Furthering your causes.

General Tax Exempt Entity Education

We can educate you on key issues surrounding the formation and generation of tax exempt entities including the following:

Nonprofit Status and State Tax Exempt Status: Nonprofit entities must be properly registered at the city, county and state level. To be exempt with respect to certain state taxes, an entity must be organized and operated in compliance with requirements for a nonprofit entity. Several state registrations and annual filings must occur to maintain a nonprofit entity. An entity that is tax exempt under federal law is often not exempt from all state level taxes.

Federal Tax Exempt Status: A myriad of different types of tax exempt entities are available. To be tax exempt at the federal level, a nonprofit must be organized and operated in compliance with requirements for a tax exempt entity. Nonprofits generally must submit a tax exempt application to the IRS and receive a determination letter from the IRS to be recognized as tax exempt, although there are certain exceptions to this rule. Nonprofits recognized as tax exempt normally must file an annual information statement.

Director and Officer Fiduciary Duties: Directors and officers of a nonprofit have duties of care, loyalty and obedience.

Liability Protection: Directors and officers can protect themselves from liability through appropriate corporate minutes, proper processes and policies, annual reviews, governance documents, and other resources.

Conflicts of Interest: Transactions between a nonprofit and an interested person (such as a director, officer, substantial donor and their family) or their related entities should be properly disclosed and determined to be reasonable and necessary.

Private Foundations

Private foundations can be an excellent way to give back to the community while leaving a legacy and engaging family or corporate management in charitable giving. A private foundation is a nonprofit entity at the state level that has received a determination from the IRS that it is a private foundation based on its organization and operations in furtherance of an exempt purpose.

We want to make sure that your foundation has the platform to be successful. A proper platform for success includes an entity that is properly formed, receipt of a tax exempt determination letter, and appropriate advice, education, processes and resources for your management team. A private foundation’s management team should be educated on issues specific to a private foundation, including:

Exempt Purpose & Private Benefit: A private foundation is required to operate exclusively for certain exempt purposes (such as religious, charitable, scientific, literary, or education) and may only have incidental private benefit to an individual or entity.

Jeopardy Investments: A private foundation must invest assets in a manner that does not jeopardize their use for exempt purposes.

Excess Business Holdings: Generally, the permitted amount of stock or other interest in a business enterprise is limited.

Qualifying Distributions: A private foundation must make qualifying distributions (often this is achieved through grants to public charities). In certain situations a private foundation should conduct a specific type of evaluation and take follow up measures to ensure that an expenditure has been properly used (expenditure responsibilities) by a person receiving the distribution. Private foundations may also need to determine whether an investment in a for-profit will be a qualifying distribution because it is a program-related investment.

Taxable Expenditures: Grants to individuals or organizations (other than a qualified public charity or an exempt operating foundation) are taxable unless expenditure responsibility or other qualifications are met. Expenditures to carry out activities with purposes other than tax exempt purposes are taxable. Lobbying and political activities generally are taxable, as noted below.

Lobbying and Political Activity: Other than through making available the results of nonpartisan analysis, study, or research, a private foundation is subject to tax on expenditures to carry out propaganda or otherwise attempt to influence legislation and to influence the outcome of an election. Substantially funding these types of activities may cause a loss of tax exempt status.

Self-Dealing: Certain types of transactions between a private foundation and an interested person (such as a director, officer, substantial donor and their family) or related entities may be prohibited. In other situations, such as compensation for qualified personal services, these transactions need to be properly disclosed and determined to be reasonable and necessary.

Donations: Qualifying donations to a private foundation are deductible by donors (other than corporate donors) to the extent of 30 percent of the donor’s adjusted gross income. Generally, donors must have receipts to support qualifying deductions, and private foundations are required to provide written disclosures to donors who receive goods or services in exchange for certain payments.

We help you plan for a private foundation, create a private foundation, address any issues that may arise and continue the private foundation throughout your family or corporation’s lifetime of charitable giving.

Public Charities

Public charities can effect great change and awareness while engaging individuals and corporations in inspired volunteerism, ventures and giving. We can help you work towards your goals through planning and counsel tailored to your situation.

When planning for and maintaining a public charity, the charity’s management should be aware of certain compliance rules that apply to public charities, including:

Exempt Purpose & Private Benefit: A public charity is required to operate exclusively for certain exempt purposes (such as religious, charitable, scientific, literary, or education) and generally may only have incidental private benefit to an individual or entity. No part of a public charity’s net earnings may benefit of a private shareholder or individual.

Public Support Requirements: A public charity is generally required to have broad public support under one of the IRS public support tests. Public support is measured over a five-year period.

Intermediate Sanctions & Excess Benefit Transactions: Transactions between a public charity and an interested person (such as a director, officer, substantial donor and their family) or their related entities may be subject to an excise tax if the economic benefit that is directly or indirectly provided by the charity to an interested person exceeds the value of the consideration given to the charity. These transactions need to be properly disclosed and determined to be reasonable and necessary.

Unrelated Business Income Tax: Income from a regular trade or business that is not substantially related to the tax exempt purpose of a public charity is regularly taxed.

Lobbying and Political Activity: A public charity many only engage in an insubstantial amount of lobbying. The public charity may elect to apply one of two tests. A public charity is taxed on substantial lobbying expenditures, as measured under the expenditure test. A public charity may lose its tax exempt status if it engages in a substantial amount of lobbying. Public charities are prohibited from directly or indirectly participating in, or intervening in, any political campaign on behalf of (or in opposition to) any candidate for elective public office.

Donations: Qualifying donations to a public charity are deductible by donors (other than corporate donors) to the extent of 50 percent of the donor’s adjusted gross income. Generally, donors must have receipts to support qualifying deductions. Public charities are required to provide written disclosures to donors who receive goods or services in exchange for certain payments.

We help you build a public charity, address any issues that may arise and continue the public charity into the future.

Other Tax Exempt Entities

A range of other tax-exempt entities are available, including civic leagues, agricultural organizations, business leagues, and boards of trade. We help you understand which entity that best fits your situation, educate you about the applicable law, and help you form and maintain your entity and tax exempt status.