Moving Out Of New York

With the New Year comes new beginnings. I’ve noticed one such new beginning recurring regularly in the New York nonprofit community. I call it “Moving Out of New York.”  It happens elsewhere too of course, but wherever it occurs, it signals a change to an organization’s state of incorporation or a trust’s situs (the legal term for where it is established). While this might or might not include a physical change in the location of the organization’s office, it always entails legal changes to the organization.

The decision to change an organization’s state of incorporation or situs—which I’ll call the “home state” here for convenience—is driven by various factors. Often, organizations make the move because the organization no longer has a nexus to the home state. Officers and directors may have moved to other states; organizations may not maintain any office or employees in the home state; or the organization may conduct business from wherever the single paid employee resides. Organizations may move their headquarters to another state for a variety of reasons, including, for example, the high cost of operating in the home state.

While some organizations move when there is no longer an operational nexus within the original home state, many organizations decide from the outset to form in a state other than that in which the organization’s day-to-day activities take place. For example, many nonprofit corporations choose to incorporate in Delaware because of its corporate-friendly laws for both for-profits and nonprofits alike.

Now to be frank, the trend for organizations to move out of New York is often partially driven by New York’s nonprofit laws. Administered by the New York Attorney General’s Charities Bureau (“Charities Bureau”), the laws governing nonprofit governance and transactions in New York are complex and onerous in many ways. Although the recently adopted New York Nonprofit Revitalization Act has eased certain regulatory burdens for New York nonprofits, the remaining governance and regulatory compliance requirements still impose a significant burden, more so than in most states. This translates into significant delays and cost to nonprofits in maintaining their compliance within New York.

Moving out of New York does not always completely eliminate the state’s ability to regulate the organization, especially if the organization continues to conduct some activities in the State. But it does reduce the State’s jurisdictional nexus for regulating many, if not most, of the organization’s governance and corporate transactions. Consequently, organizations, particularly those that no longer maintain an operational nexus to New York, are increasingly moving to less burdensome domiciles.

Below are three different forms of moving out of New York, and the procedures each form requires:

1.  New York Not-for-Profit Corporation to New State Corporation.

To change a New York not-for-profit corporation’s state of incorporation, the organization must:

  • Incorporate a new entity in the target state;
  • Obtain federal tax-exempt status for the new corporation; and
  • Merge the New York corporation into the new corporation.

The two merging corporations must each comply with the legal requirements governing mergers in both New York and the target state. In New York, nonprofit mergers are subject to approval by the Charities Bureau. The members, if any, and the board of each corporation, must approve the transaction. As a final step, the New York corporation must close out its registration with the Charities Bureau. A variation of this option is for the New York not-for-profit to grant its assets to the new corporation and then dissolve. If the new corporation will hold property or assets, engage in charitable activities, or fundraise in New York, it may need to register with the Charities Bureau.

A few jurisdictions, such as Delaware, the District of Columbia, and Pennsylvania, permit organizations incorporated in those jurisdictions to convert their state of incorporation to another state without incorporating a new entity — a procedure knowing as “domesticating” or “redomesticating.” This permits an expedited option for corporations located in those states. Unfortunately, New York law does not permit domestication, necessitating the cumbersome moving process described here.

2. New York Charitable Trust to New State Charitable Trust.

Charitable trusts are formed in a particular state, but do not incorporate under the corporate laws of their home state. Trust instruments often designate both the situs of the trust, which is the state of the trust’s administration, as well as the state laws that will govern the trust—which may not be the same state. The courts of the situs state (and certain government agencies, such as the state Attorney General’s office) have oversight responsibility over the trust. Unless prohibited by the trust instrument, charitable trusts may transfer their situs to another state and the trust instrument may be amended to establish a new governing state law. A trust instrument could prohibit either kind of change, such that, for example, the situs may be transferred from New York to a new state while New York law remains the governing law. In that case, the courts in the new situs state would be required to interpret the trust instrument in accordance with the laws of New York. Transferring the situs of a trust generally requires court approval from both New York and the target state.

To transfer the situs of a New York charitable trust, the organization must undertake the following steps:

  • Petition the court in the target state to assume jurisdiction over the trust.
  • If the court in the target state agrees to assume jurisdiction, the trust must then petition the New York court, on notice to the Charities Bureau, to relinquish jurisdiction over the trust and direct that the situs of the trust be transferred to the target state.
  • Following or simultaneous with these court approvals, the New York trust must file an informal accounting with the Charities Bureau.

