ASAE opposes any increased or additional federal income tax burden on associations. ASAE supports the ‘relatedness test’ — continuation of the present system for determining areas of tax-exempt organization activity that are taxable because they are not related to the purposes for which exempt status was granted. Association activities, which benefit not only association members but also the entire United States economy and society, include education, publications, government affairs, conventions, trade shows, standards-setting, credentialing, research, joint marketing, charitable and community service, and other products and services. Any new tax for associations would threaten those activities and might require replacement of the programs by tax-supported government programs.– ASAE Board Approved Position Statement #5a

Tax Reform In December 2017, congressional Republicans passed, and President Trump signed into law, the most sweeping overhaul of the tax code since 1986. Most changes take effect for the 2018 tax year.

Throughout the legislative process, ASAE and many other associations opposed a number of provisions that were stripped from the final bill. The three most important provisions that were successfully removed were: taxation of royalty income; eliminated non-qualified deferred compensation plans; and applied intermediate sanction rules to 501(c)(6) groups. And, as expected with any issue as complex as tax reform, the law includes a few provisions that associations and other tax-exempt organizations need to be aware of.

Provisions Stripped from Final Bill

Taxation of royalty income: This provision was in the original Senate bill but was removed after opposition from ASAE and hundreds of other associations. ASAE and others contended that royalties should not be taxed when the organization has entered into a licensing arrangement for use of its name or logo but is not actively involved in the marketing or administration of the product or service connected with the arrangement.

Royalties are a significant source of non-dues revenue or non-contributed revenue that can be reinvested in education, skills training, standard setting, research, and other activities critical to the mission of a tax-exempt entity. Thanks to our community’s collective advocacy work, passive income from royalties will not be subject to unrelated business income tax (UBIT).

Nonqualified deferred-compensation plans: This provision, originally included in both the House and Senate bills, would have eliminated so-called 457 plans for associations and other nonprofit employers. ASAE and others made the case that these deferred-compensation arrangements are offered to many employees of tax-exempt organizations as a means of supplementing their retirement income. Since nonprofit employers can’t offer performance stock options to key employees, 457 plans are an important benefit that assists in attracting top talent.

Intermediate sanctions: This provision was originally in the Senate bill. It would have applied intermediate sanction rules to 501(c)(6) groups and eliminated the “presumption of reasonableness” for nonprofit organizations that practice due diligence in setting compensation arrangements. ASAE and others argued that this proposal would have given the IRS the power to determine what constitutes an excess benefit transaction and would have removed the safe harbor for nonprofit organizations that follow reasonable, responsible processes for determining compensation—including review by a governing body or committee, use of appropriate comparability data, and adequate documentation supporting the decision on compensation at the time it was made.

Noteworthy Provisions Included in the Final Bill

Excise tax on executive compensation: Associations and other tax-exempt organizations will be subject to a 21 percent excise tax on executive compensation over $1 million paid to the five top-earning executives. Compensation includes salary and the cash value of most benefits, including those that have vested but haven’t been received yet by the executive. Compensation also includes payments contingent on the executive’s separation that are at least three times the executive’s base compensation—also known as “parachute payments.”

ASAE has advocated for a grandfather clause that exempts existing contracts for tax-exempt organizations, as was provided to their for-profit counterparts. ASAE and association leaders have met with the Joint Committee on Taxation, as well as with the leadership of the House Ways & Means Committee and the Senate Finance Committee. Action on this issue is most likely to take place during the lame-duck session after the election.

Separate computation of UBIT: This provision requires that unrelated business taxable income be separately computed for each business activity. In other words, associations are prevented from offsetting income from one business with losses from another business. ASAE believes a sensible work-around on this provision is to route UBIT activity through a for-profit subsidiary that can net the profits and losses of each business. Still, ASAE is very concerned about the lack of guidance from Treasury on how associations should calculate the tax.

