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.
As we fast approach tax filing deadlines, like the IRS Form 990’s May 15 deadline for tax-exempt organizations operating on a calendar fiscal year, the time is ripe for focusing on the joys and perils of tax reporting compliance. Some key lessons emerge from the U.S. Tax Court’s 2017 decision, which addressed the Losantiville Country Club’s Form 990-T tax returns.
An integrated auxiliary is a creature of tax law: in a nutshell, it is typically a separately formed legal entity operating a ministry extension of a church or other house of worship. Integrated auxiliaries may range from an afterschool sports ministry to more complex elder care or housing programs. Because churches are exempt from the initial exemption and annual Form 990 filing requirements under Section 501(c)(3), so too are churches’ integrated auxiliaries. These significant benefits warrant careful evaluation with respect to formation of church-related organizations and their tax compliant operations.