We often advise clients and community leaders who consult with us for advice regarding the creation of a new non-profit organization to address a specific charitable, religious or educational purpose. The legal entity created may be a non-profit, non-stock corporations or a charitable trust, and the tax provisions in the Code and Regulations governing the structure and operation of these entities require significant evaluation before the commitment is made. We truly appreciate the opportunity to provide legal and tax counsel to clients who wish to create a new non-profit organization or private foundation, as well as to those who operate established non-profit organizations.
FORMATION OF TAX-EXEMPT ENTITIES
COMPLIANCE FOR TAX-EXEMPT ENTITIES
Non-profit organizations must file an annual informational income tax return (Form 990), which enables the Service to examine the reported transactions for evidence of unlawful private benefit to the officers or of income arising from unrelated business activities (on which charities must pay tax).
Private foundations must file an IRS Form 990-PF each year to verify that the required amount of charitable distributions were made, in addition to reporting the income earned and the absence of self-dealing between the charity and its officers and directors. Given the potential for severely negative consequences, including revocation of tax-exempt status, it is recommended that these tax returns be reviewed, if not prepared, by experienced tax professionals engaged by the charity.