Fringe expenses: The final bill imposes a first-ever tax on fringe transportation benefits for tax-exempts. Employer-provided benefits, such as transportation, parking, and on-premises athletic facilities are subject to the tax. Most associations and nonprofits do not know how to properly assess such tax obligations, while two estimated tax payment deadlines having already passed

In meetings with Treasury officials earlier this year, ASAE stressed that the new law disproportionately hurts tax-exempt employers by requiring them to pay a new unrelated business income tax (UBIT) on the value of these benefits. ASAE contends this is a new tax on an expenditure, not a revenue-generating activity

In addition, some cities, including Washington, DC, New York, and San Francisco, have mandated that employers provide pre-tax mass transit benefits, so employers in those cities do not have the option of changing those benefits to avoid being taxed. ASAE has suggested that special consideration be given for employers in localities that mandate transportation benefits.

ASAE has created the UBIT Coalition to bring together other associations and nonprofits to urge the Treasury Department to retroactively delay implementation of this provision. The coalition is also working to encourage members of Congress to make the case to Treasury as well. “Absent any guidance, tax-exempt organizations cannot confidently and accurately comply with the 21 percent UBIT tax on transportation fringe benefits or the provision that requires separate computation of UBIT for each unrelated business activity,” said ASAE President and CEO John Graham IV, FASAE, CAE. “That’s why the coalition feels strongly that there needs to be a delay. How long the delay should be depends on when we can realistically expect to see guidance.”

The efforts of association professionals to share this issue with Congress has resulted in multiple pieces of legislation being introduced on this issue in the last few months. The Nonprofits Support Act (H.R. 6037), sponsored by Rep. Mike Conaway, would repeal the UBIT provision on transportation and parking benefits for tax-exempts. It also includes a section on UBIT siloing. The LIFT for Charities Act (H.R. 6460), sponsored by Rep. Mark Walker (R-NC), was introduced on July 19th. That legislation would also repeal the UBIT on transportation and parking benefits provision for tax-exempts, but does not include the section on UBIT siloing that is included in the Conaway bill.

In late July Assistant Democratic Leader James Clyburn (D-SC) introduced the “Stop the Tax Hike on Charities and Places of Worship Act” (H.R. 6504) with 31 Democrat cosponsors. Similar to Rep. Walker (R-NC) and Rep. Conaway’s (R-TX) bills, it repeals the applicability of UBIT on certain fringe benefits for tax-exempts. Unlike the Conaway bill, it does not include a provision on UBIT siloing. The bill attempts to pay for itself with an increase in the corporate tax rate from 21 percent to 22 percent.

We will continue to work with Congress and the administration and monitor this issue closely.

Additional Tax Issues:

Charitable contributions: The tax bill increases the adjusted gross income (AGI) limit on the charitable contributions deduction from 50 percent to 60 percent for cash gifts. However, the final bill roughly doubles the standard deduction to $12,000 for individuals and $24,000 for couples. With a higher standard deduction, fewer taxpayers will itemize their deductions on their tax returns and therefore won’t receive a benefit for giving to charity, which some charities fear could reduce giving.

Local lobbying expenses: The bill eliminates the deduction for lobbying expenses regarding legislation before local government bodies. As a result, these expenses will need to be included in the calculation of nondeductible membership dues or proxy tax liability.

Excise tax on investment income of private colleges and universities: The tax bill imposes a 1.4 percent excise tax on the net investment income of private colleges and universities that have more than 500 full-time-equivalent students and assets of at least $500,000 per full-time-equivalent student.

Johnson Amendment: A provision in the House bill would have effectively repealed the Johnson Amendment, which prohibits churches and other 501(c)(3) groups from participating or intervening in political campaigns. The provision was removed from the final bill because it conflicted with the Senate’s Byrd rule, which prevents reconciliation bills from containing provisions that aren’t fiscal in nature. Efforts to repeal the Johnson Amendment to allow church leaders and others to engage in political speech are expected to continue.

