Nonprofit and Tax-Exempt Organizations

  • Members of Holland & Knight’s Nonprofit and Tax-Exempt Organizations Team, many of whom hold advanced Master of Laws degrees in tax, have an in-depth understanding of nonprofit corporate governance, finance law and the tax laws and regulations that are unique to exempt organizations.
  • Our team provides clients with comprehensive legal representation, ranging from matters exclusive to tax-exempt organizations, such as excise taxes, intermediate sanctions and unrelated business taxable income, to those common to all business entities, including employment law, real estate leasing and intellectual property issues.
  • Several members of our team were directly involved in drafting the federal tax regulations applicable to tax-exempt organizations.

While nonprofit and tax-exempt organizations enjoy special tax advantages, the rules and regulations governing them are complex and ever changing. Our team is on the leading edge of these evolving rules and can help your organization successfully navigate through them. Recent changes that impact your tax-exempt organization include the IRS’s increased focus on governance and tax issues for exempt entities, the revised IRS Form 990 that considerably increases required disclosures and the active interest of state attorneys general in the operations and activities of tax-exempt organizations. Our Nonprofit and Tax-Exempt Organizations Team counsels clients in these issues along with every other aspect of their operations and can effectively guide you through the intricate legal issues faced by your organization.

Broad Client Base

Our team represents all types of nonprofit and tax-exempt organizations, including:

  • public charities, including national and international organizations
  • private foundations
  • private operating foundations
  • donor-advised funds and community foundations
  • colleges and universities
  • private and charter schools
  • student exchange organizations
  • healthcare providers
  • research organizations
  • museums and other cultural institutions
  • religious organizations
  • social service agencies
  • membership organizations
  • trade and professional associations
  • social clubs
  • advocacy groups

With respect to international organizations, we advise United States-based entities conducting activities outside the U.S., as well as foreign entities conducting activities in or generating income from the United States.

Comprehensive Legal Counsel

We provide comprehensive legal counsel to our clients by drawing on the knowledge and experience of our Nonprofit and Tax-Exempt Organizations Team members as well as other attorneys and professionals throughout the firm. We will work with you to assemble a customized team of lawyers based on your unique legal needs. Following are some of the legal areas important to nonprofit organizations:

Tax Law

Tax law considerations are critical to nonprofit and tax-exempt organizations in order to obtain and preserve their tax-exempt status. Failure to comply with tax rules may result in penalties imposed on the officers, directors and key employees of tax-exempt organizations and can also jeopardize the organization's tax-exempt status. The experienced tax lawyers on our team have an in-depth understanding of the Internal Revenue Service (IRS) and will guide your organization through the complex tax rules to maximize the benefits of your tax-exempt status while safeguarding against potential challenges. We regularly advise clients on:

  • IRS regulations and rulings
  • IRS audits, examinations and controversies
  • reasonable compensation issues
  • intermediate sanctions and "excess benefit" transactions
  • unrelated business taxable income
  • private inurement and private benefit prohibitions
  • private foundation rules, including provisions on self-dealing, excess business holdings, mandatory distributions, jeopardy investments and taxable expenditures
  • lobbying and political activities, including applicable restrictions and elections
  • rules on supporting organizations and donor-advised funds
  • partnerships and other joint ventures between exempt organizations or between an exempt organization and a non-exempt organization

Corporate Law and Governance

Our team regularly assists clients in creating tax-exempt organizations and in guiding them through the exemption application process. Once the entity is formed, developing and adhering to proper governance procedures is vital for tax-exempt organizations. The revised IRS Form 990, the annual tax return for exempt organizations, places more focus on governance issues than ever before. Because your organization's Form 990 is available to the public, your answers to the "good governance" questions and the financial disclosures will be reviewed by your prospective donors, especially those considering a substantial donation or bequest. It may also be examined by state government officials, the press, self-appointed "watchdogs" and others with an interest in your organization.

Our team can assist you in conducting internal reviews of your governance procedures to help you develop best practices that meet current standards. This process may include the preparation and adoption of governance guidelines, amendments to bylaws, committee charters, conflict-of-interest policies, document retention policies, "whistleblower" policies, grant procedures, indemnification policies and ethical conduct statements. We can advise the directors and officers of your organization on their fiduciary responsibilities, as well as indemnification and insurance issues.

We can also advise you in complex corporate transactions such as mergers of exempt organizations; formation of tax-exempt or for-profit subsidiaries; creation of a separate charitable foundation to accompany an existing non-charitable organization; contractual relationships between exempt and non-exempt organizations; asset transfers between exempt organizations; transactions between exempt organizations in the same state or in different states; agreements with professional fundraisers, corporate sponsors and other organizations and termination of exempt organizations. In addition, we regularly advise tax-exempt organizations on issues pertaining to lobbying and political activities.

