All’s well that ends well – at least according to Shakespeare and now Aegis for Dreams Foundation and its journey toward Section 501(c)(3) tax-exempt recognition. The Foundation is a self-described educational nonprofit that is producing an historically accurate film about the United States’ founding fathers. Last January, W&O blogged about the IRS’s denial of tax-exempt status, based on the IRS’ misplaced reliance on private benefit and commerciality tax doctrines. While these tax doctrines bear much relevance for nonprofits that rely on strategic relationships with private parties or engage in innovative business-like methods, they can derail a tax-exempt application and result in denial.
Churches, synagogues, mosques, temples, and other houses of worship have long enjoyed Section 501(c)(3) public charity status, with resulting exemption from IRS Form 990 filings, availability of clergy housing allowances, and religious liberty protections. When, why, and how should other faith-based organizations affirmatively seek IRS reclassification as a “church” – or as an “association of churches” or “mission society” – with similar tax and other legal benefits? The following article addresses such questions extensively, including applicable tax considerations, corporate governance aspects, legal requirements for housing allowance, employment discrimination aspects, and other resulting implications. We hope this deep-dive guidance will help those who are interested in religious tax reclassification. This article was co-authored by W&O Partners Sally Wagenmaker, Ryan Oberly, and Paul Winters and was previously published in Thomson Reuters’ Taxation of Exempts Journal (Jan./Feb. 2022)
“Can we get sales tax exemption?” Our law firm’s State Compliance and Tax Practice Group handles this question on a regular basis, usually for a specific state and increasingly with an eye toward online activity and multi-state legal compliance. Additional questions arise depending on whether the anticipated activities will involve purchases, sales, tangible goods, and intangible goods, as well as how and when such activities will be carried out. While this short question seemingly could be answered by a quick “yes” or “no” response, the answer usually warrants a more extensive and fact-specific legal evaluation. This article addresses key points of such evaluation for nonprofits, including purchases, sales, online activity, and guidance about state-specific dimensions.