Tax Reform 2.0 In July House Republicans unveiled a broad framework for the next phase of tax reform, which would make permanent tax cuts for individuals and small business owners that were enacted in last year’s tax law. Dubbed “Tax Reform 2.0,” the package has three distinct objectives: making the individual tax cuts permanent, promoting retirement savings, and helping new businesses write off more of their initial start-up costs.

Ways and Means Chairman Kevin Brady (R-TX) said he expects to introduce three separate bills to cover each objective and wants his committee to vote on the package in September. While “Tax Reform 2.0” could get out of the House this fall, it is likely to falter in the Senate where it would need support from Democrats to pass.


ASAE supports quality, affordable, accessible health care for all Americans. ASAE supports national uniform standards for funding benefits and employee protections. ASAE further believes that association health care plans possess many years of proven experience in the delivery of benefits through purchasing coalitions. As such, association health care plans can lead the way to the reform goals of providing the efficient delivery of quality health care to more citizens.– ASAE Board Approved Position Statement #6

Health Care In June the Trump administration issued a final rule expanding association health plans (AHPs) as a means of helping small businesses and self-employed people get affordable health coverage. The final rule broadens the definition of an employer under the Employee Retirement Income Security Act (ERISA) to allow more groups to form AHPs as an alternative to the Affordable Care Act health exchanges. ERISA is the federal law governing health benefits offered by large employers. Under the final rule, AHPs may be sold nationally, in groups of states or in a single state, according to the Labor Department. States will continue to regulate them, although ASAE and others had pushed for AHPs to be exempt from state regulation.

ASAE also suggested in its comments submitted to the Labor Department earlier this year that the definition of “bona fide groups or associations” be expanded to include professional societies whose members are not necessarily employers. The final rule, however, clarifies that existing law stipulates that an AHP must be sponsored by a group of employers and/or self-employed individuals who themselves are considered employers. An existing trade association would be eligible to form an AHP, for example.

The new rule also allows small businesses and self-employed individuals who are in unrelated professions to band together to obtain coverage through an AHP as long as they are in the same geographic region. The rule attempts to strengthen oversight of AHPs by requiring associations to have a formal organizational structure with a governing body and bylaws so they can act in the interests of participating employers and ensure claims are paid.

The rule has already been challenged by attorneys general from New York and Massachusetts, who filed suit to block the administration from offering plans that don’t have to cover all of the Affordable Care Act’s essential health benefits. A new lawsuit was filed by 12 state attorney generals in late July arguing the Department of Labor violated federal rulemaking procedures when it expanded small business access to group health insurance.

ASAE has launched a coalition to determine if the rule will be workable for associations. ASAE believes the new DOL rule has opened up a possible opportunity, but there are still many questions regarding implementation. The coalition will focus on the policy work necessary to give associations the best change at confidently establishing AHPs.

Cadillac Tax An issue of concern to the association community is the Cadillac tax, a 40 percent non-deductible excise tax on high-cost health plans in the Affordable Care Act that was set to go into effect in 2018. The tax was delayed by Congress in 2015. In January Congress again passed a two-year delay of the tax. Postponing the start of the Cadillac tax from 2018 to 2022 should lessen the incentive for employers to make changes immediately to their benefit plans and give opponents additional time to repeal the tax altogether. The tax is projected to raise $87 billion over the next ten years. President Trump has said he would sign a bill to repeal the tax, but legislation on this issue hasn’t progressed recently.

Overtime Rule ASAE submitted comments in August of 2017 to the Department of Labor (DOL) as it prepares to revise regulations for overtime eligibility. The overtime rule has been identified as a major area of concern for nonprofit employers. Earlier in the year, Labor Secretary Alexander Acosta said the salary threshold proposed by the department under the Obama administration was excessive and too burdensome on many employers. The Obama-era rule would have doubled (to $47,476) the salary threshold under which virtually all workers are guaranteed overtime pay if they work more than 40 hours per week. Acosta has suggested, however, that the current minimum salary level of $23,660 should be updated and the DOL’s request for comments is considered to be a first step in the agency’s plan to revise the regulations. The overtime rule was last adjusted in 2004.

