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Handbook | Finance

General Principles

Law Society chapters are primarily responsible for managing their finances. In general, the following recommendations apply to all chapters; however, in some cases, the recommended approaches vary depending on whether the chapter is an attorney or student chapter and whether it is based in the U.S. or internationally. These distinctions are highlighted in the information that follows. For U.S. based chapters, one over-arching principle is that you must not do anything that endangers the tax-exempt status of the Society. These requirements are set forth in detail in Sections 6 and 7. Members of the Finance Committee are available to address any questions or otherwise assist chapters in establishing their financial practices.

Financing Chapter Activities

Although numerous forms of support are given to chapters at the International Society level, chapters are expected to be financially self-sufficient at the local level. One method of financing chapter activities is through dues. The Membership chapter has some creative and effective ways to structure dues. However, one constraint is that Law Society policy requires chapters to have a non-dues-paying category, and chapters should keep in mind the relative financial situations of all potential members such as recent graduates.

A chapter can also simply charge on an event-by-event basis. The cost of the event can be allocated among those who attend, or extra funds can be generated to subsidize other events by charging for a major event and setting the price at an amount which exceeds the cost of that event.

Finally, events can be funded through donations from members and their firms or other entities interested in a specific event being sponsored by the chapter. Firms often have amounts budgeted for community involvement activities or may allow the use of their facilities, provide printing and copying services, etc. Public recognition at an event may also motivate donors, and a firm’s advertising budget may be a source of funds in this scenario. Firms and vendors of other legal services such as court reporters may contribute in exchange for recognition in an event program or in a chapter’s annual directory.

Student chapters often have access to funding through their schools.

Law Society chapters are not fundraising arms of the J. Reuben Clark Law School, BYU, or any other group and should not be used to solicit funds through chapter communications, lists, meetings, or events. It is not appropriate for Law Society chapters to have fundraising goals set for the chapter by the Law School, BYU, or any other representative of these organizations.

Payment by Credit Card

Chapters may contact the BYU Law School Accounting Office and use their credit card processing vendor. This approach means the chapter can avoid the time required to set up a local account and allows the chapter to take advantages of the broader agreement between BYU and the vendor. However, due to accounting cycles, there is a significant lag time before the funds can be distributed from the general fund to the local chapter.

Alternatively, sometimes members have access to credit card processing vendors through their firms, so that option can also be a viable one. Finally, chapters may choose to establish their own accounts with a credit card processing vendor. However, the process requires advance planning to establish and processing fees plus a percentage of each transaction are generally required. Before establishing a local account, the chapter should consider whether the vendor: i) charges an annual or monthly minimum fee, ii) requires the purchase of any specialized equipment, iii) has a charge for “card not present” transactions, iv) processes all major credit cards or just MasterCard and Visa, v) has a competitive “per transaction” percentage fee, and vi) what privacy protection is provided by the system. We recommend that chapter leaders avoid any personal guarantees in the agreements and avoid accepting credit card information through email.

Legal Entity Formation

U.S. Based Attorney Chapters: U.S. based attorney chapters must follow the process outlined below so they come under the “umbrella” 501(c)(3) status of Brigham Young University. U.S. based attorney chapters must comply with each of the guidelines listed in the Handbook for Alumni and Other Related Organizations under Brigham Young University’s 501(c)(3) Umbrella (see sections 6 and 7 below). U.S. based attorney chapters should not file individually for tax-exempt status under IRC Section 501(c)(3).

  1. Notify the Executive Director of the Law Society of their intent to utilize the university’s 501(c)(3) status.
  2. Follow the guidelines as described in the Handbook for Alumni and Other Related Organizations Under the General University’s 501(c)(3) Umbrella. Special attention should be given to record keeping, including but not limited to bank accounts, annual reports, donations, and scholarship funds.
  3. List the university treasurer as an authorized signer on all bank accounts.
  4. Send the following reports to the Executive Director by 20 January of each year, for the prior calendar year of 1 January to 31 December: (1) Annual Report of Remote Cash Receipts and Disbursements; (2) Annual Bank Reconciliation; and (3) Constituency Society Bank Account Information. Forms can be obtained here.

