Proskauer’s Annual Trick-or-Treat Seminar was held virtually on Friday, October 30 and discussed timely topics and best practices specifically tailored to the not-for-profit community.

The seminar discussed:

• AI Risks, Trends and Practical Strategies for Nonprofits
• IRS Civil and Criminal Enforcement Against Tax Exempts
• Compensation and Benefits Developments

Amanda Nussbaum welcomed everyone and introduced the presenters.

Here are some key points from each presentation:

Wai Choy discussed key legal risks and practical strategies for not-for-profit organizations adopting generative AI, outlining a risk management framework that distinguishes tool-specific and use-case-specific risks from broader concerns relating to accuracy and bias, confidentiality, security, privacy, intellectual property and regulatory compliance. He reviewed how organizations can address these risks through targeted contractual protections, internal AI policies and operational safeguards, including human review of outputs, restrictions on sensitive data sharing and oversight of autonomous AI agents. Wai also discussed the implications of AI use for attorney-client privilege, highlighting recent cases and practical steps to help preserve protections when using AI in connection with legal matters. He concluded with guidance on AI notetakers, including appropriate disclosures and consent, avoiding use during sensitive discussions, reviewing generated notes for accuracy, and managing retention and access.

Laura Gavioli discussed the IRS’s heightened focus on civil and criminal enforcement involving tax-exempt organizations. The Tax Exempt and Government Entities (TE/GE) Division has announced three major compliance areas for enforcement in fiscal year 2027: tax-exempt organizations operating outside their exempt purposes or regulatory requirements, entities engaged in abusive or prohibited transactions, and entities engaged in fraudulent activity, such as misuse of government grant funds. In keeping with those goals and Treasury’s Priority Guidance Plan, the IRS is considering changes to Form 990 regarding the reporting of fiscal sponsorship arrangements. Contemplated IRS guidance, potential regulations, and proposed legislation could require project-by-project reporting and impose a new excise tax (or penalty) regime for reporting failures. In addition, the IRS and the Department of Justice (DOJ) are involved in numerous high-profile cases that could result in revocation of organizations’ tax-exempt status for alleged noncompliance with Section 501(c)(3). Revocation is a lengthy process, and Laura discussed the procedural rights available to exempt organizations facing it. Finally, the IRS is actively encouraging whistleblowers to come forward about the misuse of grant funds by tax-exempt organizations. Laura discussed the contours of the IRS Whistleblower Program and how organizations can best prepare for these claims, audits, and investigations.

Jaime Santos discussed hot topics in employee benefits administration and litigation.  First, she discussed the quickly approaching December 31, 2026 deadline established by IRS for amendments to plans pursuant to the CARES Act, SECURE Act, and SECURE 2.0 Act, as well as the audit and enforcement priorities recently articulated by the Department of Labor’s Employee Benefits Security Administration.  Second, Jaime discussed recent trends in ERISA litigation.  She addressed actuarial-factor litigation regarding the factors that must be used to calculate joint and survivor annuities under defined-benefit plans, and what employers who sponsor health plans should do to evaluate their potential exposure.  It also includes recent health-plan class actions challenging wellness plans that include premium discounts for employees who do not use tobacco or who engage in tobacco-cessation, and class actions challenging prescription-drug components of employer-sponsored health plans.  Finally, Jaime discussed the ERISA case currently pending before the U.S. Supreme Court, Anderson v. Intel Corp., and what it might mean for retirement-plan litigation going forward.