ASAE’s comments focus on how potential changes to overtime eligibility would impact associations and other nonprofit employers. As it did with the Obama-era rule, ASAE emphasized that it’s not against increasing the overtime salary threshold, but that creating a “one-size-fits-all” salary threshold for overtime eligibility across the country – inconsiderate of cost of living differences – would not be workable for many employers. Based on the federal government’s inflation calculator, ASAE has suggested that an inflation-adjusted minimum salary level of $30,830 would be an appropriate threshold for overtime eligibility moving forward.


“ASAE opposes expanding the definition of candidate-related political activity by tax-exempt organizations to include candidate forums and issue-related communications sent out close to elections. Recent efforts to restrict political activity by 501(c)(4) social welfare groups would regulate far more speech and advocacy than is warranted and could create a chilling effect on the role nonprofit organizations play in fostering civic engagement and democracy. ASAE also opposes any extension of new restrictions on 501(c)(4) political activity to trade associations and professional societies.” – ASAE Board Approved Position Statement #1

Prior Approval ASAE is helping to lead a coalition to address the Federal Election Commission’s prior-approval requirement for trade associations. The Prior Approval Reform Coalition (PARC) is working to achieve legislation to amend the Federal Election Campaign Act to eliminate the requirement that trade associations have prior approval from member companies before soliciting their eligible employees. The coalition believes the requirement is inequitable and restricts First Amendment rights. In addition, ensuring compliance with the regulation is costly and burdensome.

In 2017 Rep. Mark Amodei (R-NV) introduced the Prior Approval Reform Act, HR 2101. The legislation would repeal the prior approval requirement. There are currently 26 cosponsors. Last year over 115 associations signed on to the Prior Approval Reform Coalition letter urging Members of Congress to cosponsor the legislation.

In addition, an amendment to defund FEC enforcement of the prior approval requirement was included in the base text of the Financial Services and General Government (FSGG) bill for FY18.

In late July, the House passed an FY19 minibus spending bill consisting of Financial Services and Interior-Environment titles. As such, it contained the Financial Services and General Government (FSGG) bill, H.R. 6258, which includes the provision to defund FEC enforcement of the prior approval requirement.

In July coalition representatives met with several representatives from Republican leadership from the Senate and House, including Senator McConnell’s Chief of Staff, NRSC Policy Director, NRCC Policy Director and PAC Director, and Executive Director of Team Ryan among others. Senate representation will actively look for opportunities to include the legislation in their legislative efforts. The House representatives are supportive of the proposal and agreed to encourage members to sign on to HR 2101. Follow up meetings will be conducted after the upcoming legislative break.

Treasury Changes to the Form 990 Treasury officials announced in July that the IRS will no longer require tax-exempt organizations other than charities to disclose information about their donors as part of their annual returns.

Congress in the 1960s directed the IRS to collect donor information from 501(c)(3) charities that accept tax-deductible contributions. The policy provided the IRS information that could be used to confirm contributions. By regulation, however, the IRS had – since the Nixon administration – extended the donor reporting requirement to all other tax-exempt organizations, including 501(c)(6) trade associations and 501(c)(4) political groups. Names and addresses of donors of $5,000 or more have previously been listed on Schedule B of tax-exempt Form 990 returns.

Charities and section 527 political organizations, including political action committees, will continue to disclose names and addresses of donors, but the new rule will apply for other types of tax-exempt organizations beginning with Form 990 filings for the years after 2018.

In announcing the change, Treasury Secretary Steven Mnuchin said the IRS has no administrative need for continuing the routine collection of donor names and addresses. If the information is needed for purposes of an examination, the IRS will simply ask the organization for it directly, Mnuchin said.

Democratic lawmakers disagreed, arguing that being able to see who donates to certain tax-exempt organizations – particularly those engaged in political activities – helps taxpayers and lawmakers understand who is trying to influence elections.