If the charitable trust will no longer hold property or assets, engage in charitable activities, or fundraise in New York, the trust must close out its registration with the Charities Bureau.

3. New York Charitable Trust to New State Nonprofit Corporation.

Organizations originally formed as charitable trusts may choose to move to a new state as a nonprofit corporation, if such a change is not prohibited by the trust instrument. This change into corporate form has the benefit of providing the trustees with certain additional legal protections available through the state’s nonprofit corporation or general corporation laws.

To move a New York charitable trust to another state in the form of a corporation, the trust must:

  • Incorporate in the target state;
  • Obtain federal tax-exempt status for the new corporation;
  • Obtain Charities Bureau approval to relinquish its oversight over the trust and transfer the assets to the new corporation by filing an informal accounting with the Charities Bureau; and
  • Upon Charities Bureau approval, transfer the charitable trust’s assets to the new corporation.

The accounting must cover all of the years of the charitable trust’s existence, a requirement which can be difficult for older trusts. Depending on the language of the trust instrument, such a move may not be possible, or may only be possible following amendment of the trust instrument, if such amendment is permitted. If the charitable trust will no longer hold property or assets, engage in charitable activities, or fundraise, in New York, the trust will need to close out its registration with the Charities Bureau.

Moving is stressful, whether for persons or businesses. For nonprofits corporations and charitable trusts considering changing their home state, the long term benefits may in the long run be worth the cost.

Share this Post

Related Posts

perlman & perlman philanthropic sector law firm blue logo

click to exit page

silk lanterns

who we work with

Our clients are diverse nonprofit organizations with a broad range of missions, as well as for-profit companies in evolving areas such as social enterprise, corporate philanthropy, joint ventures, technology-driven fundraising, and impact investing.

A.B. Data
AB InBev Foundation
Absolut Company
American Committee for the Weizmann Institute of Science
American Diabetes Association
American Friends of the Hebrew University
American Parkinson Disease Association
Association of Fundraising Professionals
Avalon Consulting
Baton Rouge Area Foundation
Black Lives Matter Global Network Foundation
Bleeding Blue for Good Fund
Bradley Cooper’s One Family Foundation
BrightFocus Foundation
Brooks Brothers
Chadwick Boseman Foundation for the Arts
Changing Our World
Charity Defense Council
Christian Appalachian Project
Doctors of the World/ Medecins du Monde
Doctors Without Borders/ Medecins San Frontieres
Drug Policy Alliance
Duke University
Emory University
Estee Lauder Companies, Inc.
Feed The Children
Food For The Poor
Gerald R. Ford Presidential Foundation
Grameen Foundation USA
Hope for New York
International Campaign for Tibet
International Crisis Group
International Justice Mission
J. Crew Group
Johns Hopkins University
Lautman Maska Neill & Company
Lawyers Committee for Civil Rights Under Law
LSU Foundation

Marts & Lundy
Meyer Partners, LLC
Milken Institute
NAACP Foundation
National Alliance on Mental Illness (NAMI)
National Marrow Donor Program
National Park Foundation
Natural Resources Defense Council
North Carolina State University
North Shore Animal League
Operation Smile
PBS Foundation
Pernod Ricard USA
PetSmart Charities
PopSockets
Population Action International
Project ORBIS International
Public Interest Communication
Rails to Trails
Redeemer Presbyterian Church
Rockefeller Philanthropy Advisors
Save the Children Federation
Sesame Workshop
Simon Wiesenthal
SOS Children’s Villages – USA
Subaru of America
The Little Market
Touro University
United States Equestrian Team Foundation
United Way Worldwide
University of Connecticut
University of Virginia
Vote.org
Whitney Museum of American Art
World ORT
World Wildlife Fund
YWCA USA

