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L3C Update
News and Avoiding Scams

L3C – An Update by Keren Raz

Since Charity Lawyer’s last blog post on the Low-Profit Limited Liability Company, there has continued to be significant legislative activity across the country in support of the L3C though no corresponding uptick in foundation support. Louisiana, Maine, and North Carolina have signed L3C legislation into law. These three states join the following jurisdictions in recognizing the L3C: Illinois, Michigan, Utah, Vermont, Wyoming, the Oglala Sioux Tribe, and the Crow Indian Nation of Montana. In the following states, legislators have formally introduced L3C legislation: Arkansas, Colorado, Kentucky, Maryland, Massachusetts, Missouri, Montana, New York, North Dakota, Tennessee, and Virginia.

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November 30, 2010 No Comments
Proposition 203
News and Avoiding Scams

It’s a Medical Marijuana Miracle – Arizona Voters Approve Proposition 203

Following initial reports that the measure had failed, officials announced Sunday that Arizona voters approved Proposition 203, a measure that will legalize medical marijuana, by a razor thin margin of 4,300 votes.

As we have pointed out before ,Proposition 203 requires medical marijuana dispensaries to be formed as nonprofit entities but does not require that they incorporate or that they operate on a tax-exempt basis. Accordingly, we expect most dispensaries to operate as nonprofit corporations that are taxed as for-profits to avoid the burdensome restrictions applicable to tax-exempt organizations.

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November 15, 2010 No Comments

Small Tax Exempt Organizations: Extension of Time to File Delinquent Form 990s

Two types of relief are available for small exempt organizations – a filing extension for the smallest organizations required to file Form 990-N, Electronic Notice (e-Postcard), and a Voluntary Compliance Program for small organizations eligible to file Form 990-EZ , Short Form Return of Organization Exempt From Income Tax. Small organizations required to file Form 990-N simply need to go to the IRS website, supply the eight information items called for on the form, and electronically file it by Oct. 15, 2010.

Under the Voluntary Compliance Program, larger tax-exempt organizations eligible to file Form 990-EZ (but not eligible to file Form 990-N) must file their delinquent annual information returns by October 15 and pay a compliance fee which is between $100 and $500 depending upon the organization’s revenues. Details about the VCP are on the IRS website , along with frequently asked questions.

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July 27, 2010 No Comments

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.

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May 2, 2010 1 Comment
Automatic Revocation of Exemption
News and Avoiding Scams

May 17 First Major Deadline for New Automatic Revocation of Exemption Penalty

As part of the Pension Protection Act passed in 1996, Congress added a new penalty for tax-exempt organizations that fail to file their annual return for three years in a row. Formerly, the only penalty was a monetary penalty. The new law has upped the ante to impose the ultimate penalty: loss of exemption. The penalty applies to organizations that fail to file Form 990, Form 990-EZ, as well as the relatively new Form 990-N. Form 990-N is a relatively new form that must be filed by tax-exempt organizations whose revenues normally fall below $25,000. Organizations that have their status revoked may apply for reinstatement based on reasonable cause for the failure to file. The first three year period is 2007 through 2009, which means that once the 2010 filing deadline passes for these forms (May 15, 2010 for tax-exempt organizations with calendar fiscal years), organizations that failed to file their Form 990s forms for those three years will automatically lose their tax-exempt status.

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April 24, 2010 No Comments
Maryland Benefit Corporation
News and Avoiding Scams

Maryland Benefit Corporation

The benefit corporation concept has some similarities to the L3C model but is geared toward corporations rather than LLCs. Like the L3C, benefit corporations pursue a mission that goes beyond making a profit for owners and investors. Importantly, it also provides legal protection for board members that consider social and environmental issues when making decisions on behalf of the corporation.

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April 21, 2010 No Comments
Small is Beautiful
News and Avoiding Scams

Caritas Law Group: Small is Beautiful

Yes, the rumors are true. CharityLawyer has formed her own law firm. My theme for 2010 is Small is Beautiful (which happens to be the title of the next book review). I started my career at a big four accounting firm with thousands of tax professionals, moved down the food chain to a national law firm of only 400 lawyers, and then to a regional law firm with a mere 200 lawyers. So, to continue the trend, I have started my own boutique law firm specializing in representing nonprofit and tax-exempt organizations. The firm is located in Phoenix, Arizona but will represent clients with respect to exempt organizations matters nationwide.

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January 13, 2010 2 Comments

How to Keep your Non-Profit Compliant in All 50 States

Most states require you to register your organization if you solicit donations from their residents. Many states also require registration if your organization collects substantial or ongoing donations from their residents, even if you aren’t specifically targeting donors in that state. Download our comprehensive list of each state’s requirements.

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