Taxation and Wealth Planning

Nonprofit Organizations

Blog – Nonprofit Roundup

Authored by attorneys in the firm’s Nonprofit Organizations Practice, this blog addresses the issues encountered by these organizations and their directors, officers, trustees and donors, including formation, charitable trust creation and administration, retention of tax-exempt status, taxation, donations, unrelated business income tax and nonprofit governance.

Recent Blog Posts

  • How to Select a Merger/Reorganization Structure that is Right for your Nonprofit (Part IV) Another reorganization option for nonprofit organizations is “consolidation”. Under the consolidation option, the two nonprofit organizations that wish to affiliate with one another both merge into a newly-formed, third entity (“NewCo”). As a result of the mergers, both target entities dissolve into NewCo. All of target entities’ assets (including their contracts and licenses) automatically transfer to NewCo. NewCo also assumes all of the target entities’ liabilities. The main advantage of consolidation is that, like a statutory merger, it is simple. All assets... More
  • How To Select a Merger/Reorganization Structure that is Right for Your Nonprofit (Part III) Previously, we discussed two merger/reorganization structures: a statutory merger and a transfer of assets .  Part III of this series will discuss the advantages and disadvantages of a liquidating transfer of assets. A liquidating transfer of assets is very similar to a transfer of assets. A liquidating transfer of assets occurs when the target nonprofit uses its assets to pay its known liabilities and transfers its remaining assets to the surviving nonprofit (just like a transfer of assets).  However, after transferring... More
  • How To Select a Merger/Reorganization Structure that is Right for Your Nonprofit (Part II) Our first installment in this series discussed the advantages and disadvantages of a statutory merger, the main disadvantage being the assumption of all of the target nonprofit’s known and unknown liabilities. One alternative the surviving nonprofit can use to protect itself from the target nonprofit’s known and unknown liabilities is to structure the reorganization as a transfer of assets. Under this alternative, the target nonprofit (or “transferor nonprofit”) uses its assets to pay its known liabilities. The transferor nonprofit then transfers... More
  • How to Select a Merger/Reorganization Structure that is Right for your Nonprofit (Part I) Recently, the nonprofit sector has seen a drastic rise in the number of nonprofit mergers and reorganizations. The constant need to reduce costs, especially in the healthcare sector, seems to be the driving force behind the movement.  When selecting a merger or reorganization structure, what considerations should be reviewed to ensure the structure is right for the participating nonprofits? This series will provide a general overview of the various options nonprofits have when looking to undergo a merger or reorganization and... More
  • 10 Most Common Bylaw Problems Facing Nonprofit Organizations (Part III) We have been counting down the most common bylaw problems facing nonprofit organizations.  So far, we have discussed a number of problems ranging from the proper length of notice periods to an honorary board member’s potential liability.  For more on these problems and others, see our prior posts (Problems 10-8; Problems 7-4).  Below are the top three most common bylaw problems we encounter. 3.  Members – In the nonprofit world, members are akin to shareholders. But, in the IRS’ eyes, not... More
  • 10 Most Common Bylaw Problems Facing Nonprofit Organizations (Part II) Last week, we discussed the notice period for special board meetings, the proper power of executive committees and the differences between officers of the board and officers of the corporation.  Below, we continue on our countdown to the most frequently seen bylaw problem. 7.  CEO Designation – Many nonprofit organizations designate the board chair, generally a volunteer director, as the CEO of the nonprofit organization. Under state law, a board chair’s sole duties are to call the board meetings to order and... More
  • 10 Most Common Bylaw Problems Facing Nonprofit Organizations (Part I) Over the years, we have seen and reviewed numerous sets of nonprofit organization bylaws. Time and again, we see the same mistakes being made.  We’ve complied a list of the top 10 problems we encounter when we review a nonprofit organization’s bylaws.  Join us as we count down to the most frequently encountered bylaw problem.  Will your bylaws contain any of these problems? 10.  Notice Period – In an effort to ensure directors can make arrangements to attend special board meetings, a nonprofit organization’s... More
  • Corporation’s Charitable Contributions on Behalf of Employees are Not Deductible Business Expenses In Private Letter Ruling 201616002, the IRS ruled that a corporation’s contributions to charities on behalf of the corporation’s employees are not deductible business expenses. The contributions were made as part of a matching program. Under the matching program, if an employee contributed a certain amount to the corporation’s political action committee (PAC), the corporation would match the amount in the form of a charitable contribution.  The charitable contribution would be made on behalf of the employee to a charity of... More
  • What are Excess Business Holdings? A Primer The Internal Revenue Code permits private foundations and their disqualified persons (e.g., their directors, officers, substantial contributors, family members of the foregoing and entities owned by any of the aforementioned individuals) to own, collectively, a limited amount of stock in a single business enterprise. Generally, a private foundation and its disqualified persons are allowed to hold a combined total of 20% of all voting stock issued and outstanding by a single business enterprise (i.e., “permitted holdings”). Any amount that the private... More
  • Clerical Error Overlooked to Allow Charitable Deduction of $4.75 Million In February, an Oklahoma District Court ruled against the IRS, allowing the owners of Hobby Lobby to take a $4.75 million charitable deduction despite a clerical error made by the taxpayers at the time the charitable contributions were made. The charitable contributions at issue were made by Hob-Lob LP, which in turn owns more than 99% of Hobby Lobby Stores, Inc. The checks issued to the charities where incorrectly issued on checks from Hobby Lobby Stores, Inc., instead of on checks... More