A.B. Data
Absolut Company
American Committee for the Weizmann Institute of Science
American Diabetes Association
American Friends of the Hebrew University
American Parkinson Disease Association
American Rivers
Association of Fundraising Professionals
Baton Rouge Area Foundation
BrightFocus Foundation
Burger King McLamore Foundation
Cancer Care
Carnegie East House and James Lenox House Association
Center for Car Donations
Changing Our World
Charity Defense Council
Christian Appalachian Project
Coca-Cola Scholars Foundation
Convoy of Hope
Cornell University
Doctors Without Borders/ Medecins San Frontieres
Drug Policy Alliance
Duke University
Emory University
Feed The Children
Gerald R. Ford Presidential Foundation
Grameen Foundation USA
Helen Keller Services
Hope for New York
Human Rights Watch
Humane Society of US
Indiegogo
International Campaign for Tibet
International Crisis Group
International Justice Mission
Japanese American National Museum
Johns Hopkins University
Lane Bryant Charities
Lautman Maska Neill & Company
Lawyers Committee for Civil Rights Under Law
LSU Foundation
Mattel
Meyer Partners, LLC
Milken Institute
National Breast Cancer Coalition
National Marrow Donor Program
Natural Resources Defense Council
North Carolina State University
North Shore Animal League
Obama Foundation
Operation Smile
PBS Foundation
Pernod Ricard USA
PetSmart Charities
Population Action International
Project ORBIS International
Public Interest Communication
Rails to Trails
Redeemer Presbyterian Church
Rock and Roll Hall of Fame and Museum
Rockefeller Philanthropy Advisors
Sesame Workshop
Simon Wiesenthal
SOS Children’s Villages – USA
Steinhardt Foundation
Subaru of America
United States Equestrian Team Foundation
University of Montana Foundation
University of Nevada, Las Vegas Foundation
Whitney Museum of American Art
World ORT
World Wildlife Fund
YMCA USA
YWCA of New York City
YWCA USA

perlman & perlman philanthropic sector law firm blue logo

click to exit page

news & events

Our attorneys’ recent contributions to the media and nonprofit sector publications.

news & events

Check out our attorneys’ recent contributions to the media and industry publications.

Secure Your Data – Seriously, AFP New York Chapter News
As Jon Dartley, a data privacy and security attorney at Perlman and Perlman says, “It is vital to have the appropriate legal terms in the contract to protect your interests.”  Find out what your liability limit is.  Have it in writing who bears the responsibility and cost of a data breach.  And, have the vendor agree on a specific timeframe within which they need to advise you of a data breach.

Warning: Don’t Cut Legal Corners When Mixing Social And Business Impact,  Forbes
Particularly striking is that (Karen) Wu believes this is the “first multi-state regulatory activity involving cause marketing in almost two decades.”

Is stealing, then giving back, OK?
Cliff Perlman lends his advice on theft within a nonprofit.

Buyer Beware: Negotiating Terms in Technology Agreements
Jon Dartley provides tips on negotiating contracts with technology vendors.

Four Ways Charitable Giving Could Change with a Tax Overhaul
Cliff Perlman remarks on the possible threat of a change to charitable deduction.

How To Deal With Residual Data, Nonprofit Times
Jon Dartley’s advice on addressing “data exhaust”.

Secure Your Data – Seriously, AFP New York Chapter News
As Jon Dartley, a data privacy and security attorney at Perlman and Perlman says, “It is vital to have the appropriate legal terms in the contract to protect your interests.”  Find out what your liability limit is.  Have it in writing who bears the responsibility and cost of a data breach.  And, have the vendor agree on a specific timeframe within which they need to advise you of a data breach.

Warning: Don’t Cut Legal Corners When Mixing Social And Business Impact,  Forbes
Particularly striking is that (Karen) Wu believes this is the “first multi-state regulatory activity involving cause marketing in almost two decades.”

Is stealing, then giving back, OK?
Cliff Perlman lends his advice on theft within a nonprofit.

Buyer Beware: Negotiating Terms in Technology Agreements
Jon Dartley provides tips on negotiating contracts with technology vendors.

Four Ways Charitable Giving Could Change with a Tax Overhaul
Cliff Perlman remarks on the possible threat of a change to charitable deduction.

How To Deal With Residual Data, Nonprofit Times
Jon Dartley’s advice on addressing “data exhaust”.

perlman & perlman philanthropic sector law firm blue and green logo

click to exit page

perlman & perlman philanthropic sector law firm blue and green logo

click to exit page

silk lanterns

who we work with

Our clients are diverse nonprofit organizations with a broad range of missions, as well as for-profit companies in evolving areas such as social enterprise, corporate philanthropy, joint ventures, technology-driven fundraising, and impact investing.

who we work with

Our clients are diverse nonprofit organizations with a broad range of missions, as well as for-profit companies in evolving areas such as social enterprise, corporate philanthropy, joint ventures, technology-driven fundraising, and impact investing.