As the association community depends on a viable travel and tourism industry and vice versa, ASAE supports advancing domestic and international travel initiatives that balance the need for homeland security with the business needs of associations. ASAE also acknowledges the particular needs of the meetings industry and understands the importance of sustaining fundamental relationships when negotiating, developing and executing events. – ASAE Board Approved Position Statement #10

Federal Employee Travel to Conferences and Meetings After more than six years of work to educate Congress and the administration about the value of government employee attendance at association meetings, ASAE continues to see perceptions trending toward the positive on this important issue.

In late 2016, the Obama administration relaxed guidelines on federal employee attendance at conferences. The updated guidance issued by the Office of Management and Budget (OMB) reflected changes to the rules issued by the White House in 2012 that drastically reduced government travel after inappropriate conference spending by federal agencies was first reported and investigated by Congress.

The updated M-12-12 memo makes three major changes to the conference approval process. First, the memo focuses on approval and oversight on agency-sponsored or hosted conferences and not outside conferences. This provides agencies with more flexibility for approval. The memo also allows for pre-approval of known reoccurring conferences, especially conferences not sponsored by the government. Finally, the updated memo does not extend the funding caps that expired at the end of the 2016 fiscal year in September.

This update provides many of the process changes that members of the association community have been asking the administration to make since 2012. ASAE and the association community support changes to agency guidance that reduce the paperwork requirements for agency travel and attendance at association conferences.

In 2017 OMB Director Mick Mulvaney issued a memo to federal agencies proposing to roll back the M-12-12 memo. While Director Mulvaney has not yet been successful in rolling back the memo, it shows interest by the administration in reducing unnecessary barriers to meaningful travel.

While we’ve seen real progress in terms of senior government officials and lawmakers recognizing the value of meetings, we’ll need to continue to emphasize and cultivate this understanding with the Trump administration.


“In principle and in practice, ASAE values and seeks diverse and inclusive participation within the field of association management. ASAE promotes involvement and expanded access to leadership opportunity regardless of race, ethnicity, gender, religion, age, sexual orientation, nationality, disability, appearance, geographic location, or professional level.” – ASAE Diversity and Inclusion Statement

Travel Ban In June the Supreme Court ruled in a 5-4 decision that President Trump has not exceeded his authority in banning travelers from certain countries in the name of national security. Lower courts had struck down each of three iterations of the president’s travel ban, the first of which was announced in January 2017 at the beginning of Trump’s term. The current version of the ban, which was allowed to take effect while the high court considered challenges to it, bans travelers from eight countries, six of which have Muslim majorities. The countries are Syria, Libya, Iran, Yemen, Chad, Somalia, North Korea and Venezuela. Restrictions on North Korea and Venezuela were not part of the court challenge. Chad was later removed from the list after it was determined to have met minimum vetting standards.

The administration said the current version of the ban responds to judicial criticisms of the first two and is based solely on a “worldwide review of the processes for vetting aliens seeking entry from abroad.”

While lower courts had focused on statements President Trump made on the campaign travel and concluded that the travel ban was motivated by antipathy toward Muslims, the Supreme Court rejected that conclusion.

Separate from the constitutional questions about the ban, which are now resolved with the court’s ruling, many business groups have expressed concern that the administration needs to better balance its national security interests with policies that don’t discourage foreign travelers from traveling to the U.S.

“Throughout the various legal challenges to the different iterations of the travel ban, ASAE has left the constitutionality question for the courts to decide,” said ASAE President and CEO John Graham, FASAE, CAE. “Now that the travel ban has been affirmed, it’s our continued hope that the administration will balance our national security interests with policies that don’t discourage inbound travel to the U.S. Unfortunately, international travel to the U.S. is declining, so we want to work with policymakers and the administration to reverse this trend.”

ASAE’s position on travel has been consistent – we understand and support the need for strong screening processes, but we don’t want to make it so difficult to enter the country that we discourage international visitors from traveling to the U.S.

In January, ASAE joined the U.S. Travel Association and other pro-travel groups to launch the Visit U.S. Coalition, whose aim is to work with the administration to reverse the decline in international travel to the U.S.

