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About Richard Keyt

The author of this article is Richard Keyt, an Arizona business law attorney who has formed 7,800+ Arizona companies, including 300+ nonprofit corporations.

Tax Exemptions for Religious Institutions: A Primer

Washington Post:  “Today, the IRS’s requirements for any group seeking tax-free status are relatively simple. The organization must be set up and operated “exclusively for religious, educational, scientific, or other charitable purposes,” its earnings shouldn’t benefit private individuals, it shouldn’t attempt to influence legislation or intervene in political campaigns, and its purpose and activities may not be illegal or violate fundamental public policy. The current IRS tax guide states that churches automatically qualify for federal income tax exemption under rule 501(c)(3) without even needing to apply. . . . But recent developments may mean things are about to change.”

2018-01-14T10:38:13-07:00September 14th, 2015|Religious Institutions|0 Comments

First Church of Cannabis Gets 501(c)(3) Tax Exemption from IRS

USA Today:  “Emotions appeared to be sky high at the newly formed First Church of Cannabis after the Internal Revenue Service granted it nonprofit status.  The designation means donors can deduct gifts to the church on their federal tax returns if they itemize and the church is eligible for a property-tax exemption in Indiana. The organization has raised $10,905 in a gofundme.com solicitation but has not found a home yet.  “What a GLORIOUS DAY it is folks,” the founder and grand poohbah, Bill Levin, wrote May 26 in a Facebook post announcing the church’s IRS approval as 501 (c) (3) charitable organization.

2018-01-14T10:38:13-07:00June 6th, 2015|Charitable Organizations, Charity News, IRS News|0 Comments

4 Cancer Charities Are Accused of Fraud

New York Times:  “There were subscriptions to dating websites, meals at Hooters and purchases at Victoria’s Secret — not to mention jet ski joy rides and couples’ cruises to the Caribbean.  All of it was paid for with the nearly $200 million donated to cancer charities, and was enjoyed by the healthy friends and family members of those running the groups, in what government officials said Tuesday was one of the largest charity fraud cases ever.  At the center of the operation was James T. Reynolds Sr., who opened the Cancer Fund of America in 1987. Over the decades, according to a complaint filed by the Federal Trade Commission and regulators from 50 states and the District of Columbia, he expanded the enterprise to four separate groups and was joined by his son, friends and members of his Mormon Church congregation in Knoxville, Tenn.”

2015-05-27T21:31:57-07:00May 19th, 2015|Charitable Organizations, Charity News|0 Comments

Can an LLC be a Tax-Exempt 501(c)(3) Charity?

Question:  My group is considering forming a tax-exempt charitable organization.  Can the organization be a limited liability company or must it be a nonprofit corporation?

Answer:  It can be an LLC if the LLC is owned only by Section 501(c)(3) organizations or governmental units or wholly owned instrumentalities of a state or political subdivision thereof and the LLC satisfies the 12 conditions described in an IRS paper called “Limited Liability Companies as Exempt Organization Update.” The LLC cannot have individuals or nonexempt organizations as members, and its organizing documents must contain certain language required by the IRS.  The 12 conditions are:

1. The organizational documents must include a specific statement limiting the LLC’s activities to one or more exempt purposes.

2. The organizational language must specify that the LLC is operated exclusively to further the charitable purposes of its members.

3. The organizational language must require that the LLC’s members be section 501(c)(3) organizations or governmental units or wholly owned instrumentalities of a state or political subdivision thereof (“governmental units or instrumentalities”).

4. The organizational language must prohibit any direct or indirect transfer of any membership interest in the LLC to a transferee other than a section 501(c)(3) organization or governmental unit or instrumentality.

5. The organizational language must state that the LLC, interests in the LLC (other than a membership interest), or its assets may only be availed of or transferred to (whether directly or indirectly) any nonmember other than a section 501(c)(3) organization or governmental unit or instrumentality in exchange for fair market value.

6. The organizational language must guarantee that upon dissolution of the LLC, the assets devoted to the LLC’s charitable purposes will continue to be devoted to charitable purposes.

7. The organizational language must require that any amendments to the LLC’s articles of organization and operating agreement be consistent with section 501(c)(3).

8. The organizational language must prohibit the LLC from merging with, or converting into, a for -profit entity.

9. The organizational language must require that the LLC not distribute any assets to members who cease to be organizations described in section 501(c)(3) or governmental units or instrumentalities.

