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HOW DO WE PROACT, TRANSACT, AND ENACT? For our 2024 Spring/Summer Investor Update, we interview our legal partners at Morgan Lewis and Lawyers for Civil Rights.
In light of 2023’s record disbursement of loans and investment capital from the Ujima Fund ($1.6 million out of the door and invested in our local businesses, by community demand), we want to pull the curtain back on how these investment transactions happen. Key to Ujima’s processes are our technical assistance partners. ‘Technical assistance,’ a wonky and sterile phrase, refers to support to help nonprofits acquire any specialized service or skill that is not currently resident within the organization. In this update, we highlight our legal technical assistance partners at Morgan Lewis.
Irene Hong, an associate with Morgan Lewis, focuses her legal practice on tax-exempt organizations. She supports private foundations, public charities, social welfare organizations, and other tax-exempt entities, many of which are active worldwide. She advises clients on a range of issues, including nonprofit formation and exemption, corporate structuring, domestic and international grantmaking, impact and charitable investing, Internal Revenue Service (IRS) audits, corporate governance, operational policies and procedures, and tax and regulatory compliance. In addition to her work with tax-exempt organizations, Irene also advises for-profit entities operating in the philanthropic sector.
UJIMA: Let’s start off with an introduction of yourself and what you do at Morgan Lewis.
IRENE HONG: My name is Irene Hong and I work in Morgan Lewis's tax exempt organizations group, where we advise charities and other nonprofits in the United States and internationally. A significant aspect of our practice is setting up new charities and helping them apply for tax-exempt status with the IRS, which includes drafting corporate documents and tax forms, advising on corporate governance matters, and so on. I am based in the San Francisco office, and I work with my colleague Tomer Inbar out of the New York office. We’re currently working with the Boston Ujima Project on a pro bono basis which is really exciting.
Did you get to choose to work with Ujima and if so, what drew you to working with us?
I first became involved with the Boston Ujima Project through Carl Valenstein. Tomer, our tax-exempt organizations partner, works with Carl on a variety of projects, including the Boston Ujima Project. So when I joined Morgan Lewis, they thought that working with Ujima would be an opportunity for me to support a great organization, and to learn about fiscal sponsorships and how they operate in real life. Tomer let me know that Ujima is a great organization to work alongside, and I agree; I think the mission's great, and everyone's really friendly and awesome to work with. It then became an opportunity to help an organization that already has substantial programming to get them set up for success as they transition to their independence.
What brought you to this specific lane or area of legal practice?
I got into tax-exempt organizations and nonprofit work via a dual degree at the University of Pennsylvania; I attended their law school, got a Juris Doctor and also picked up a Master's of Science in Social Policy. My capstone thesis was on international corporate tax, and I have been involved in community organizations and local bar associations throughout undergraduate, law school, and beyond. So when this opportunity came up, I thought, “wow, this is awesome.” I've already done a good amount of pro bono work in my previous role in international tax, including nonprofit formations and exemptions. So it was a really cool opportunity to make a more formal pivot into the nonprofit space and it's been great so far– I've been at Morgan Lewis for almost two years.
It’s exciting to be a part of that process and to help make sure that the legal work doesn't become a hindrance, but rather something that can be understood and can be a tool so that the organization (and the people involved in it) can be set up for success.
Why do organizations choose to separate from their fiscal sponsors and go the independent route?
I’ll explain why organizations might choose a fiscal sponsorship and then why they might choose to go their own way. If a project is initially starting up, there's a lot of back office administrative work necessary to get the project off the ground, right? Forming an entity, putting in place procedures for operating, etc. You have to register with all the relevant authorities in all of the different states you're operating in. And all of this comes before being able to actually do the good work. So fiscal sponsorships [wherein a charitable project is housed within an established 501(c)(3) public charity] are really helpful; the sponsor will often have established infrastructure and people willing to invest the time and energy to handle the logistics and administrative work while the sponsored project hasn’t yet gotten its own 501(c)(3) status.
A lot of projects do really well staying fiscally sponsored for the long term; not every single project is necessarily trying to become independent, and the sponsorship can work great for a long time. However, some organizations become large enough and robust enough where it makes sense for them to separate and get their own tax-exempt status. The sponsored entity may then be able to move on to operating as their own nonprofit organization, without necessarily being tied to another organization's 501(c)(3) status.
What stands out to you about working with us?
I was just really blown away by how many different projects there are and how many balls are in the air at Ujima; how Ujima is simultaneously very community-focused but also very high level as well. Typically, a nonprofit organization will fit in a bucket: this one does this, this one does that. But the Boston Ujima Project doesn't fit neatly into one category. It's not just community development or just investment in socially responsible businesses. There's a lot of boots-on-the-ground action happening, but also structural and economic development activities that are happening, too. I thought that was really cool and unique, and helped put actual color behind what the organization is doing and what it plans to do as it grows out.
What excites you about this work?
The opportunity to see Ujima transition from a fiscally sponsored project, as part of a different organization, to becoming independent–with more robust long-term operations and the ability to shape itself into its own nonprofit organization. Much of the effort in setting everything up properly is front-loaded, but I believe that it's a good investment of time and energy so that it can focus on doing its important work and programming in the future. It’s exciting to be a part of that process and to help make sure that the legal work doesn't become a hindrance, but rather something that can be understood and can be a tool so that the organization (and the people involved in it) can be set up for success. ✦
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