In May ASAE and other members of the Visit U.S. Coalition jointly submitted comments on the State Department’s plans to heighten its scrutiny of U.S. visa applicants’ social media histories, a move which would affect more than 14 million people a year.

Research prepared by the U.S. Travel Association shows that while global travel has increased 7.9 percent from 2015 to 2017, the U.S. market share has fallen from 13.6 percent to 11.9 percent over the same period. That decline in international travel has resulted in a loss of $32.2 billion in visitor spending and 100,000 hospitality jobs.

State Religious Freedom Protection Laws Over the past few years ASAE has been active in numerous states urging elected officials to defeat or veto legislation that would effectively permit discrimination against the LGBTQ community. While we did not see this an influx of “religious freedom” or “bathroom bills” in 2018, this is something we will continue to track when many state legislators begin their work again in January.

Texas In August of 2017 the Texas Legislature special session concluded without the passage of discriminatory legislation that ASAE and many in the community were monitoring. ASAE commends Texas legislators, in particular Speaker Joe Straus, for having the courage to block any so-called bathroom bills from being passed in this 30-day special session.

The special session and the inclusion of bathroom restrictions on the agenda comes after a divisive, months-long debate on the issue. Opponents of bathroom restrictions, including ASAE and numerous other corporate and hospitality interest groups, have argued that the proposals are discriminatory and would have dire economic consequences for the state.

ASAE was an active member of the “Keep Texas Open for Business” coalition that included the Texas Association of Business and major corporations in Texas including Amazon, American Airlines, Apple, Marriott, and United Airlines, among others.

ASAE thanks its members and industry partners in Texas who joined ASAE in opposing legislation that would deny public accommodations to members of the LGBTQ community. Convention and visitor bureaus, hospitality executives and corporate leaders in Texas have been united in opposing legislation we view to be discriminatory and contrary to our diversity and inclusion commitment.

This is an issue that could emerge again when the Texas Legislature reconvenes in 2019 or perhaps sooner, or in other states where associations hold meetings or conduct business. With the support of ASAE’s Board of Directors, ASAE will remain vigilant in opposing all legislation that we view to be discriminatory against segments of our community.


Voluntary Professional Certification Earlier this year Louisiana and Missouri introduced legislation that challenges the authority of many professionals holding credentials granted by associations and other groups. While we have had success in some states in pushing back against this legislation, 12 states introduced bills concerning to the association community this year. In order to proactively bring the association community together to combat the spread of legislation impacting professional certification programs, ASAE and The Institute for Credentialing Excellence (ICE) have formed the Professional Certification Coalition (PCC).

The mission of the PCC is to inform the state legislative process about voluntary professional certification in the face of state legislative initiatives that would restrict, or even ban, certification.

In most cases, legislation has been introduced to reduce burdens on employment by cutting back on occupational licensing. Non-governmental professional certification programs have been affected by those initiatives, whether intentionally or not. Only a concerted effort by a large and focused coalition of certification organizations resulted in neutralizing that legislation in the form that ultimately passed and was signed into law.

Louisiana In April ASAE was alerted to legislation in Louisiana that, if enacted, would potentially prohibit many professionals in the state from identifying themselves as holding a professional certification. Louisiana House Bill 748, the Occupational Licensing Review Act, was introduced in March and passed the House by a large margin. Association professionals in Louisiana and organizations around the country weighed in on this issue to highlight the value of certification.

In early May, House Bill 748 passed the Louisiana Senate Commerce Committee with all language related to certification and registration removed. The committee—along with Rep. Julie Emerson, who authored the bill, and the governor’s office—amended the bill to incorporate all changes that the association community had requested. The measure was further amended to provide for the governor’s office to review only 20 percent of the agencies engaged in regulatory and licensing activities over the next five years. ASAE is pleased that Rep. Emerson was receptive to changes after hearing from the association community.

