Tax-Exempt Organizations

Overview

Tax-exempt organizations face their own set of legal and business challenges. Although these organizations face some of the same legal issues for-profit entities confront, many unique legal and business challenges apply exclusively to tax-exempt organizations. Complying with the law, maintaining tax-exempt status and overcoming the difficulties of operating as a tax-exempt entity require counsel who know the ins and outs of the tax code and are experienced at advising tax-exempt organizations.

Stradley Ronon understands the legal and business challenges tax-exempt organizations face and is skilled at resolving them. Our lawyers represent tax-exempt organizations and those involved in tax-exempt financings regarding the many and varied legal issues that arise throughout their life cycle. From transactional issues to governance and structure matters, from tax issues to joint venture concerns, we address our clients’ needs and apply our vast experience to represent them effectively and cost efficiently.

Among our many clients are entities that qualify as tax-exempt charitable entities under Internal Revenue Code Section 501(c)(3), and we also represent title holding companies; social welfare organizations; religious organizations, including church and religious orders, colleges and universities, hospitals and health care systems, donor-advised funds, and supporting organizations; political organizations; trade associations; and other nonprofits. Additionally, we represent private foundations and advise them on the self-dealing rules, excess business holdings, taxable expenditures and prohibited grants.

Stradley Ronon’s attorneys have formed many nonprofit organizations, including nonprofit corporations, charitable trusts and limited liability companies. We assist with structuring issues, day-to-day management, transactions, and the host of operational and compliance issues they encounter.

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Representative Matters

  • Structuring and negotiating partnership arrangements between tax-exempt 501(c)(3) organizations and for-profit entities to ensure that the interests of the tax-exempt organizations were protected and to ensure compliance with various IRS rulings and court cases relating to joint ventures.
  • Successfully defending a church in a church tax inquiry relating to its alleged violation of the electioneering prohibition applicable to 501(c)(3) organizations.

  • Implementing programs to enable organizations to accept charitable contributions used to make grants to organizations in foreign countries and/or to enable organizations to use the donated funds to conduct charitable activities in foreign countries.

  • Successfully defending an organization in a federal tax audit involving the classification of its workers as independent contractors instead of employees.

  • Forming donor-advised funds and successfully obtaining IRS determination letters for them.

  • Structuring incentive compensation arrangements to ensure compliance with the intermediate sanctions rules and the prohibitions on private inurement and private benefit.
  • Structuring and negotiating a low-income housing tax credit transaction yielding a tax credit of $12 million and enabling a tax-exempt organization to transform a vacant building into apartment units for the elderly.
  • Negotiating with the IRS on behalf of numerous affiliated tax-exempt organizations to avoid penalties for nonfiling of Form 990.
  • Forming a company foundation designed to provide scholarships to children of its employees, designing the foundation’s scholarship application and guidelines, successfully obtaining tax-exemption for the foundation, and assisting company management in the implementation of the scholarship program.
  • Structuring and negotiating an affiliation agreement between a three-hospital health care system and an academic medical center, ensuring compliance with the supporting organization rules, and filing a request for a miscellaneous determination with the IRS to change the public charity status of an entity that received a $300,000 payment for capital improvements as a result of the affiliation.
  • Structuring and obtaining U.S. federal tax exemption for a Canadian charity that conducts charitable operations worldwide.
  • Successfully obtaining sales tax exemption in cases argued before administrative boards such as the Pennsylvania Board of Appeals and the Pennsylvania Board of Finance and Revenue.
  • Negotiating and drafting agreements for the acquisition of a group home for developmentally challenged adults by a regional health care system.
  • Reinstating the tax exemption of tax-exempt organizations that have had their tax-exempt status automatically revoked for nonfiling of Form 990, including retroactive reinstatement of tax-exemption by successfully arguing the existence of reasonable cause for nonfiling.
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