Finance, Fundraising and Donor Issues

Finance and fundraising efforts are critical to nonprofit and tax-exempt organizations, especially in today's economic climate. Members of our team regularly advise tax-exempt organizations with respect to endowment policies, finance issues and agreements with donors. In addition, we provide Section 501(c)(3) tax opinions in tax-exempt bond financings, and advise clients on the use of tax credits to finance schools.

Tax-exempt bonds are often essential to finance projects that benefit the community. Members of our firm's Public Finance Team are experienced in structuring tax-exempt bond issues that qualify under Internal Revenue Code section 501(c)(3), as well as obtaining tax-exempt status under section 501(c)(3) for qualifying non-profit organizations. We have experience with organizations that provide housing for the aged, low-income persons and the disabled, as well as housing used in efforts to combat general community deterioration — and experience with bonds issued to benefit such organizations. Our team has also participated in numerous other qualified 501(c)(3) bond issues to finance hospitals, other types of healthcare facilities, educational institutions and museums. Since 2007, we have completed 51 financings involving 501(c)3/non-for-profit organizations totaling more than $1.78 billion.

We can provide you with the resources needed to comply with the laws governing charitable solicitation and fundraising. We are well-versed in federal tax law requirements related to fundraising as well as state charitable solicitation statutes. In addition, our team regularly renews and amends registrations and resolves disputes with state agencies.

We can advise you on the solicitation of endowment funds and gifts and the restrictions relating to endowments. Because charities often ask for gifts to be used as an endowment without understanding the restrictions that apply to the use of endowment funds, we assist clients in developing effective endowment policies and statements of investment policy. We also advise clients on their fiduciary obligations relating to the investment of charitable assets, including the specific rules relating to private foundations and charitable split-interest trusts.

We protect the interests of organizations named as beneficiaries in charitable bequests and estate planning documents. This also protects the interests of the charitable donors. Because many charities lack the staffing to monitor the progress of trusts and estates in which they are beneficiaries, we can provide you with valuable assistance in expediting the distribution of funds and reviewing the actions of the executor or trustee to assure that your organization receives the full amount of the gift as intended by the donor.

Private Foundations

Private foundations are subject to unique rules and restrictions governing their operations. Our team includes lawyers who drafted the federal tax regulations relating to private foundations. We can advise you on issues including annual distribution requirements, rules on domestic and foreign grant-making, and the prohibitions against self-dealing, jeopardizing investments, excess business holdings and taxable expenditures.

Trust Law

Some exempt organizations are created as trusts, rather than corporations. In other cases, an exempt organization may be the beneficiary of a trust. When trust law issues arise, our experienced trust lawyers can provide you with counsel relating to trust law issues, including the fiduciary obligations of trustees.

Real Estate Law

Nonprofit and tax-exempt organizations often require a physical location to carry out their work. Our firm’s Real Estate Team has extensive experience in real estate law, and can assist you with issues such as leasing, acquisition and disposition of property and contract drafting and negotiation. Our team can also provide counsel on issues unique to nonprofit organizations, such as rules governing low income and student housing as well as obtaining and preserving real property tax exemptions. Because the terms of a real estate transaction may affect your organization's exposure to unrelated business income tax, we can help you to structure transactions in the most appropriate manner possible.

Employment Law

For many nonprofit and tax-exempt organizations, human capital is the organization’s most precious resource. Members of our firm’s Labor and Employment Team can assist you with employment related issues such as job descriptions and postings, employment contracts, noncompete contracts, employee benefits, business immigration, employment discrimination, occupational safety and health, trade secret and intellectual property protection, whistleblower claims and more.

Employment law issues can intersect with tax law because excessive compensation of key employees may result in IRS penalties on the recipients as well as on the organization managers who approved the transaction. We can advise you about "safe harbors" and other means of avoiding a determination of excessive compensation, as well as employment "best practices" for exempt organizations.

Intellectual Property Law

Intellectual property may be one of the most valuable assets of a nonprofit or tax-exempt organization, especially for colleges, universities, research organizations and healthcare organizations. We have a team of attorneys who concentrate their practice in intellectual property, and can help you protect such property through patents, copyrights, trademarks, licensing and other agreements that safeguard your rights.

Litigation

Even organizations that do good works are sometimes involved in legal disputes. Fiduciary conduct and liability issues may arise in the course of normal business operations. For example, hospitals, schools and other organizations that deal with the public are exposed to a variety of legal claims, including injuries that may occur on the premises and alleged misconduct on the part of employees.

Members of our Litigation Team have extensive experience in conducting internal investigations and defending organizations when claims are brought against them. Some of our attorneys concentrate in representing nonprofit organizations in investigations by the IRS or state officials who regulate charities. We can advise you when claims are asserted against your organization or your directors, officers or other fiduciaries.

We endeavor to help our nonprofit clients avoid litigation, but when a dispute cannot be resolved through other means, our team has the knowledge and experience to handle any litigation that may arise.