Are Your Volunteers Safe From Legal And Tax Risks?

Comprehensive risk management is a primary responsibility for leaders of nonprofit organizations. While you likely take steps to protect your facilities, assets, staff, and clients, it's crucial not to overlook your volunteers. Despite the federal Volunteer Protection Act of 1997 offering some protection, volunteers can still face legal and tax risks. Here's how you can manage these risks effectively.

Understanding Legal Liability for Volunteers

The Volunteer Protection Act provides some defense for volunteers acting within their designated roles, and many states have similar laws. However, the specifics of liability can vary significantly from state to state. Some states offer broad protection unless there is willful or wanton misconduct, while others require the nonprofit to explicitly assume liability for claims in its articles of incorporation. Despite these protections, your nonprofit should still carry appropriate insurance coverage, as some state laws mandate it to limit volunteer liability.

Essential Insurance Coverage

To minimize risk, your organization should have general liability insurance that includes volunteer coverage and directors and officers liability insurance. If volunteers will be driving for your organization, verify that your auto insurance covers them. Larger nonprofits might consider amending their bylaws to include broad indemnification for volunteers when claims exceed insurance limits. Additionally, implement processes to mitigate risks, such as proper screening and training for volunteers, and restrict certain high-risk activities to paid staffers.

Addressing Tax Liability for Volunteers

Volunteers might also face tax liabilities due to their activities. For instance, providing benefits beyond reimbursements for actual out-of-pocket expenses can create taxable income. Reimbursements that exceed actual expenses are taxable. To avoid this, ensure that any reimbursed expenses are well-documented. Inform your volunteers in writing and verbally that they must provide receipts for any expenses incurred on behalf of your organization. While this might seem burdensome, it's essential for both their protection and yours.

Protecting Everyone Involved

Volunteer risk varies by nonprofit, but it is particularly significant for those providing medical services or working with vulnerable populations. Even seemingly simple tasks, like driving, can lead to litigation. To protect your hardworking volunteers and your nonprofit's mission, consult with an attorney for legal advice tailored to your specific situation.

By taking these steps, you can help ensure that your volunteers are not at risk and that your organization continues to thrive in its mission.

How HoganTaylor Can Help

The HoganTaylor Nonprofit team of business advisors and CPAs is comprised of former CFOs, controllers, and industry experts with extensive experience providing the guidance organizations need to lean forward again in their leadership. If you have any questions about this content, or if you would like more information about HoganTaylor’s Nonprofit practice, please contact Jack Murray, CPA, Nonprofit Practice Lead.

INFORMATIONAL PURPOSE ONLY. This content is for informational purposes only. This content does not constitute professional advice and should not be relied upon by you or any third party, including to operate or promote your business, secure financing or capital in any form, obtain any regulatory or governmental approvals, or otherwise be used in connection with procuring services or other benefits from any entity. Before making any decision or taking any action, you should consult with professional advisors.