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Starting a nonprofit

OFAC RULES FOR HUMANITARIAN AID
Starting a nonprofit

Foreign Aid and OFAC Sanctions

Certain countries, regimes, businesses, and individuals are subject to sanctions administered by the Department of Treasury’s Office of Foreign Assets Control (“OFAC”).

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Tax-exempt Purpose
Starting a nonprofit

Tax-exempt Purpose

There are 29 different exemptions under Code Section 501, the most popular of which is Section 501(c)(3). If the corporation plans to qualify for tax-exemption under Section 501(c)(3), the articles must limit the corporation’s activities to tax-exempt purposes. Tax exempt purposes include:

religious,
charitable,
scientific,
testing for public safety,
literary,
educational,
to foster national or international amateur sports competition, or
promote the arts, or for the prevention of cruelty to children or animals.

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Choice of Domicile for Nonprofit Corporations
Starting a nonprofit

Choice of Domicile for Nonprofit Corporations

Over the years we have worked with organizations in many different states and have had the chance to form some opinions about choice of domicile for nonprofits. Some of the factors that have influenced our thoughts on this matter include states requiring mandatory audits, multiple agencies overseeing nonprofits, unclear statutes governing nonprofit corporations, and aggressive regulation.

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Fiscal Sponsorship vs. Fiscal Agency
Starting a nonprofit

Nonprofit Jargon Buster 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.

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Excess Benefit Transactions
Starting a nonprofit

Excess Benefit Transactions

Before 1996, the only option the IRS had when faced with a tax-exempt organization that had violated the private inurement rules was to do nothing or to revoke the organization’s tax-exempt status, a penalty that often punished the organization’s beneficiaries more than the insiders who benefited from the inurement. To cure this problem, Code Section 4958 was added to the Internal Revenue Code in 1996 to provide the IRS with an “intermediate” tool between the extremes of either ignoring the problem or revoking the nonprofit’s tax-exempt status.

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Taking Over an Existing Nonprofit
Starting a nonprofit

Taking Over 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.

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Why Start a Private Foundation
Starting a nonprofit

Why Start a Private Foundation?

With the popularity and ease of donor advised funds, why do some donors still choose to start a private foundation to conduct their charitable giving?

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How to Start a Non-Profit Organization

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