Nonprofit Tax Matters

Our approach

The labyrinth of tax regulations is becoming increasingly complex and nonprofit organizations are in constant motion just trying to keep up with issues relating to:

• Unrelated business income tax
• Tax-exempt status
• Public charity vs. private foundation status
• Private benefit
• Political activity
• Lobbying
• The use of subsidiaries and joint ventures
• Excess benefits excise taxes (IRC Sec. 4958)
• Private foundation excise taxes (IRC Chap. 42)

We are at the forefront on unrelated business tax issues and work with nonprofit organizations to avoid and/or minimize its impact, including how to defend transactions on audit.

Who we work with

• Foundations
• Charitable organizations
• Colleges and universities
• Hospitals and health care systems
• Religious institutions
• Trade associations
• Social clubs, museums and cultural organizations
• Professional schools

Recent experience

• We have worked with private foundation clients to structure investments abroad and avoid the imposition of U.S. taxes. The firm successfully prosecuted a number of private letter rulings before the Internal Revenue Service National Office to approve one of these tax-saving approaches.
• We successfully challenged the revocation of the exemption of a multi-million dollar affiliate of a nationally known health care system by structuring a solution that met the requirements of the IRS to maintain exempt status.
• We represented a charitable organization accused by the IRS of paying unreasonable compensation to its CEO, and settled a proposed $1.0 million assessment against the CEO for $10,000.
• We engineered a novel relationship between a corporate funder and some local foundations to allow for enhanced giving in pursuit of corporate philanthropy.
• We have helped several charitable organizations avoid private foundation status without the need to satisfy the annual public support tests by forming them as medical research organizations or supporting organizations.
• We developed and implemented a post-merger reorganization plan for a major national trade association, which streamlined numerous nonprofit and for-profit subsidiaries, eliminated duplication and creatively used LLCs (limited liability corporations) to minimize unrelated business income taxes.