NEW!

Inside Peak at the IRS: Problems and Pitfalls of Form 1023-EZ Tax-Exemption Applications

To enjoy the benefits of Section 501(c)(3) tax-exempt status, nonprofits (other than churches and their integrated auxiliaries), must apply to the IRS using its Form 1023 or the newer Form 1023-EZ.  A few years ago, with Form 1023 processing times bogged down to a year or more, the IRS issued the streamlined Form 1023-EZ application as a way to expedite decisions made on tax-exempt applications.  But this cure is not so curative, as reflected in recently published Internal Revenue Service (IRS) reports. These reports flash caution signals for nonprofits seeking Section 501(c)(3) approval.

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Domestication: Moving Corporate Status Into (or Out of) Illinois

Where were you born?  For many people, that question leads to all sorts of interesting conversation, and the answer may carry important legal implications. For nonprofit organizations, they are “born” wherever the corporation was incorporated.  The state of incorporation is sometimes where a nonprofit is still located, and sometimes far from where it now operates. May the nonprofit’s state of incorporation change?  Until recently, the answer for Illinois nonprofit corporations was “No.”  But thanks to Illinois’ recently enacted “domestication” law, formally known as the Entity Omnibus Act, the answer is now “Yes.”  Effective July 1, 2018, the new law allows nonprofit corporations to move their “place of birth” into or out of Illinois.  That may be good news for certain nonprofits that have migrated here or elsewhere, particularly with respect to periodic state reporting requirements as well as other applicable state law. 

Taking a Strange Turn on Employee Transit Benefits

Transit benefits can be a great employer-provided perk to employees, whether provided for mass transit or parking, and whether paid directly to transit and parking companies or to employees.  As a result of recent federal legislation known as the Tax Cuts and Jobs Act (“Act”), however, employers may no longer deduct such transportation fringe benefits as their own deductible business expenses.  Moreover, nonprofit employers that provide this employer-provided perk must report and pay tax on the value provided as taxable “unrelated business income.”  On the other hand, employees may still contribute their own earned wages through a pre-tax salary reduction program.  Confusing?  Here are the key legal details and related employment adjustments that may be warranted in light of the Act’s passage, for both taxable and tax-exempt employers.

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