Non-U.S. Based Attorney Chapters: Non-U.S. based attorney chapters generally operate without creating a legal entity. However, if compelling reasons exist, a chapter may choose to file for a locally available tax-exempt status after receiving approval from the Executive Board. However, due to reporting obligations, filing fees and other associated legal requirements approval will be granted on an exceptions basis.

Student Chapters: Student chapters generally organize based on their school’s requirements for being a recognized student organization. However, if this option is not available, the chapter should organize as an attorney chapter would based on where it is located.

Chapter Finance Policies

While extensive finance policies are not generally necessary, solid financial planning often drives success in other aspects of the chapter. Factors that should be addressed in local finance policies are i) who has authority to make financial commitments on behalf of the chapter, ii) who is responsible for preparing and approving the annual or any event specific budget, iii) who is responsible for reconciling revenues and expenses, and iv) who is responsible for ensuring compliance with the Handbook’s requirements for U.S. based attorney chapters or for other applicable reporting requirements for non-U.S. based chapters that have elected to create a local legal entity. Although the Handbooks’ requirements do not directly apply to non-US based attorney chapters, they do provide sound accounting advice that should be considered in developing any chapter’s financial policies.

Handbook For Alumni and Other Related Organizations Under BYU’s 501(c)(3) Umbrella

The purpose of the Handbook for Alumni and Other Related Organizations is to assist constituent organizations sponsored by Brigham Young University in maintaining their inclusion under the university’s 501(c)(3) tax-exempt status.

    1. Significance of 501(c)(3) Status
      In order to be recognized as a tax-exempt entity, an organization must file for and be formally recognized as tax-exempt by the Internal Revenue Service. To maintain this status, BYU must meet certain organizational and operational tests, and is required to file an annual information return with the IRS (Form 990), which includes a summary of all financial transactions and other required non-financial information. Any organization or unit that wishes to take advantage of BYU’s tax-exempt status must comply with general university policy and provide sufficient and timely information to be included in the annual tax report.
    2. Taxable Activities
      Certain activities may be subject to income tax. These may include regularly carried on business-like activities which are not closely related to the general educational purpose of the university, sales of advertising space in publications, and certain lease and rental transactions, etc. In addition, tax-exempt organizations, their officers and employees are prohibited from engaging in political activities.
    3. Soliciting and Accepting Donations
      Donations of cash and non-cash assets are regulated by IRS regulations. BYU must advise donors and potential donors of these regulations and related restrictions on tax deductibility. Solicitation and receipt of donations is coordinated closely with LDS Philanthropies Foundation to assure compliance with these regulations. See section 7.8(e) below regarding fundraising activities.
    4. Covered Tax Exemptions
      In addition to being exempt from federal income taxes, BYU is also exempt from payment of sales taxes in the States of Utah, Idaho, and Hawaii. BYU is required, however, to collect and remit state sales taxes for consumer sales of goods or services which are not clearly exempted under state law.

Policies and Procedures Applicable to Law Society Chapters under BYU’s 501(c)(3) Umbrella

    1. Accounting Records & Reports
      Each unit should provide adequate internal reporting to make certain that those in management positions within the organization have the necessary information to control and direct the operations of the unit. The University Financial Services Office can assist with analyzing and developing the necessary reporting (phone 801/422-3661). For those some distance from the Provo campus, local accountants may provide those services.

       

        1. Receipts and Disbursements
          Each unit which has received and/or disbursed cash during a calendar year (1 January to 31 December) is required to maintain an appropriate accounting record of those receipts and disbursements, and to provide a summary of those receipts and disbursements on the Annual Report of Remote Cash Receipts and Disbursements form by 20 January of the following year (See section 7.?) In order to prepare this report, a detailed record of all cash transactions needs to be maintained. If there are relatively few transactions, the unit’s check register may be adequate. If there are numerous transactions, it is recommended that the unit’s treasurer establish and maintain an appropriate financial recording system to keep the accounting records of the unit. Local accountants may be recommended to assist in this process.
        1. Cash Receipts
          All cash receipts must be recorded in the accounting records and deposited promptly in the unit’s bank account. Any delay in depositing receipts exposes the unit to potential losses. Each cash deposit should be traced to the monthly bank statement. Cash receipts should be segregated in the accounting records into at least the following categories:

           

