational test which requires an organization to show that it is “organized, and at all times thereafter is operated, exclusively for the benefit of, to perform the functions of, or to carry out the purposes of one or more specified [publicly supported] organizations ....”  To meet this requirement, the Treasury Regulations require an organization’s articles of incorporation to designate each specified supported organization by name. However, a Type II supporting organization’s articles may instead require it to be operated to support one or more beneficiary organizations that are designated by class or purpose.  This latter exception applies only if the class of supported organizations is “readily identifiable,” for example, “institutions of higher learning in the State of Y” and “[tax-exempt public charities] located in the [city of] Z area.”
The Court found that, unlike the examples above, the foundation’s designation of publicly supported organization was overly broad, and could not be easily identified because there was no limit by type or geographic area.  Because the foundation failed to qualify as a public charity, it was categorized as a private foundation, and therefore subject to the additional restrictions imposed on private foundations by the IRS.  

This ruling demonstrates how important it is for foundations setting up supporting organizations to identify the name of the supported organizations with appropriate specificity.

Animal-Rescue Group Volunteer Allowed to Take Charitable Deduction
By: Megan C. Spratt, Esq.

The U.S. Tax Court recently ruled in Van Dusen v. Commissioner that an animal-rescue volunteer may take a tax deduction for unreimbursed expenses incurred while providing foster care to feral cats.  The volunteer was working with a Section 501(c)(3) tax-exempt organization whose mission is to trap stray cats, neuter them, and care for them until the cats are adopted or released back into the wild. 

The Tax Court rejected the IRS' position that the taxpayer's expenses should be categorized as nondeductible personal expenses, and instead allowed the taxpayer to take a charitable deduction for many of her unreimbursed expenses under Tax Code Section 170 because the expenses were incurred in connection with helping a charity further its mission. 

This was the first case to address such expenses, and should provide support for volunteers of charitable groups to deduct unreimbursed expenses that advance their charities' missions.