Getting Ready for the New Washington Nonprofit Corporation Act
by Cole Voorhees, CPA
Nonprofit organizations in Washington State will be ringing in the 2022 new year with…some new laws. A new Washington State Nonprofit Corporation Act will be implemented effective January 1, 2022, which reforms and changes the overall governance for nonprofit corporations. The new act replaces Chapter 24.03 RCW and will have significant changes for current nonprofits in Washington. Below are some key changes for nonprofits to keep in mind:
- Now by default, the new law allows for the delivery of electronic communications to directors, members, and officers of nonprofit corporations. Currently, these members are allowed to opt in for such communication but requires written consent. This will be overridden to default to electronic communication.
- Board consent for action items can be delivered by email by default now. No written consent is required.
- There are supplementary requirements that address how charitable assets must be treated upon the dissolution of the charitable corporation.
- The changes set new rules that differentiates between nonprofit corporations and charitable trusts and confirms when Chapter 11.110 of RCW (the charitable trust chapter) would apply to nonprofit corporations.
- Charitable corporations pay a new, annual charitable asset protection fee that will support the Attorney General’s enforcement of the new act. The fee is payable each year at the filing of the annual report.
- The changes allow additional flexibility of the use of charitable assets, including allowance for nonprofit corporations to modify their charitable purposes and providing additional options for organizations to change or release gift restrictions without obtaining court approval.
- There are clarifications regarding criteria around who is considered a “member” of a nonprofit.It gives any specific members the right to vote on fundamental transactions (changes in articles of incorporation, etc.).
- The new law codifies the fiduciary duties of directors and officers of nonprofit corporations to align with those of other companies. Nonprofits must now have, at minimum, a President, Vice President (at least one), Secretary and Treasurer.
- The nonprofit must have at least three directors, as opposed to currently, just one.
- Affirmative board action will be needed for directors to be appointed past five years.
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Cole Voorhees, CPA
Cole Voorhees joined Larson Gross in 2021 and is a Manager of the firm’s Nonprofit Practice, specializing in financial statements.