          1. Association membership dues.
          2. Donations with tax receipts issued by LDS Foundation (gifts to BYU, scholarship fund receipts, special fundraising revenues, etc.).
          3. Project/activity receipts (such as payments for meals, event ticket sales, sponsorship income, etc.).
          4. Other (breakdown if significant).
        1. Sales Transactions
          Generally, units should avoid “sales” transactions (T-shirts, memorabilia, etc.). Such transactions are probably subject to local sales tax and could trigger other business taxes. Any decision to engage in sales activities should be supported with assistance from local accountants and/or attorneys to assure that local tax issues are handled correctly.
      1. Cash Disbursements
        Cash disbursements should generally be made by check from the unit’s bank account if one is maintained, with two authorizing signatures. If the unit does not maintain a separate bank account, then regular BYU disbursement procedures should be followed. All disbursements must be supported by documents which indicate the nature and business purpose of the goods or services purchased (vendor invoices, cash register receipts, etc.). Sales taxes paid in the state of Utah must be reported to BYU in order for such taxes to be refunded. BYU will reimburse the unit for all sales tax refunds received. Some vendors will honor agreements with the BYU Purchasing Department not to assess sales taxes. Anyone buying merchandise or other taxable items should check with the vendor before the transaction is completed to see if sales taxes may be exempted.
        Units in Utah are welcome to use the university purchasing and disbursing tools and procedures, which are automatically oriented toward Utah tax compliance (see purchasing section). All cash disbursements must be traced to the monthly bank statement if a bank account is maintained.
    1. Applicability of Local Laws
      Each organization must become familiar with and comply with local laws at each of its operating locations. For example, local building usage ordinances need to be followed at events. Since these regulations can be quite complex, it may be necessary to obtain assistance from local accountants or lawyers. Some matters that should be reviewed, include, but are not limited to the following:

       

      1. Requirements to register or license the organization by city, county, or state governments.
      2. Tax permits required by government entities. These could include sales, franchise, income, and other taxes. BYU does not intend to file for exemption from sales taxes in all states in which related organizations are active. The relatively small volumes of retail business expected do not justify the effort involved in obtaining and maintaining exemptions. Chapters outside Utah are advised to pay applicable sales taxes.
      3. Type of business organization and activities permitted for the type of entity being operated.
    1. Bank Accounts
      Each unit may establish local bank accounts to facilitate its operation. However, each account must be coordinated with BYU’s Treasurer, through the Law Society Executive Director. The BYU Treasurer’s contact information is: University Treasurer, P.O. Box 21128, Brigham Young University, Provo, UT 84602-1128, (801) 422-4887.

       

      1. Opening an Account
        Obtain the forms required by your bank to open a corporate account (i.e. signature cards, corporate resolution, and corporate authorization). Send the required bank documents, together with the completed Constituent Society Bank Account Information form from this guide (see section 7.?) to the treasurer at the address listed above. The bank documents will be completed and signed by the university and returned to the executive officer listed on the bank account information form.The university treasurer will be listed as an authorized signer on all bank accounts. Any subsequent changes to the bank accounts or accounts previously established, (i.e. a change in authorized signers) should be handled in a similar manner through the Treasurer’s Office. Whenever possible, the account established should require two signatures on each check written.
      2. Statement Reconciliations
        To verify that bank transactions have been recorded properly, monthly bank reconciliations should be performed. An annual reconciliation of banking activity form (see section 7.?) must be submitted to the Law Society Executive Director by January 20 of each year. The Executive Director will then forward the forms as a unit to the University Financial Services.
    1. Contracting and Otherwise Obligating the University
      Care must be taken when contracting with vendors that appropriate purchasing procedures are followed. Generally, the BYU Purchasing Department has been authorized to sign contracts and otherwise obligate the university. Some exceptions are allowed for alumni and other related organizations.