Missouri In June Missouri House Bill 1719, the Professional Employer Organization Act, was signed into law. ASAE believes this bill contains language that is detrimental to both credentialing programs that are incorporated into state licensure laws (such as in the medical and accounting fields) and voluntary certifications that are not required to practice an occupation in any state but demonstrate an individual’s professional knowledge and competence in a field (such as ASAE’s CAE credential). The bill’s signing was expected, as it was wrapped into an omnibus package that required passage before the legislature ended its session.

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ASAE has had productive discussions with staff at the Missouri legislature and will continue to pursue a fix that addresses our concern. Additionally, ASAE will be working with a coalition of like-minded organizations concerned about state certification/licensing legislation around the country and will keep the association community informed when there are developments that warrant attention.


Paid Leave – Plans by DC Council Chairman Phil Mendelson to make changes to the District’s paid-leave bill passed in December 2016, one of the most generous in the nation, have been tabled for now. Mendelson did not rule out future changes, but at this point ASAE advises all DC-based associations to budget for the 0.62 percent payroll tax on all employees that is set to go into effect on July 1, 2019.

Employees would not be able to access the paid-leave benefit until July 1, 2020, at the earliest, and it will likely be later, as technical delays are common with new government programs. The DC Department of Employment Services posted proposed paid-leave regulations on March 31, 2018.

ASAE has consistently suggested that an employer mandate model would best serve employees and employers. We continue to have serious concerns that the current legislation will result in reduced or eliminated benefits packages for many District employees and will create a government-run program that will be difficult for employees to navigate during challenging times in their lives.


China’s Foreign NGO Law formalizes legal requirements for foreign NGOs desiring to conduct activities in China and establishes what types of activities are welcomed. Chinese officials have said the new law is intended to clarify uncertainties as to how foreign nonprofits can operate in China, but the nation’s leaders have also expressed security concerns and wariness of nonprofits with an advocacy or civil liberties agenda.

While the law exempts universities, hospitals, and scientific-research organizations, many industry and trade associations are now subject to the law’s registration and reporting requirements, which took effective on January 1, 2017. Under the law, foreign NGOs will need to register with China’s Ministry of Public Security and submit to a review of their operations, including their finances. Such groups will also have to report on planned activities each year and be sponsored by a Chinese partner organization.

ASAE’s general counsel firm, Pillsbury Winthrop Shaw Pittman LLP, prepared a client alert detailing the law’s provisions and implications for foreign-based organizations that conduct activities in China.

“Foreign NGOs will need to understand the new law’s tighter policing provisions, reporting requirements (including annual reports on planned activities for the coming year), and restrictions on fundraising and recruiting within China, among other changes,” the Pillsbury alert said. “The new law does clarify some uncertainties regarding how foreign NGOs in China can operate, but it also engenders new questions about how the relevant authorities will apply its provisions.”

The Ministry of Public Security (MPS) issued a guidance “handbook” that outlines the procedural documents necessary for registration. The MPS then released a list of Professional Supervisory Units (PSUs). This list, released only days before the law went into effect, specifies which government bodies would oversee an application based on the nature of the foreign organization. For example, the Sports Ministry would oversee an athletic organization. The main PSUs categories are: Economics and Trade, Education, Science and Technology, Culture, Health, Sports, Environmental Protection, Emergency Assistance and Disaster Relief, and Other. Each of these categories has subcategories. For example many nonprofits might find themselves in the “Other” subcategory: Social Organization Research, Exchange and Collaboration. It has been noted that while this list of PSUs outlines the categorization of supervisory government agencies, this does not mean the agency has an obligation to become a PSU for an applying organization.

Many organizations feel the legislation is still too vague and are struggling to navigate the bureaucratic process to become registered. Many organizations are declining to even comment publicly on their registration difficulties for fear that it may endanger their applications. The law’s ambiguity has even deterred some Chinese government departments from agreeing to be the legally required sponsors for foreign NGOs. As predicted, the law and registration process appears to be most burdensome to NGOs working in politically sensitive areas.