Forming nonprofit entities in New York State will be far simpler starting July 1, 2014, when the Nonprofit Revitalization Act of 2013 becomes effective. Governor Andrew Cuomo signed the Act into law on December 18, 2013.
The Act removes the distinctions among four statutory types of nonprofit corporations, leaving just two categories: charitable and non-charitable. The new law also eliminates the requirement to obtain certain state agency consents as a condition of incorporation. These provisions of New York law had created incentives for organizations to form nonprofit entities in other states.
The New York State Bar Association worked to revise the Not-for-Profit Corporation Law for many years. The Association's Business Law Section developed legislation that was first introduced in 2008. In its memorandum urging approval, the Bar Association stated that the four current statutory types of nonprofits "complicate the formation process given some ambiguity among types," while the need to obtain certain state agency consents as a condition of incorporation results in "unnecessary and unwarranted delay in incorporation with unclear benefits to the public interest." The state bar President expressed praise for Governor Cuomo, State Attorney General Eric T. Schneiderman, and the bill's legislative sponsors, Sen. Michael H. Ranzenhoffer (R-Williamsville) and Assemblyman James F. Brennan (D-Brooklyn).
The New York State Attorney General's Office played a central role in developing and supporting modernization of New York's nonprofit law. The Attorney General's office press release contains an excellent summary of the Act, listing the ways in which the Act reduces unnecessary and outdated burdens on nonprofits while enhancing nonprofit governance and oversight to prevent fraud and improve public trust. Nonprofit organizations will now be able to incorporate, dissolve and merge more easily; communicate and hold meetings by conference call and videoconference, and engage in certain transactions without having to go to court. At the same time, the Act will require nonprofit boards to adopt stricter financial oversight requirements, conflict-of-interest policies, and policies to protect nonprofit employee whistleblowers from retaliation.