Client Alert: IRS Relief Available for Not-Profits Losing Their Tax-Exempt Status, But Donors Beware

Donors should confirm the charitable status of recipients to ensure that a charitable deduction will be available. Starting in June 2011, the IRS began publishing a monthly "revocation list" of organizations which had their federal tax-exempt status automatically revoked for failure to file an annual federal tax return (Form 990, 990-EZ or 990-PF) or notice (Form 990-N "e-Postcard") for three consecutive years after 2006. While the IRS will mail a notice of the revocation of tax-exempt status to the last known address of each affected organization, donors and grant-makers may not receive notice that such organizations are on a revocation list making any subsequent contributions to these organizations no longer tax-deductible.

Philanthropy & Tax-Exempt Organizations

Increasing numbers of individuals, families and businesses are creating their own personal gift vehicles, such as private foundations, donor-advised funds and supporting organizations, to carry out their own philanthropic goals and create an enduring charitable legacy. Donors in today’s world want to customize their charitable gifts, measure results and be confident that their charitable intent will be safeguarded. Consequently, charities are required to be more responsive, transparent and accountable than ever before. Giving money away efficiently and effectively is an increasingly complex endeavor.

The firm also has a tradition of helping tax-exempt organizations meet the challenges of adopting “best practices” standards. We have represented numerous private foundations (corporations and charitable trusts), trade associations, supporting organizations and public charities.

We have particular experience in issues relating to qualifying for tax-exempt status (including issues relating to form, structure and situs), joint ventures and other partnering arrangements, Sarbanes-Oxley compliance and the formation of donor advised funds. We also assist clients in grant making and grant agreements, compliance and disclosure requirements, Internet and information technology agreements and on audits, both federal and state.

We offer the full range of consulting services that a donor or charity may need, including:

Planning

  • Determination of short- and long-term charitable giving goals and values
  • Identification and evaluation of charitable giving alternatives tailored to particular goals and interests, and financial and tax needs
  • Development of a philanthropy mission statement and charitable giving plan

Formation

  • Development of a “business plan” for the charitable entity
  • Formation of a charitable entity (not-for-profit corporation or trust)
  • Securing of a 501(c)(3) tax exemption
  • Registration with applicable state authorities

Operations

  • Advice concerning strategic grant-making
  • Negotiation and drafting of gift agreements
  • Oversight of grants and gifts
  • Advice concerning intergenerational philanthropy
  • Advice concerning corporate governance, fiduciary duty and director’s liability issues
  • Advice concerning tax issues applicable to private foundations, donor-advised funds, supporting organizations and public charities, including managing or avoiding unrelated business taxable income

Administration

  • Keeping and maintaining record books
  • Preparing and filing of federal and state regulatory forms, including IRS Forms 990 and 990-PF

Fundraising

  • Advice concerning fundraising activities
  • Advice concerning state charitable solicitation and registration laws

Termination

  • Advice concerning the dissolution, merger, split-up of not-for-profit organizations and charitable trusts