Bryan Cave lawyers possess substantial experience representing tax-exempt organizations before the Internal Revenue Service (“IRS”), state Attorney Generals, and other governmental bodies concerning tax exempt issues. In recent years, we have witnessed a substantial increase in audit and enforcement activities.
Formation, Governance, and Operation
Bryan Cave attorneys are experienced in formation of nonprofit organizations, and can provide strategies and tools for sound and effective nonprofit governance, board structures, and board/staff relationships.
- Formation and incorporation;
- Choice of form (corporation, trust, LLC) and choice of state law;
- Fundamental governance issues and board structure, roles, and responsibilities, including the fiduciary duties of board members and officers, committee responsibilities and charters, and indemnification rights;
- Board/staff relationships, responsibilities, and delegation of authority;
- Conflict of interest policies;
- Audit committee charters;
- Regulatory compliance and annual reporting;
- Sarbanes Oxley and “best practices”;
- Proxy, voting and other issues especially relevant to national and international membership organizations and organizations with affiliates or chapters;
- Corporate practices and record-keeping operations of the board of directors and appropriate board resolutions and minutes;
- Establishing grantmaking programs, including policies, procedures and criteria for grants;
- Design of grants for general support and specific projects or programs, as well as implementation through grant agreements;
- Pledge agreements and endowment fund issues;
- Investment policies and procedures and review of management contracts and investment instruments;
- Intra-organizational relationships:
- Board/staff relationships and responsibilities
- Executive and staff employment agreements
- Contracts for independent contractors, vendors, consultants and fund raisers
- Confidentiality, non-competition, and non-solicitation agreements;
- Negotiation and drafting of commercial contracts;
- Acquisition and leasing of office and program space.
Laws and Regulations Affecting Tax-Exempt Organizations
Bryan Cave attorneys are highly experienced in helping nonprofit organizations obtain tax-exempt status, and in helping to ensure that the status is maintained as the organization carries out its intended purpose despite the many operating pitfalls that exist.
We have filed hundreds of IRS Forms 1023 and 1024 and obtained recognition of exemption on behalf of these IRC § 501(c) organizations. After exemption is obtained, we help ensure that the exemption is maintained in the normal course of activities, providing guidance on tax, governance, corporate and contract law matters. We frequently submit filings with the IRS Adjustments Unit to approve instances where tax-exempt organizations expand or change their activities. In other contexts we have prepared and processed to a successful conclusion numerous private letter ruling requests on a number of issues affecting tax-exempt organizations.
Structuring, Reorganization, and Joint Ventures
Tax-exempt organizations are becoming more sophisticated in their approach to business operations and financial management, participating more often in business transactions and interacting more often with for-profit organizations. As they seek more creative sources of revenue to support their activities, they may face tax consequences in many instances. We can provide support across the complex environment in which these organizations must now operate.
When a tax-exempt organization is ready to reorganize, add a supporting entity, consolidate, or enter into a joint venture with another nonprofit organization, we help develop solutions and structures that will accomplish the client’s goals and maintain tax exemption. Creating joint ventures with for-profit organizations and integrating for-profit subsidiaries into a tax exempt organization’s structure are also solutions we implement frequently. We are also experienced in crafting and submitting private letter rulings to the IRS that provide additional certainty to a client embarking on an innovative activity or structure. Our experience includes:
- Structuring and restructuring related groups of nonprofit and tax exempt organizations, including the creation and management of subsidiary and supporting organizations;
- Structure and execution of entity mergers, acquisitions and joint ventures;
- Agreements for joint services, funding, administration, and joint venturing;
- Design and implementation of strategic alliances and collaborations;
- Structure, formation and execution of transactions and relationships with affiliated and unaffiliated not-for-profit and/or for-profit corporations, partnerships or limited liability companies;
- Design and implementation of strategic alliances, collaborations, community and economic development projects, and social enterprise ventures;
- Dissolution, entity terminations, and conversions.
State Tax Issues Impacting Nonprofit and Tax-Exempt Organizations
Bryan Cave attorneys are highly experienced advising nonprofit and tax-exempt organizations regarding state and local tax issues. These issues include state sales tax and property tax exemption, as well as state law issues impacting nonprofit corporations and charitable trusts, board fiduciary duties, and Attorney General oversight.
Our experience includes:
- Representation directed at tax-exempt organization compliance with, and full or partial exemptions from, state tax laws, including state income, franchise, sales/use, earnings, and real and personal property tax.
- Representation before state agencies in connection with examinations, audits, appeals and litigation involving state regulation, compliance and/or taxation matters.
- Alternative compliance strategies available to tax-exempt organizations under workers’ compensation and unemployment compensation laws.
- Issues concerning regulation by state Attorneys General, including annual reporting and compliance with federal and laws requiring other filings with state Attorneys General.
- Government relations, including advice to tax-exempt organizations with respect to state fundraising regulation requirements.
- Issues concerning commercial co-venture or cause-related marketing, including compliance with multiple jurisdictions for nationwide promotions, drafting necessary agreements, registration and filing obligations, and on-going reporting.
Foreign and Cross-Border Activities
Bryan Cave attorneys are highly experienced advising public charities and private foundations engaged in foreign and cross border activities.
