Tax-Exempt Organizations
Tax-Exempt Attorneys for Businesses and Nonprofits
Kirton McConkie attorneys combine technical tax expertise with an understanding of how exempt organizations operate in practice. We design practical solutions that are legally sound, administratively workable, and aligned with the client’s mission.
Tax Planning
Tax-exempt organizations face the same range of legal issues that taxable organizations face, including employment, real estate, intellectual property, and litigation, but embedded in all of them can be complex issues related to maintaining tax-exempt and public charity status, compliance with various operational restrictions, and taxes uniquely imposed on otherwise tax-exempt organizations. In addition, taxable entities related to or transacting with exempt organizations may also become subject to special tax rules, and donors must meet detailed substantiation requirements for charitable contributions or risk loss of potential tax benefits.
Our tax-exempt organizations lawyers focus on the tax rules applicable to tax-exempt organizations, related taxpayers, transactions between taxable and tax-exempt entities, and charitable contributions. Whether in the midst of daily operations or significant transactions, we help our clients avoid prohibited activity and risks to their tax-exempt status, find practical paths to compliance, and plan for applicable taxes (such as those on investment income, university endowments, unrelated business income, and executive and employee severance compensation).
We serve tax-exempt clients operating across the country, including large and small public charities, private foundations, private operating foundations, supporting organizations, donor-advised fund sponsors, religious and educational institutions, hospitals, trade associations, social welfare organizations, employee benefit trusts, and state, local, and tribal government entities. We also advise donors, family offices, companies, investment managers, and other taxable organizations in their dealings with exempt organizations.
Since exempt-organization tax issues frequently intersect with corporate, investment, employment, real estate, intellectual property, and regulatory matters, we work closely with attorneys throughout several practice areas to provide coordinated and practical advice to clients and have developed our collective ability to spot and resolve issues unique to non-profit and tax-exempt entities. Our firm’s Nonprofit Organizations industry group reflects our collaborative, multidisciplinary approach, bringing knowledgeable professionals together across the firm to benefit our nonprofit clients.
We work with individuals, corporations, LLCs, and tax-exempt organizations to identify and implement strategies that minimize risk and optimize financial outcomes. We advise religious, educational, and charitable organizations on non-profit tax exemption, 501(c)(3) compliance, and charitable giving structures.
Exempt Organizations Services
- Formation and tax-exempt status. From simple entity formation and exemption applications to more complex options, including multi-entity structures and group ruling requests, we help ensure new organizations are thoughtfully structured and federal exemption applications are properly completed to avoid unnecessary delays while providing organizational reliance and appropriate transparency.
- Maintaining tax-exempt and public charity status. We counsel organizations on operational compliance with exemption requirements, including charitable qualification of new activities; implementation of good governance practices, including conflicts-of-interest policies; avoidance of self-dealing and excess-benefit transactions; public-support requirements; appropriate executive compensation and benefits; and federal and state tax reporting.
- Investing and unrelated business activities. We counsel both large and small exempt organizations and benefit plans regarding unrelated business taxable income from non-charitable activities and investments. We assist clients with planning and structuring income producing activities, allocation of expenses for dual-purpose activities, and application of unrelated business income tax rules, including numerous exceptions. We regularly think through tax issues involving debt-financed income, partnership investments, private equity and hedge funds, real estate investments, alternative investment structures, controlled entities, and the use of domestic or offshore blocker entities for foundations, endowments and large institutional investors.
- Executive compensation and employee benefits. We regularly counsel on setting executive and board compensation for tax-exempt organizations and we are experienced with the full range of compensation, fringe benefit, and benefit plan provisions, including the special rules that apply to tax-exempt plans like 403(b) plans, church plans, and other plans involving multiple tax-exempt and taxable affiliates. We also advise on tax-exempts’ nonqualified deferred compensation subject to section 409A and 457(f), as well as the interaction with excess benefit rules of section 4958 and the recently expanded section 4960 tax on exempt employee compensation, including planning for involuntary terminations and regulatory exceptions for certain volunteers.
