A Break for Massachusetts Nonprofits: Lowering the Demand for Financial Reporting and Providing Incentives for Board Members to Serve | Partridge Snow & Hahn LLP

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.