Update for Nonprofit Employers on Ohio's
Proposed Pregnancy Leave Rule

No doubt in recent weeks you have read or heard about the changes proposed by the Ohio Civil Rights Commission (the “Commission”) to sections of the Ohio Administrative Code, which implements Ohio’s anti-discrimination laws. The changes, which were proposed earlier this year, concern pregnancy discrimination in the workplace.

On Dec. 3, 2007, the Joint Committee on Agency Rule Review (“JCARR”), which must approve the proposed Pregnancy Leave Rule, held a hearing; however, it did not address the validity of the rule, but instead sent the rule back to the Commission with instruction to provide a summary and analysis of the proposed rule’s anticipated financial impact on certain public employers in Ohio. The Commission has 90 days to re-file its fiscal analysis.

What Does The Proposed Rule Provide?

The proposed rule currently provides:

• Uniform Standard of 12 Weeks Maternity Leave - A ‘One Size Fits All’ Approach. One of the most significant and heavily challenged provisions creates a presumption of discrimination against employers that provide less than 12 weeks of unpaid maternity leave to an employee when medically recommended, unless a lesser amount is justified by business necessity.

• Certain Distinctions No Longer Legitimate. Under the proposed rule, not only are employees entitled to 12 weeks of leave when medically recommended, but they are entitled to the leave immediately upon hire, notwithstanding any policies requiring a certain length of service prior to eligibility for unpaid leave. Thus, an employer who prohibits all employees from taking any leave during their initial 90-day probationary period would have to make an exception for employees affected by pregnancy, childbirth or related medical conditions.

• Availability of Light-Duty Positions. An unclear and potentially overly rigid provision of the rule pertains to the availability of light duty positions for pregnant employees. The Commission’s rule requires that employers make available light-duty positions and other similar benefits to pregnant employees under the same terms available to other employees similar in their ability or inability to work. The proposed rule overlooks various considerations, such as safety concerns, that an employer may have to take into account when providing light duty positions for pregnant employees.

• No Alteration of Job Duties. The new rule would also prohibit an employer from unilaterally limiting or altering the job duties of pregnant employees in the absence of an objective and verifiable safety justification. Employers have challenged this provision for failing to take into consideration employers who need to adjust job duties for reasons which are completely unrelated to pregnancy, such as the introduction of new and different equipment or systems, layoffs, or for reasons favorable to pregnant employees, such as for a promotion.

What Happens Next?

As noted, the Commission will have the opportunity to re-file its rule summary and fiscal analysis in 90 days, and if JCARR does not invalidate the rule at that point, it will become effective shortly thereafter. To be prepared, non-profit employers should begin looking at their current policies and practices and consider what changes they might need to make.

Quick Hits

IRS Releases New Form 990
On December 20, the IRS released the 2008 Form 990, Return of Organization Exempt from Income Tax. The Form is available at on the IRS website. Organizations will begin using new Form 990 for the 2008 tax year (returns filed in 2009), but must continue to use the current Form 990 for the 2007 tax year (returns filed in 2008). The Form is based on the Discussion Draft that was released to the public for comment on June 14, 2007 but incorporates many recommendations made in the public comments.

The Form consists of an 11-page core form. In addition, the Form’s 16 schedules are designed to require reporting of information only from those organizations that conduct particular activities. The IRS added one page and a new schedule (Schedule O) to the Discussion Draft in response to requests for more opportunity to provide explanations and narrative responses to the Form’s questions.

Among the major changes the Form made to the Discussion Draft are the following: (1) a revised summary page; (2) a reordered core form that moves the organization’s description of its program service accomplishments to page 2, immediately after the summary; (3) a new checklist of schedules that shows which schedules the filing organization must complete; (4) more opportunity throughout to provide supplemental information; (5) revised governance and compensation sections; and (6) modified schedules for hospitals, tax-exempt bonds, non-cash contributions and supplemental financial statements. Finally, to address transition concerns expressed by the sector, the IRS will phase in the new Form over a 3-year period. The IRS expects to release draft instructions for the 2008 Form 990 in early 2008.

IRS to Address 501(c)(4)s’ Compliance with Political Activity Rules
The IRS will reach out to 501(c)(4) organizations next year to make sure they are complying with rules that limit the political activities of such groups. The new look at compliance will be in addition to an ongoing program to assure compliance by 501(c)(3) organizations. Whereas 501(c)(4) (“social welfare”) entities may be involved in political campaigns as long as it is not their “primary purpose,” 501(c)(3) organizations are barred from any intervention in political campaigns. The new outreach effort will try to educate the nonprofit community about the rules for permissible political activity. “It’s not a compliance initiative yet,” the IRS said, “but we are prepared to be looking at these cases” if the IRS uncovers evidence of improper activity. The IRS also is monitoring whether all 527 groups that are required to disclose their activities actually are doing so.

IRS 2008 Projects to Include Donor Advised Funds, Universities and Political Activity
In addition to scrutinizing donors who claim inflated charitable giving deductions and loans to officers that have generous or no terms of repayment, the IRS will focus in 2008 on universities that have questionable ways of dealing with endowments, the Exempt Organizations Director said on Dec. 13. The IRS also will focus on whether supporting organizations in their third to fifth year of existence continue to qualify as that type of organization.

The Exempt Organizations Unit made significant headway in reducing its backlog of applications for tax-exempt status in 2007 and plans to create a new voluntary closing agreement program in 2008 to enable organizations with unfiled returns for the three most recent tax years to avoid the automatic revocation provisions of the Pension Protection Act of 2006 by filing the missing returns and paying all taxes and applicable interest, without facing any penalties.

New IRS Computer Program to Expedite Tax-Exempt Status Requests Criticized by Treasury Inspector General
The Treasury Inspector General for Tax Administration on Dec. 13 raised serious concerns about the IRS’s new computer system for handling requests for tax-exempt status. TIGTA said that the cost of the system, currently scheduled for completion in May 2008, “may far outweigh its benefits.” There have been issues with schedule delays and deletion of system capabilities. The system was approved in December 2001 to replace the Employee Plans/Exempt Organizations Determination System, automate a number of manual processes to reduce labor costs, and “address several critical workload factors that threatened to overwhelm the Employee Plans function and Exempt Organizations function programs.”

Major Accomplishments Cited in Oversight of Exempt Organizations
Sen. Charles Grassley (R-Iowa), ranking member of the Senate Finance Committee, has issued a release citing a number of accomplishments in the area of oversight of exempt organizations since 2004. Among the provisions Grassley took credit for in the release was language in the American Jobs Creation Act of 2004 (Pub. L. No. 108-357) that attempts to end abuse by corporations that have been reducing their tax bills by hundreds of millions of dollars each year by taking intellectual property of little or no value and donating it to charity. Congress also has passed and the President signed several pieces of legislation that contain provisions to restrain exempt organization abuses related to tax shelters and the application of excise taxes to certain activities – such as high salaries and living allowances – by private foundations and foundation managers.