10. The organizational language must contain an acceptable contingency plan in the event one or more members ceases at any time to be an organization described in section 501(c)(3) or a governmental unit or instrumentality.

11. The organizational language must state that the LLC’s exempt members will expeditiously and vigorously enforce all of their rights in the LLC and will pursue all legal and equitable remedies to protect their interests in the LLC.

12. The LLC must represent that all its organizing document provisions are consistent with state LLC laws, and are enforceable at law and in equity.

2018-01-14T10:38:13-07:00August 4th, 2014|Charitable Organizations, FAQs, Start Up Issues|0 Comments

IRS Creates New 501(c)(3) Streamlined Application for Tax Exemption

Effective July 1, 2014, the IRS adopted Form 1023-EZ, Streamlined Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code.  For organizations that are eligible to use the new Form 1023-EZ can complete a 2 page online application form, pay a $275 filing fee and obtain an IRS determination letter that the organization is a tax-exempt 501(c)(3) organization within two to four weeks.  To learn more about this new application process, the Form 1023EZ, the eligibility requirements and potential negative consequences of using the streamlined form instead of the lengthy and more complex IRS Form 1023, read my article called “IRS Form 1023-EZ.”  For the complete list of disqualifications see the “IRS Form 1023-EZ Eligibility Worksheet.”

2020-03-08T07:13:14-07:00July 6th, 2014|Applications for Exemption|0 Comments

How Long is the IRS Taking to Approve Form 1023 Applications for Exemption?

Question:  If my nonprofit corporation files its IRS Form 1023 today, how long will it take before the IRS issues a letter approving the corporation as a tax-exempt Section 501(c) charitable organization?

Answer:  See the the IRS’ web page called “Where Is My Exemption Application?” to determine how far behind the IRS is in reviewing applications for tax-exemption.  We know of organizations that have received favorable IRS determination letters as quickly as six weeks and as long as two years after submitting applications for tax exemption.

2018-01-14T10:38:15-07:00October 4th, 2013|Applications for Exemption, FAQs|0 Comments

Arizona Abolishes Charity Registration Requirement

Before September 13, 2013, Arizona law required that all Arizona charities register with the Arizona Secretary of State before soliciting charitable donations in the State of Arizona.  The Arizona legislature passed and Arizona Governor Jane Hull signed House Bill 2457, which repealed Arizona’s charitable organization solicitation registration laws and eliminated the requirement that Arizona charities must file annual charitable organization renewal forms with the Arizona Secretary of State.

HB 2457 repealed the following Arizona statutes:

  • ARS Section 44-6552 Charitable organizations; registration; violation; classification
  • ARS Section 44-6553 Exemptions
  • ARS Section 44-6554 Contracted fund raisers; registration, reregistration, contract and disclosure requirements
  • ARS Section 44-6555 Solicitation disclosure requirements; written confirmation
  • ARS Section 44-6556 Public records
  • ARS Section 44-6557 Fiscal records; inspection; retention
  • ARS Section 44-6558 Exchange of information with other states
  • ARS Section 44-6559 Rules
  • ARS Section 44-6560
2018-01-14T10:38:15-07:00September 13th, 2013|Legal Issues|0 Comments

ACC Now Gives Email Reminders of Due Date for Corporate Annual Reports

Since October 1, 2009, when the Arizona Corporation Commission stopped mailing reminders to Arizona corporations that the corporation’s annual report was due to be filed ten percent of the corporations formed in Arizona have been administratively dissolved because the corporation did not file its annual report.  Dissolution means the corporation ceases to exist, which is almost always a bad thing.  Fortunately the problem and the dissolution can be corrected if the corporation files all past due annual reports within six years of the date of the dissolution.”

Our corporate friendly Arizona Corporation Commission adopted a new feature that will help to reduce the number of corporations that are dissolved each year due to failure to file the annual report.  Beginning September 5, 2013, anybody can do a look up for the corporation commission on the ACC’s website and enter an email address to which the ACC will send four email reminders (90, 60, 30 & 15 days) of the upcoming due date of the corporation’s annual report.  Multiple email addresses can be entered for a corporation.  Tell your computer to accept email from [email protected].

2018-10-28T09:26:12-07:00September 5th, 2013|Arizona Corporation Commission|0 Comments
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