A legal audit is an overview of an organization’s non-financial compliance, governance and risk management issues. Organizations typically consider a legal audit when new management takes over and wants to ensure they are starting with a clean slate or the in the wake of a costly mistake. … Continue Reading
Category Archives: Form 1023
Sandy Deja’s 2012 Update of Prepare Your Own 501(c)(3) Application
In 2010, I blogged about Sandy Deja’s ebook, Prepare Your Own 501(c)(3) Application. Ms. Deja has recently updated her popular guide to tackling the exemption process. While not much has changed with the application itself (something Ms. Deja notes may not be true much longer), much has changed in the nonprofit world in the past few years.… Continue Reading
Forming a 501(c)(3) Booster Club
Section 501(c)(3) of the Internal Revenue Code allows for tax exemption for organizations organized and operated to foster national or international amateur sports competition so long as no part of the net earnings inure to the benefit of any private shareholder or individual. A parent run booster club must be organized so that it benefits the entire class of athletes or participants and does not benefit certain individuals over others.… Continue Reading
Start-up Nonprofits Beware: Ensure your Tax Preparer is Registered with the IRS
Charities should be aware that it is now illegal for anyone to receive compensation for preparing a return for someone else if they have not obtained a PTIN from the IRS first; a paid preparer who is not registered with the IRS is perpetrating fraud. If a charity chooses to work with an unregistered paid preparer, it opens itself up to IRS scrutiny and, possibly, denial of tax exemption plus additional attorneys’ fees to resolve any issues arising from the initial filing. Charities also need to keep in mind that the organization, regardless of whether or not a paid preparer was used, is ultimately responsible for the information in it’s exemption application.… Continue Reading
Nonprofit Startups: Repurposing An Existing Nonprofit
Often prospective clients call us wanting to know whether we know of any dormant nonprofits that are going out of business that they could take over. The idea is that taking over an existing entity avoids the hassle and expense of incorporation, creating a governance structure and obtaining tax-exempt status for a brand new entity. Presumably, a new board of directors would be substituted in place of the old board and new officers would be elected.… Continue Reading
New Form 8940 for Miscellaneous IRS Approval Requests
The IRS has released a new form for tax-exempt organizations to use when they request determinations (other than initial exemption applications) about their tax-exempt status. In addition to foundation status issues, organizations will use Form 8940, Request for Miscellaneous Determination, to obtain advance approval of certain activities and exemption from Form 990 filing requirements. Prior… Continue Reading
Sweet Relief! IRS Announces Retroactive Relief Program for Revoked Nonprofits
Today, the IRS has made public the long awaited list of organizations that automatically lost their tax-exempt status due to their failure to file a Form 990, 990-EZ or 990-N for three consecutive years. The IRS announced that it has revoked the tax-exempt status of approximately 275,000 such organizations, including over 4,000 in Arizona.… Continue Reading
CyberAssistant – Not Worth The Wait
The IRS’ continuing delays in launching the CyberAssistant program have left many would be nonprofit founders struggling with the question of whether CyberAssistant and its promise of significantly lower filing fees is worth the wait. Due to the ongoing delays and lack of information regarding an expected launch date, we think not. … Continue Reading
Nonprofit Business Planning – Steal All the Underpants!
As a nonprofit lawyer, I spend a ludicrous amount of time talking people out of forming nonprofits. If founding a successful, impactful nonprofit were easy, everyone would be doing it! Unfortunately, that logic does not deter the majority of prospective nonprofit founders that call our offices. Often what we read between the lines goes something… Continue Reading
What is an American “Friends of” Organization?
To qualify as a U.S. “Friends of” affiliate of a foreign charity, U.S. law dictates how the U.S. organization must relate to its foreign affiliate. Under United States tax law, U.S. Friends of organizations must be operated independently of the foreign organizations they support.… Continue Reading
Fiscal Sponsorship vs. Fiscal Agency
The term “Fiscal Sponsorship” describes an arrangement between a non-profit organization with 501(c)(3) tax exempt status and a project, often a new charitable effort, conducted by an organization, group, or an individual that does not have 501(c)(3) status. Fiscal sponsorship permits the exempt sponsor to accept funds restricted for the sponsored project on the project’s behalf. The sponsor, in turn, accepts the responsibility to ensure the funds are properly spent to achieve the project’s goals. This arrangement is useful for new charitable endeavors that want to “test the waters” before deciding whether to form an independent entity as well as temporary projects or coalitions that are looking for a neutral party to administer their funds.… Continue Reading
Review of “Prepare Your Own 501(c)(3) Application” by Sandy Deja
Review of “Prepare Your Own 501(c)(3) Application” by Sandy Deja… Continue Reading
IRS Cyber Assistant – Is it Worth the Wait?
In 2003, the number of applications for exemption had gone up by over 40% with no corresponding increase in the number of IRS Exempt Organization employees. This motivated the IRS to consider how to streamline the application for exemption process to make processing easier for both the IRS and the applicant. The IRS invited a panel of experts from the nonprofit legal community to make recommendations to improve the application process. The panel’s key recommendation was that the IRS revive earlier plans to develop and fund an interactive online Form 1023 filing tool accessible through the IRS website known as the “Cyber Assistant.”
UPDATE: On May 7, 2010, IRS announced in IRS Exempt Organization Update 2010-11, that Cyber Assistant is delayed – no release this year. … Continue Reading
EO Exemption Application User Fees to Increase in 2010
Here’s a tip for nonprofits planning to apply for tax exempt status: submit the application for exemption in 2009, before the fees increase. The IRS has announced it is implementing an online application system known as Cyber Assistant in 2010. Once it’s launched, the application fees will change again and there will be a reduced fee for… Continue Reading
IRS Issues Guidelines for Processing Exemption Applications
The I.R.S. has made the guidelines it provides to its exempt organization determination specialists for processing tax exemption applications publicly available. … Continue Reading