Charitable Organization Tax Planning

Individuals, companies and civic groups often are interested in forming tax-exempt organizations.  Those organizations may be formed to promote charitable work, they may be formed to include family members in promoting an important charitable cause supported by their parent or benefactor. They may be formed by groups of business owners for promoting business growth or public service objectives.  Section 501 of the Internal Revenue Code provides a variety of exemptions available to different kinds of organizations.  Attorney, Otto S. Shill, III has extensive experience in forming, liquidating and operating such entities.

Each type of tax exemption brings with it different requirements.  In order to qualify for a tax exempt status, one has to first establish a valid entity under state law and then request and qualify for an exemption from the Internal Revenue Service.  The exemption will be granted based on how well the entity meets the requirements of applicable treasury regulations.  That application is typically accomplished on a specified tax form.  For example, a public charity that would be exempt under Internal Revenue Code Section 501(c)(3) would be submitted on a form 1023.  The forms typically will require a business to demonstrate that it is organized (through its corporate documents) and operated (through detailed explanations of its advertising, payroll practices, anticipated activities, publicity, and revenue sources) for charitable, educational, scientific purposes, or to relieve the burdens of government.  Other exemptions would have different but similar requirements and application forms.

Once granted an exemption, an entity must be operated in accordance with the exemption.  The application and the exemption granted in response to the application form the standard against which the entity’s performance will be judged.  An entity that desires to substantially change those operations must seek additional approval from the IRS.  Sometimes, tax-exempt entities merge or sell their assets to others and those transactions have all of the usual complexities that go with business transaction. Additionally, there are concerns with issues that are unique to tax-exempt organizations and Attorney, Otto S. Shill has the experience to assist you with such issues.