A.B. Data
AB InBev Foundation
Absolut Company
American Committee for the Weizmann Institute of Science
American Diabetes Association
American Friends of the Hebrew University
American Parkinson Disease Association
Association of Fundraising Professionals
Avalon Consulting
Baton Rouge Area Foundation
Black Lives Matter Global Network Foundation
Bleeding Blue for Good Fund
Bradley Cooper’s One Family Foundation
BrightFocus Foundation
Brooks Brothers
Chadwick Boseman Foundation for the Arts
Changing Our World
Charity Defense Council
Christian Appalachian Project
Doctors of the World/ Medecins du Monde
Doctors Without Borders/ Medecins San Frontieres
Drug Policy Alliance
Duke University
Emory University
Estee Lauder Companies, Inc.
Feed The Children
Food For The Poor
Gerald R. Ford Presidential Foundation
Grameen Foundation USA
Hope for New York
International Campaign for Tibet
International Crisis Group
International Justice Mission
J. Crew Group
Johns Hopkins University
Lautman Maska Neill & Company
Lawyers Committee for Civil Rights Under Law
LSU Foundation

Marts & Lundy
Meyer Partners, LLC
Milken Institute
NAACP Foundation
National Alliance on Mental Illness (NAMI)
National Marrow Donor Program
National Park Foundation
Natural Resources Defense Council
North Carolina State University
North Shore Animal League
Operation Smile
PBS Foundation
Pernod Ricard USA
PetSmart Charities
PopSockets
Population Action International
Project ORBIS International
Public Interest Communication
Rails to Trails
Redeemer Presbyterian Church
Rockefeller Philanthropy Advisors
Save the Children Federation
Sesame Workshop
Simon Wiesenthal
SOS Children’s Villages – USA
Subaru of America
The Little Market
Touro University
United States Equestrian Team Foundation
United Way Worldwide
University of Connecticut
University of Virginia
Vote.org
Whitney Museum of American Art
World ORT
World Wildlife Fund
YWCA USA

A.B. Data
Absolut Company
American Committee for the Weizmann Institute of Science
American Diabetes Association
American Friends of the Hebrew University
American Parkinson Disease Association
American Rivers
Association of Fundraising Professionals
Baton Rouge Area Foundation
BrightFocus Foundation
Burger King McLamore Foundation
Cancer Care
Carnegie East House and James Lenox House Association
Center for Car Donations
Changing Our World
Charity Defense Council
Christian Appalachian Project
Coca-Cola Scholars Foundation
Convoy of Hope
Cornell University
Doctors Without Borders/ Medecins San Frontieres
Drug Policy Alliance
Duke University
Emory University
Feed The Children
Gerald R. Ford Presidential Foundation
Grameen Foundation USA
Helen Keller Services
Hope for New York
Human Rights Watch
Humane Society of US
Indiegogo
International Campaign for Tibet
International Crisis Group
International Justice Mission
Japanese American National Museum
Johns Hopkins University
Lane Bryant Charities
LSU Foundation
Mattel
Meyer Partners, LLC
Milken Institute
National Breast Cancer Coalition
National Marrow Donor Program
Natural Resources Defense Council
North Carolina State University
North Shore Animal League
Obama Foundation
Operation Smile
PBS Foundation
Pernod Ricard USA
PetSmart Charities
Population Action International
Project ORBIS International
Public Interest Communication
Rails to Trails
Redeemer Presbyterian Church
Rock and Roll Hall of Fame and Museum
Rockefeller Philanthropy Advisors
Sesame Workshop
Simon Wiesenthal
SOS Children’s Villages – USA
Steinhardt Foundation
Subaru of America
United States Equestrian Team Foundation
University of Montana Foundation
University of Nevada, Las Vegas Foundation
Whitney Museum of American Art
World ORT
World Wildlife Fund
YMCA USA
YWCA of New York City
YWCA USA
Lautman Maska Neill & Company
Lawyers Committee for Civil Rights Under Law

perlman & perlman philanthropic sector law firm blue and green logo

click to exit page

Culture & Values

Vision

We view our clients as partners that share our commitment to bring about change in the world. Our goal is to provide them the peace of mind of knowing that they are in compliance with their legal obligations and to further empower them to achieve positive social impact and financial success.

Our Mission

Our mission is to provide the highest quality, integrity-driven legal services to our clients, using a practical, consultative, client-focused approach to identify and respond to problems and challenges.

We strive to maintain a culture characterized by respect, opportunity, diligence, mutual empowerment, entrepreneurship, and fair reward for efforts made on behalf of clients and the firm.

Perlman & Perlman is a Certified B Corporation

Certified B Corporations use the power of business to solve social and environmental problems. B Corps are unlike traditional businesses because they

  • Meet comprehensive and transparent social and environmental performance standards
  • Meet higher legal accountability standards
  • Build business constituency for good business