Tax Exemption

Securing and maintaining tax exemption is paramount for every nonprofit. We regularly engage with the IRS and fellow nonprofit attorneys throughout the country to remain in the vanguard of tax-exempt law for the benefit of our clients. 

  • Tax exemption applications
    • Our attorneys help nonprofit organizations to obtain federal tax exemption recognition as a 501(c)(3) public charity or private foundation, through development of the IRS Form 1023 application.   We also assist other tax-exempt organizations, including Section 501(c)(4) social welfare and Section 501(c)(6) trade association.  We provide guidance regarding compliance with initial requirements for obtaining tax exemption and with annual filing requirements to maintain exemption.  We also prepare state property and sales tax exemption applications for clients.
  • Unrelated business income
    • Unrelated business income is income from a trade or business, regularly carried on, that is not substantially related to the charitable, educational, or other purpose that is the basis of an organization's exemption.  Notwithstanding an organization’s general income tax exemption, unrelated business income is taxable.  Issues related to unrelated business income tax (UBIT) can be quite complex, but our attorneys are well-versed in these considerations and regularly advise clients regarding whether activities will result in unrelated business income tax.
  • Form 990 issues
    • The annual filing of IRS Form 990, 990-EZ, or 990-N is required of almost all tax-exempt organizations, with the notable exception of churches and similar religious institutions.  Our team members review IRS Forms 990 prepared by clients or their accountants, assist with drafting descriptive language required in the 990, and consult on Form 990 issues, such as how to report specific revenues or expenses, whether organizations are “related” organizations, and Schedule B donor disclosure considerations.  We also prepare tax-exemption reinstatement applications for organizations whose tax-exempt status has been automatically revoked for failure to file 990-series returns.
  • Private benefit and inurement
    • The activities of 501(c)(3) organizations and many other nonprofits generally must benefit a large charitable class, rather than the interests of a small group of private individuals.  Excess private benefit or inurement to nonprofit insiders is the most common reason nonprofits lose or fail to qualify for tax exemption under Internal Revenue Code Section 501(c)(3).  Our team helps nonprofit clients understand these restrictions, structure transactions to avoid impermissible private inurement and excess private benefit, and adopt policies that help the organization avoid conflicts of interest and private benefit.
  • Political campaign and lobbying limitations
    • Section 501(c)(3) organizations and some other nonprofits must adhere to restrictions on political campaign activity and lobbying, but there are a number of ways that nonprofits can and should be involved in the policy and electoral process, such as permissible issue advocacy and provision of educational materials.  We evaluate nonprofit clients’ activities for legal compliance with political campaign and lobbying restrictions, assist our clients to complete Section 501(h) lobbying elections when warranted, and help nonprofits to understand their rights in addressing vital public issues and to develop creative educational programs to promote public awareness.
  • Joint ventures
    • When two entities have a common goal, they can often benefit from a joint venture.  We help structure these ventures – through a new nonprofit corporation, a limited liability company, a limited partnership, another form of entity, or even simply a joint program funded by more than one organization – keeping in mind the advantage of available tax exemptions and advising on the tax ramifications of the venture.  Our clients rely on our expertise to assist them in determining what type of structure will best meet their needs. We advise nonprofit clients that join together for an endeavor, help create joint ventures between tax-exempt organizations and for-profit entities formed to accomplish unique public-private objectives, and draft and review joint venture agreements to protect our clients’ valuable charitable assets and tax exemptions.
  • Charitable contributions and deductions
    • Donor relations are very important to the success of a nonprofit.  We structure client giving opportunities in order to best protect donors’ deductibility of charitable contributions.  We also help clients report different types of contributions, such as non-cash contributions and corporate sponsorships, to the IRS to comply with donation receipting requirements.  This includes requirements related to quid-pro-quo contributions (where the donor receives a good or service in return), receiving contributions through Donor Advised Funds or online fundraising platforms.  
  • Private foundation excise taxes
    • Private foundations may be subject to excise taxes in many situations, including for self-dealing with substantial contributors or other “disqualified persons,” for failing to distribute a certain portion of income for charitable purposes, or for making impermissible expenditures.  The IRS also collects excise taxes on the net investment income of most private foundations, which private foundations are required to report annually on IRS Form 990-PF.  Our attorneys advise private foundations on how to minimize excise taxes through creation of and adherence to policies that prevent activities that would lead to excise tax and on how to properly report revenues, expenses, and activities on Form 990-PF.
  • IRS audits
    • The IRS may initiate a tax inquiry or examination of a nonprofit if the IRS believes that the organization may not qualify for tax exemption or may not be paying tax on unrelated business income or other taxable activity. Our attorneys have experience in favorably resolving IRS audits of tax-exempt organizations, either at the examination stage or at the IRS Appeals stage, including audits involving churches that are subject to the special "church tax inquiry" examination provisions under the Internal Revenue Code.