Conflicts of Interest Policies Under N.Y. N-PCL § 715-A and New Jersey Best Practices

Nonprofit Law

Nov 7

Good Pine P.C. | Nonprofit Law & Governance | March 2026

Managing Conflicts Is a Legal Obligation, Not Just Good Practice

Conflicts of interest are inevitable in nonprofit governance — especially when directors, officers, or employees wear multiple hats in the community. While some overlap is unavoidable, the law requires clear procedures to identify, disclose, and manage conflicts so that personal interests never outweigh an organization's charitable mission. Even when no wrongdoing occurs, the appearance of a conflict can erode public trust, jeopardize donations, and expose the organization to regulatory penalties.

What Is a Conflict of Interest?

A conflict of interest arises when someone in a position of authority within a nonprofit — such as a director, trustee, officer, or key employee — could personally benefit from a transaction or decision made by the organization. Common examples include a nonprofit hiring a company owned by a board member, a director approving a grant to an organization where their spouse works, or an officer influencing a decision that affects their own financial interest. The risk is not limited to actual misconduct — perceived conflicts can be just as damaging.

New York Requirements: N.Y. N-PCL § 715-A

New York's Not-for-Profit Corporation Law § 715-A mandates that every nonprofit corporation adopt a formal conflict-of-interest policy approved by the board. The requirement applies to all nonprofit corporations regardless of size. Under § 715-A, the policy must:

Define conflicts of interest, including transactions or arrangements where an individual might have a direct or indirect financial interest
Require disclosure of any actual or potential conflict to the board or an authorized committee
Prohibit participation in discussions or votes on matters where the conflict exists
Require documentation in board minutes of the disclosure, the board's deliberation, and the final decision with its rationale
Require annual written disclosures from all directors, officers, and key employees
Be distributed to all covered individuals, who must acknowledge receipt in writing

Enforcement falls under the New York Attorney General's Charities Bureau, which can request copies of the policy during audits or investigations. Public charities registered in New York must also report compliance on the CHAR500 annual filing. Failure to comply can trigger state enforcement actions, including penalties, removal of directors, or loss of charitable registration.

New Jersey: Best Practices and IRS Expectations

Unlike New York, New Jersey's Nonprofit Corporation Act (Title 15A) does not expressly mandate a written conflict-of-interest policy for all nonprofits. However, New Jersey regulators and courts expect organizations to follow best practices consistent with IRS standards and sound governance principles.

The New Jersey Attorney General and Division of Consumer Affairs encourage nonprofits to adopt a written policy approved by the board, ensure annual disclosure of financial interests from board members and officers, document recusals and board deliberations in meeting minutes, and provide orientation and training on ethics and fiduciary duties.

IRS Form 990 Part VI asks whether the organization has a written conflict-of-interest policy and whether it follows the policy — meaning compliance is effectively required for any nonprofit that values its tax-exempt status and public credibility.

Elements of a Strong Conflict-of-Interest Policy

A compliant policy in either state should include the following core components:

Purpose statement. A clear statement that the policy exists to protect the organization's integrity and ensure decisions serve its charitable mission.
Definitions. Precise definitions of "financial interest," "conflict of interest," and "related party."
Disclosure procedures. A requirement that board members and officers disclose potential conflicts in writing, both annually and as they arise.
Recusal process. Individuals with a conflict must leave the room during discussion and abstain from voting.
Board review. Disinterested directors must affirmatively determine that any conflicted transaction is fair and in the organization's best interest.
Recordkeeping. Meeting minutes must reflect all disclosures, recusals, and decisions.
Annual acknowledgment. Every covered person signs an annual statement confirming they have read and understand the policy.

Related Party Transactions Under N-PCL § 715

Under New York law, "related party transactions" under N-PCL § 715 are a subset of conflicts of interest and are subject to additional scrutiny. A "related party" includes directors, officers, and key employees; their relatives; and any entity in which they hold a 35% or greater ownership or beneficial interest.

The board must affirmatively determine that any related-party transaction is fair, reasonable, and in the organization's best interest — and must document that reasoning in the minutes. Violations can lead to enforcement by the Attorney General's Charities Bureau, and in serious cases, personal liability for the directors who approved the transaction.

Practical Steps for Compliance

Adopt and circulate a formal conflict-of-interest policy that meets N.Y. N-PCL § 715-A standards — the same policy works as best practice for New Jersey organizations.
Train directors and officers annually on identifying and disclosing potential conflicts.
Collect annual disclosure statements and store them securely.
Include conflict review procedures on every board meeting agenda.
Record recusals and approvals clearly in the minutes.
Update bylaws and policies as state laws or IRS requirements change.

Conclusion

Nonprofit leaders often act with good intentions — but even perceived conflicts can damage credibility and invite regulatory scrutiny. Adopting and enforcing a strong conflict-of-interest policy protects both the organization's reputation and its tax-exempt status. Good Pine P.C. helps nonprofits in New York and New Jersey adopt policies that comply with state law, satisfy IRS expectations, and reflect genuine governance discipline.

Disclaimer

This article is provided for informational purposes only and does not constitute legal advice. The information contained herein is general in nature and may not apply to your specific circumstances. Reading this article does not create an attorney-client relationship between you and Good Pine P.C.

Good Pine P.C. is licensed to practice law in New York and New Jersey. This article is intended for audiences in those jurisdictions. Laws vary by state and locality; consult a licensed attorney in your jurisdiction before taking any legal action.

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Sung-Min Lee