CHAPTER FIVENonprofit Governance

§ 5.7 IRS AND GOVERNANCE

*p. 133, paragraph, third line. Insert following statutes:

, augmented by court opinions

*p. 133, paragraph, seventh line. Insert board composition and, following on.

(a) Matter of Agency Jurisdiction

p. 149. Insert as second complete paragraph:

In what appears to be the most direct case on point, an appellate court held that the Federal Energy Regulatory Commission did not have the statutory authority to make or enforce its order endeavoring to dictate the composition of the board of a public benefit corporation, a form of nonprofit corporation. 79.1 The agency took the position that the nonprofit organization violated its rules concerning independent system operators (ISOs); its order dictated replacement of the board. The court of appeals ruled that the FERC “has no authority to replace the selection method or membership of the governing board of an ISO.” 79.2 The court, having found the FERC's position “breathtaking,” wrote that the agency “commit[ed] … an absurdity.” 79.3 The court added that the FERC was “overreaching,” that its attempt to order the nonprofit entity to change its board was an “extreme measure,” and that the agency was “stretching” in asserting its authority over this aspect of nonprofit governance. 79.4

(c) IRS Ruling Policy

p. 153. Insert as second paragraph:

When a small board is presented to the IRS as part of the application-for-recognition-of-exemption process, ...

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