On July 23, Pennsylvania Governor Tom Wolf signed into law Pennsylvania H.B. 2484, which modifies sections of the Commonwealth’s Nonprofit Corporation Law of 1988 and the Probates, Estates and Fiduciaries Code in several key areas further detailed below. The new law provides temporary financial flexibility for nonprofits and charitable trusts to address the negative impacts of COVID-19.
1. A non-profit organization’s Board of Directors, or the Trustees of a charitable trust may select up to 10% of the value of the assets held by the organization or trust as spendable income. This is a substantial increase of the current spending limit of 7%, and applies to calendar years 2020, 2021 and 2022, or fiscal years that end during these years. In choosing a new percentage spending limit, nonprofits and trustees of charitable trusts need to consider both the long-term preservation of assets and the organization’s immediate funding needs to stay viable as a charitable organization. These provisions are applicable only to entities that: (1) previously elected or now elect to be governed by the applicable statutory provisions, and (2) adopt and follow a total return investment policy.
2. The updated law allows a donor of property transferred to a non-profit to enter into a binding non-judicial settlement agreement with the organization without the need for court approval as long as the agreement is consistent with what the court could approve and as long as the donated property has continued use for charitable purposes.
3. A proceeding to enforce a gift instrument related to charitable assets may be brought by: a donor during the donor’s lifetime; the Office of Attorney General; a charitable organization expressly named in the gift instrument or nonjudicial settlement agreement; or any other person with standing to do so, which may include anyone appointed in the gift instrument.
These changes take effect immediately. If you have any questions regarding how these changes will impact your spending plans, please contact us.