Nonprofit and Charitable Organization Law

Nonprofit law is more than just tax law. At Wewer & Lacy, we use the intricacies of nonprofit law to help clients launch, grow and sustain organizations that have a positive impact on society and politics.

In addition to our legal backgrounds, our attorneys have significant practical experience in nonprofit law. Partner Jim Lacy serves as a Director for a number of nonprofit organizations across the country, and has served on boards for over twenty years. As a board member, he has encountered innumerable problems and helped create solutions for all types of issues, and adds this practical experience to the firm’s intellectual capital in nonprofit organization law.

Partner Janice Lacy is a specialist in establishing and maintaining nonprofit organizations. She is in the process of writing a handbook for nonprofit organization managers that summarizes her experiences in counseling organizations through their most common problems.

Creating Nonprofit Organizations

Because we have incorporated so many nonprofit groups throughout the United States, we have substantial experience in choice of entity decisions among the more than three dozen classifications of nonprofit organizations, and the rules for each type of nonprofit organization.

We interview clients to determine whether they are selecting the type of entity that will best serve their goals. After assessing our clients’ needs, we specialize in establishment of:

  • Charities (under IRS Section501(c)(3))
  • Social welfare organizations (Section 501(c)(4))
  • Trade Associations (Section 501(c)(6))
  • Separate segregated funds (IRS Section 527)
  • Political committees (IRS Section 527)
  • Support organizations (IRS Section 501(c)(3))
  • Hybrids of these organizations – usually to permit involvement in elections
  • Alternative vehicles for special activity

Reflecting our 20 years of experience in this field, we maintain a library of organizational documents, such as articles of incorporation, bylaws, and board minutes. Each of these documents can be individualized to entity and state law choices, and is kept updated to reflect amendments in tax, postal, and other laws affecting nonprofits.

We specialize in explicit issues that will affect individuals creating nonprofit organizations, such as:

  • Personal exposure of directors and officers
  • Composition of boards of directors
  • Interlocking directorates
  • Provisions to offset hostilities on boards
  • Determination of executive compensation
  • Avoidance of private inurement
  • Avoidance of private benefit
  • Analysis of unrelated business income

We are especially concerned about the impact of federal and state laws on the exposure of directors and officers, and we take these issues into account when we create organizational documents and as we give advice to our clients.

Tax Exemption Issues

Nonprofit organizations have the power to impact society and elections only if they obtain – and maintain – tax exemption from the Internal Revenue Service and from state agencies. We take the following steps to guard tax-exempt organization status for our clients:

1. Obtaining – and Keeping – Tax-exempt Organization Status: We are specialists at obtaining tax exemption rulings at the federal level from the IRS and at the state level from state agencies. We often work with the IRS to hammer out problems that would otherwise prevent an organization from obtaining tax-exempt organization status.

2. Defending Clients When Problems Arise: We defend clients in audits and revocation proceedings.

3. Conducing Prophylactic Reviews of IRS Form 990: A nonprofit organization’s informational return, IRS Form 990, contains a wealth of information –and pitfalls – that can wreck an organization’s tax exempt status, create problems with other agencies, and lead to unfavorable publicity. We work closely with our clients’ accountants to review nonprofit tax returns before they are filed for tax law compliance. We also check Form 990 for compatibility with other regulations that govern nonprofit organizations, notably postal and lobbying laws.

4. Protecting a Client’s Right to Lobby, Electioneer and Engage in Other Advocacy: To understand how we help our clients, go to Advocacy rights of nonprofit organizations.

5. Defending Clients Against Fines: Nonprofit organizations can miss tax and other filing deadlines. Our firm is skilled at obtaining abatements of penalties and interest when such filings are missed.

6. Guarding Clients with Preventive Monitoring: We represent a number of public charities, private foundations, separate segregated funds, and private operating foundations, so we are familiar with the welter of complex and sometimes confiscatory regulations and penalties with which those special types of nonprofit groups must comply.

Other nonprofit groups also are subject to strict spending limits in various areas. Working with our clients’ accountants, and to ensure continuing tax exempt status, we monitor and advise on spending regarding:

  • lobbying and election activities;
  • fundraising; and
  • levels of public support.

7. Helping Clients Live in the Public Fishbowl: We help organizations comply with IRS public inspection requirements, so that the organization complies with IRS rules and procedures in making its information available to the public.

8. Protecting Clients Against Excess Benefit Sanctions: We help clients avoid excess benefit sanctions in transactions with nonprofit organizations, including unreasonable compensation and revenue sharing transactions for section 501(c)(3) organizations.

9. Helping Clients Retain Donors: We advise clients on how to handle special contribution problems, such as:

  • Noncash contributions
  • Donor notifications and written substantiations
  • Corporate sponsorship income

10. Engaging in Strategic Planning: Because we have so much experience with nonprofit organizations, our clients often discuss project ideas with us so that we can offer our input. We monitor creative projects undertaken in the nonprofit community, and keep our clients informed about these projects, and about emerging trends in the law.