Five Tax Traps for Business Lawyers Advising Nonprofit Clients

6/23/2014 Articles

Many business lawyers are often called upon to advise nonprofit organizations, such as their kids’ schools and sports leagues, soup kitchens and homeless shelters, museums and cultural institutions, community foundations, and the occasional private foundation set up by a good client. While much of the legal work for established nonprofits is the same as for any other business clients, the tax exempt status of these entities brings with it a host of income, property, and sales tax rules that are not necessarily obvious. This article highlights the most likely tax issues to arise for nonprofit organizations, typically corporations, that are described in Internal Revenue Code Section 501(c)(3). Similar traps exist for other common kinds of nonprofits – for example “social welfare” organizations, trade associations, and social clubs – but other special rules that apply to those types of entities are beyond the scope of this article.

Click here to read the full article published in the June 2014 issue of the American Bar Association's Business Law Today.