- Charitable giving. We advise donors and charitable organizations on complex gifts, gift-acceptance policies, charitable and split-interest trusts, charitable gift annuities, donor restrictions, substantiation requirements, and the tax impacts of contributions of closely held business interests, real estate, and other noncash assets. We regularly work closely with our transactional colleagues to help donors in the midst of a major liquidity event to navigate the tax complexities of gifts of business interests.
- Impact Investing. We help foundations and other charitable organizations structure and monitor program-related investments, mission-related investments, recoverable grants, guarantees, and other forms of impact investing.
- Transactions, affiliations, and restructurings. Partnering when necessary with other tax colleagues, we advise on joint ventures with taxable and tax-exempt participants, structuring relations between creation of for-profit subsidiaries, mergers, acquisitions, asset sales, conversions, dissolutions, reorganizations, and other transactions involving charitable assets or exempt organizations.
- International grantmaking and activities. We assist U.S. organizations with activities and operations in more than 100 countries worldwide, including grantmaking, visiting for work or study, participating in joint programs, and forming branches and new entities abroad. We also help foreign organizations fundraising or investing in the United States, and organizations establishing “friends of” or similar cross-border structures. We frequently partner with our International practice area attorneys, who have extensive experience in international transactions and a large global network of local nonprofit counsel, to integrate U.S. tax advice with advice on local foreign-law requirements..
- Donor-advised funds and supporting organizations. We regularly advise sponsoring organizations, donors, fund managers, supporting organizations, and supported organizations on formation, classification, distributions, governance, excess-benefit rules, and other specialized tax requirements.
- Advocacy and political activity. We counsel public charities, private foundations, Section 501(c)(4) organizations, and other exempt entities regarding exempt organization limits on lobbying and political campaign activity, and related reporting obligations.
- State and local exemptions. We help organizations think through when new uses of property could threaten their property tax exemption, and when distribution of charitable materials or transfers of property could trigger sales, use, or similar transfer taxes.
- New legislation/guidance. Thinking about how a new tax rule might apply to your non-profit organization? We likely are, too. We regularly help clients navigate new restrictions and take advantage of new incentives and benefits and, when necessary, we have the inside-the-beltway experience to help them make the case for adjustments to proposed rules through comments or meetings with IRS, Treasury, or other government officials.
- IRS examinations, rulings, and corrective action. We represent exempt organizations and related parties in IRS and state examinations and appeals, administrative proceedings, ruling requests, and voluntary corrective matters.
- Religious institutions. We help churches, integrated auxiliaries, church-controlled entities, and other religious organizations comply with special rules applicable only to them, such as employment tax requirements, compensation rules affecting “ministers of the gospel,” group ruling maintenance, and special annual reporting exemptions and protections against examination.
- Private foundations. We advise private foundations and their board members on the special foundation excise taxes, which penalize “self-dealing” transactions with contributors and managers, failures to make minimum distributions, making excessively risky investments, exceeding statutory limitations on ownership of certain business entities, and unauthorized grantmaking. We assist clients in structuring their operations to comply with the rules and help clients identify and correct potential violations.
- Donor-advised funds and supporting organizations. We regularly advise sponsoring organizations, donors, fund managers, supporting organizations, and supported organizations on formation, classification, distributions, maintaining status, governance, excess-benefit rules, and other specialized tax requirements.
- Other nonprofit-specific laws. Our tax-exempt organizations attorneys often advise clients across a range of non-tax issues specific to nonprofits, including state law fiduciary duties, independence requirements, use of donor-restricted assets, prudent investment standards, and charitable fundraising compliance. We also work closely with lawyers from other areas of the firm in our Nonprofit Organizations industry group to bring our clients advice on employment, intellectual property, international, transactional, regulatory, immigration, litigation, real estate, and other legal advice tailored to the nonprofit context.
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