Case Study

An example of a complex matter advised by Cynthia since 2007 is Beneficial State Foundation. Beneficial State Foundation, a well-known charitable organization, was created to meet particular programmatic goals. Cynthia continues to advise the foundation and its board as outside general counsel. There have been a variety of twists and turns to its journey, but it is a great example of a collaboration by founders and existing public charities to enable and support the launch of an important charitable activity.

For many years the foundation was funded almost entirely by its founders, and consequently, it would have been a private foundation from inception because it did not at the outset reasonably expect to raise sufficient funds from the public to meet its lofty goal of owning all of the equity interests in Beneficial State Bank. Private foundation status, however, was unworkable given its mission—to change the banking system for good by close cooperation with, and ownership of, substantially all the economic interests in Beneficial State Bancorp and Bank. Anticipating that the foundation would have to be classified as a public charity by the IRS, the initial legal design advised by Cynthia set up the foundation as a “Type I supporting organization” to three public charities.

The business and charitable activities of the foundation and charitable objectives of its founders faced a number of regulatory issues, including bank regulations as well as complex provisions of the Internal Revenue Code that applied at the outset and evolved over the years. A number of modifications to the legal and governance structure were needed to address changing laws and opportunities. After many years operating a unique state-funded program, the foundation had attained substantial government grant support and easily met the public support tests. Consequently, it revised its governing documents, terminated the supporting organization structure with the consent of its supported public charities, and was reclassified as a public charity with substantial public support.

Firm Highlights

Publication

California Regulation of Charitable Fundraising Platforms: Part I - Definitions

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Nonprofit Basics: Unpacking Prudent Investments, PRIs and MRIs

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California Regulation of Charitable Fundraising Platforms Part 2 - Reporting Due Diligence, Recordkeeping, and Disclosure Rules

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IRS Dirty Dozen Warnings on Charitable Scams

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REFRESH: Loot and Private Foundation Rules – Part 2

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Employment Law Update for Nonprofits With Holly Sutton

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Nonprofit Quick Tip: State Filings in Kentucky and Tennessee

Welcome to  EO Radio Show - Your Nonprofit Legal Resource . Episode 78 is the 11th in a series of Quick Tip episodes focusing on the details of state registration of nonprofit corporations. With Joe...

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Publication

REFRESH: Loot and Private Foundation Rules – Part 1

Welcome to  EO Radio Show - Your Nonprofit Legal Resource . In this episode, I'm happy to refresh  EO Radio Show  episode 21, the first of our two episodes exploring private foundation rules using the...

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