In the iconic Blues Brothers movie, Sister Mary recruits Jake and Elwood to help raise money for delinquent property taxes on the Catholic orphanage in which they grew up. The music is legendary, and the Sweet Home Chicago-area scenes are memorable – Maxwell Street, Lower Wacker, the Daley Center, and the destruction of the Dixie Square Mall. But wait: did they really need to pay those property taxes, or could they have avoided the Illinois Troopers and Jail House Rock all together? The best legal strategy surely would have made for a dull movie. Cruising around in a ’74 Dodge with cop tires and cop suspension beats paperwork after all! But there is a better answer under Illinois law for the rest of us, with no road shenanigans necessary.
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.
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.