       

      1. Spending Limits
        University policy requires competitive quotes for purchases of $2,000 or more. Expenditures of $5,000 or more must be approved in advance by the BYU Purchasing Department in Provo. Alumni and other related organizations may, however, arrange for facilities rental and food purchases without clearance from the Purchasing Department. Units may use the BYU purchasing office to obtain price quotes, negotiate purchases, and process payments for goods or services obtained. The Purchasing Department may be contacted at BYU Purchasing Department, P.O. Box 21116, Brigham Young University, Provo, UT 84602-1116, (801) 422-3471.
      2. Personal Purchases
        Organizations may make purchases using funds obtained by the unit. Organization representatives may not commingle personal and Law Society related purchases. When making personal purchases, Law Society representatives may not imply they represent BYU or in any way use their BYU affiliation as a means of coercing suppliers to give special discounts or extend tax-exempt status to the purchase.
    1. Fundraising
      Law Society chapters are not fundraising arms of the J. Reuben Clark Law School, BYU, or any other group and should not be used to solicit funds through chapter communications, lists, meetings, or events. However, chapters are permitted to raise funds for local chapter activities such as scholarships and community service projects. It is not appropriate for Law Society chapters to have fundraising goals set for the chapter by the Law School, BYU, or any other representative of these organizations.Some Law Society chapters have chosen to initiate a scholarship program or in other ways conduct activities, which result in the chapter calling upon its members for contributions. These programs are to be developed with local needs and interests being of primary importance. The guidelines of this chapter and of the Law Society Leader’s Resource Guide should be followed carefully. See section 7(m) below.
    1. Employment & Employees
      Law Society Chapters and other related organizations generally will not hire employees. In most cases, someone will be engaged as an independent contractor. See section 7.8(i) below. In the rare circumstance that an individual is to be employed by the chapter, even for a short time, the hiring must be processed through the University Employment Services offices. This is necessary to make certain that all legal and tax requirements are met and that the hiring complies with university policy. You may obtain more information and instructions by calling Human Resource Services at (801) 422-3563.If organizations are hiring or contracting with a non-U.S. citizen, special rules may apply. Contact the Payroll Office at (801) 422-2623 for additional information.
    1. Entertaining
      Under certain circumstances, it may be appropriate to pay expenses related to entertaining or hosting others. University policy permits the payment of these expenses under the following guidelines:

       

      1. Such entertaining or hosting is recognized as a deductible expense by the IRS. This usually requires that:
        1. The activity is held for a legitimate business purpose.
        2. Appropriate matters of business were discussed.
        3. Proper documentation of the expenses were obtained and reported to the organization. The required information includes the names of those hosted, business reason, and amount of expense.
      2. Generally, non-employees of the university are in attendance.
      3. Expenses are reasonable and comply with other university policies.

 

    1. Lobbying and Other Political Activities
      All lobbying and other political activities are strictly prohibited. Such activities can jeopardize the tax status of the university and must be avoided. You cannot allow individuals running for public office to speak, etc. without allowing opponents to do the same. All campaigning should be avoided.
    1. Payment to Independent Contractors
      Generally, the university considers most individuals hired to be employees. However, individuals providing services, who meet qualifying requirements, may have the classification of independent contractors. Examples include speakers paid an honorarium, entertainers hired for an event or a person hired temporarily to remodel an office. Payroll taxes are not withheld from payments made to independent contractors and no matching FICA taxes are paid.Organizations may use the common law test to define an independent contractor. An individual is an employee if the employer controls who performs the job, what is to be done, with what tools and supplies, how it is to be done, where it is to be done, and when it is to be done. Although an employee may not be expressly directed in the manner to accomplish an employment task, this alone does not cause the person to be an independent contractor. Usually, where the organization retains the right to discharge, furnishes tools and supplies, sets the location of work, sets hours or trains the individual, the status of the individual is more likely to be that of an employee. In addition, where work performed is similar to that of other employees, it is less likely the individual will be classified as an independent contractor. Normally, contracting work out to an independent contractor is done to achieve something ordinarily not within the usual functions of regular employees and completion of the work is dependent upon the unique skill of the independent contractor. Potential risk of making an improper designation intentionally or unintentionally can result in payment of retroactive employment taxes and late tax penalties. Organizations may not contract with full or part-time, or student employees of BYU as independent contractors. Rare exceptions may occur when all of the following criteria are met:

       

      1. An employee meets the requirements to be an independent contractor, as explained above.
      2. The work is substantially different from regular BYU work.
      3. The employee owns a private business and has been approved by the Purchasing Department to sell to the university.

      If an independent contractor receives payments from the university of $600 or more within a calendar year, a Form 1099 must be filed with the Internal Revenue Service. For this reason, all payments to independent contractors must be reported to the University Accounts Payable Office at D-208 ASB, Provo, Utah 84602 by 10 January of the following year. Information that must be obtained from the contractor and reported to BYU includes 1) name, 2) address, 3) social security number or employer identification number, and 4) amount paid to the contractor. For assistance call Human Resource Services (801) 422-6923.

