Board approves amendments to Education Foundation bylaws after legal warning about 501(c)(3) risk

The Charleston County School District Board of Trustees voted April 27 to approve amendments to the Education Foundation’s bylaws after the foundation’s counsel warned the existing governance language could jeopardize IRS recognition as a 501(c)(3).

Katherine Templeton, chair of the foundation’s strategic planning committee, told the board the foundation sought legal review after discovering language that delegated rights and powers to the school district. “The current governance structure delegates certain rights and powers to the school district’s board of trustees,” Templeton said. “This unusual delegation of rights and power may cause the IRS to delay or reject the foundation status.”

Templeton and the foundation’s tax attorney recommended removing provisions that gave the board of trustees direct veto or control over foundational governance documents. Foundation members voted unanimously in a morning session to ask the board to adopt the redlined changes and forward the revised bylaws to the IRS.

Trustees pressed for more time to review the legal advice and to seek counsel themselves. Trustee Miss JW said the board “owes it to our constituents to do our due diligence, speak with an attorney ourselves.” Several trustees asked whether the specific sections proposed for removal (including language referenced in discussion as related to oversight or dissolution) were the only problematic items or whether further editing would be required.

District counsel had previously provided the foundation with an opinion that the combination of rights assigned to the school board and lack of independent control by the foundation could pose a problem for an IRS application. The district’s memo to trustees quoted the tax attorney: “The foundation’s current governance structure delegates certain rights and powers to the school district’s board of trustees. This unusual delegation of rights and power may cause the IRS to delay or reject the foundation status.”

Supporters of the amendments said an independent foundation is necessary to attract philanthropic partners and grants that require donations to a tax-exempt nonprofit. Trustee Mr. Kowski said that donors and rating agencies view a truly independent 501(c)(3) differently and that the changes were necessary for the foundation to function independently while the district retains control over public funds and contracts.

Opponents sought a short pause to review the lawyer’s detailed advice and to ensure the board understood the implications for dissolution procedures and other governance matters. After debate and a motion to postpone failed, the board approved the foundation’s proposed bylaw changes.

The foundation’s chair said the group will submit the revised bylaws to the IRS; she cautioned that review by the agency can take months. The board’s vote allows the foundation to proceed with the application while the district and the foundation plan to maintain alignment on priorities and oversight of public assets.

The board took no action at the meeting to change district control over contracts, assets or public finances; trustees noted those authorities remain with the board. The next procedural step is for the foundation to file for IRS recognition of the amended bylaws and await the agency’s determination.

The board moved to the next agenda items following the vote; trustees listed upcoming committee and budget meetings before adjourning.