Public charities can effect great change and awareness while engaging individuals and corporations in inspired volunteerism, ventures and giving. We can help you work toward 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 that person's family) or the individual's 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.