    1. Postage and Mailing
      Mail Services provides postal, UPS, and Express Mail services and consultation for university departments, faculty, and staff. In addition to handling the delivery of the university’s incoming, outgoing and intra-campus mail, Mail Services will provide assistance to campus units to determine the carrier that will best meet specific shipping needs. Organizations may utilize these services and take advantage of any special rates or contracts the university maintains as long as federal postal regulations are satisfied.
      Law Society chapters wishing to use BYU Mail Services should work with the Law Society Executive Director to coordinate mailings at the chapter’s expense.
    2. Risk Management
      The university is self insured for most activities carried on by university departments and organizations. The coverage includes liability protection for property damage and/or injury. Some coverage is also provided for replacement of certain university owned capital assets (i.e. buildings, equipment, etc.).

       

        1. Need for Additional Insurance

      If the chapter is sponsoring an unusual activity or one involving large numbers of people, the BYU Risk Management and Safety Office should be informed. Risk Management can help determine if additional insurance is required for the activity and can verify safety procedures. This office can also provide letters or certificates of insurance sometimes required when renting halls or facilities for activities. They can also address questions about environmental safety and chemical hazards. If an employee or a participant in any organization activity is injured, notification must be made to the Risk Management and Safety Office as soon as possible.

      1. Additional Information
        Additional information can be obtained from the Managing Director of BYU Risk Management, BYU Risk Management & Safety, 207 TOMH, Provo, UT 84602, (801) 422-4468.
    1. Standards for University-Related Activities
      All university units must comply with general university standards and the standards of The Church of Jesus Christ of Latter-day Saints in conducting their activities. This includes moral, ethical, honor code, legal, and other standards set by these two bodies, except for those, which specifically apply only to students on campus (i.e. dress and grooming).
  1. Student Scholarships
    A Law Society Chapter under the BYU 501(c)(3) umbrella may choose to conduct a scholarship program for either BYU students and/or students at other institutions. All scholarships issued to Brigham Young University students must be processed through the University Financial Aid Office. This must be done to assure that aid to students is reported properly to avoid penalizing students who receive aid from other sources. The university also verifies that the aid is in compliance with governmental laws and university policy governing such gifts. The BYU Development Office/LDS Foundation can assist with soliciting scholarship donations.Special care must be used when granting scholarships or other aid to foreign nationals since they must be in the country on appropriate visas to receive payments. There also may be tax consequences that must be reported. Chapters under the university umbrella who wish to grant scholarships to students not attending BYU may do so. In any case, the chapter should notify the Law Society Executive Director of the names of the scholarship recipients and the institutions, which they will attend. If the recipient is to be a BYU student, the Executive Director notifies the appropriate BYU office (i.e., University Scholarship Office, or J. Reuben Clark Law School). If the scholarship recipient will not attend BYU, the Executive Director will arrange for a check to be sent to the scholarship recipient with appropriate notification going to the Law Society chapter. Send all scholarship information to the Law Society Executive Director. The following guidelines are for chapters who want BYU to receipt contributions and administer their chapter scholarship program.

     

    1. Law Society Chapters must notify the executive director of the Law Society at BYU that they intend to facilitate a scholarship program through the university.
    2. Donations from Chapter members should be made payable to the J. Reuben Clark Law School and sent to the Executive Director. Each contribution must be accompanied by a letter or donation slip that indicates the applicable Law Society Chapter and the purpose for the donation.
    3. All university donations are processed and receipted through the LDS Foundation. Contributions will be deposited in the Law Society scholarship account.
    4. When a Chapter wants to award a scholarship, the following information must be sent to the Executive Director of the Law Society:
      • Name, address and social security number of recipient
      • Amount of scholarship
      • Name and address of institution the student will attend

    BYU will then either issue the scholarship (for BYU students), or send a check in the appropriate amount to the institution the recipient will attend, earmarked for that specific student (in the case of non-BYU students). The executive director will send appropriate notification to the chapter and keep proper accounting of each chapter’s scholarship fund.

On to Next Chapter (Women in Law)

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