Current and recent representations include advising a charity providing assistance to orphans in Ukraine, nomad children in Africa, micro-loans to low-income women in developing countries, and grants by a private foundation to foreign organizations.
- Governance, structural and organizational issues of U.S.-based organizations with affiliates and offices in other countries.
- Establishing charitable organizations in foreign jurisdictions as well as domestic “friends of” organizations.
- Solicitation limits applicable to contributions earmarked for overseas grant-making to support programs of foreign charitable entities.
- Grant agreements, including grants for direct support of specific projects or programs in foreign countries.
- International operational issues associated with the U.S. anti-terrorism regulatory structure and the sanctions program of the Office of Foreign Assets Control (OFAC).
- International grantmaking matters, including expenditure responsibility for private foundations.
- Organizational, funding and exemption matters involving public-private partnerships and other organizations working on global health issues.
Tax Exempt Bonds
Bryan Cave is nationally recognized bond counsel, well known for our experience, talent and creativity as bond counsel and counsel in other capacities in public finance transactions. Our attorneys have counseled clients — including hospitals, universities, libraries, health care organizations, retirement facilities, and religious institutions — on their ability to borrow at tax-exempt interest rates for construction or equipment acquisitions.
Charitable Contributions, Endowments and Fundraising
Our attorneys are highly experienced in structuring gifts to charitable organizations, which can significantly increase the effectiveness of both the contribution and the organization. We are very familiar with:
- Charitable gifts, contributions, and deductibility;
- Endowments: creation, use, and management and control of funds, creditor protection and restrictions on use;
- Donor gift instruments including restricted and outright gifts, donor advised funds, and board designated funds;
- Planned giving arrangements, bargain sales, charitable lead and remainder trust gifts, gifts of appreciated property and other types of charitable gifts;
- Legal aspects of benefit events and other fund raising activities;
- Advice to tax-exempt organizations with respect to federal and state fundraising and solicitation registration, reporting, and other regulation requirements;
- Use of life insurance to support charity, including issues related to charitable split-dollar arrangements, application of Section 170(f)(10), insurable interest laws, and other special issues that impact a charity’s ownership or interest in life insurance.
Special Types of Nonprofit and Tax-Exempt Organizations
There are several specialized types of nonprofit and tax-exempt organizations that have unique issues. Bryan Cave attorneys are experienced in the special needs of:
- Public Charities
Bryan Cave lawyers possess substantial experience advising public charities concerning special issues that impact public charities. These issues include excess benefit transaction issues, including executive compensation. For example, Bryan Cave lawyers routinely assist public charities to establish a rebuttable presumption that executive compensation is reasonable by following the IRS safe harbor. Bryan Cave lawyers also possess substantial experience advising organizations regarding various public charity classifications, including qualification as a publicly supported charity (donative or service-providers), a school, a medical research organization, a church, or a supporting organization.
Bryan Cave lawyers possess substantial experience advising supporting organizations, including Type I, Type II, and Type III supporting organizations.
Private Foundations: Grant-Making and Family Foundations
Bryan Cave lawyers possess substantial experience advising private foundations concerning special issues that impact such organizations. These issues include application of the self-dealing rules, minimum distribution requirements, excess business holding, jeopardizing investment, and taxable expenditure rules.
Private Operating Foundations
Bryan Cave lawyers possess substantial experience advising private operating foundations and special issues applicable thereto, including navigation of the complex operating test. These operating foundations include foundations engaged in an active art loan program.
Employer Sponsored Charities
Bryan Cave lawyers possess substantial experience advising employer sponsored charities, which typically qualify as private foundations. In addition to the application of the basic private foundation provisions, numerous special issues are raised, including special rules applicable to scholarship programs, employee disaster relief programs, commercial co-ventures and cause-related marketing, and foreign grant-making activities.
Civic and Social Welfare Organizations
Bryan Cave lawyers possess substantial experience advising social welfare organizations, including issues related to lobbying, political campaign activities.
Trade Associations and Business Leagues
Bryan Cave lawyers possess substantial experience advising trade associations and business leagues.
Health Care Entities
Bryan Cave provides legal counsel for the distinct needs of exempt health care providers. We support and guide these clients on joint ventures and acquisitions, licensing, corporate and medical bylaws, conflicts of interest policies, managed care, tax exemption and unrelated business income, fraud and abuse, and the Stark rules and regulations.
Trade and Professional Associations
Bryan Cave provides comprehensive legal and legislative affairs services to exempt organizations, national trade and professional associations, buying groups, cooperative organizations, and fraternal and service organizations. We serve as counsel to large and small trade associations in the manufacturing and professional services industries.
Our attorneys represent both operating and non-operating foundations, and have helped to form numerous family foundations whose primary activities involve the award and distribution of grants. We also advise private foundations on pitfalls such as self-dealing, excessive business holdings, jeopardy investments and taxable expenditures.
Other Legal Issues
There are numerous non-tax legal issues that impact nonprofit and tax-exempt organizations. Bryan Cave attorneys in other client service groups are experienced advising nonprofit and tax-exempt organizations in a broad range of legal issues, including (but not limited to) the following:
- Employee benefits and executive compensation
- Health care
- Life sciences
- Real estate
- Tax credits, including low income housing, rehabilitation, and new market tax credits
- Intellectual property, including copyrights and patents
- Labor and employment law
- Election law
- Art Law