Starting and Managing a Nonprofit Organization

A Legal Guide
 
 
Wiley (Verlag)
  • 7. Auflage
  • |
  • erschienen am 5. Juli 2017
  • |
  • 448 Seiten
 
E-Book | ePUB mit Adobe-DRM | Systemvoraussetzungen
978-1-119-38022-1 (ISBN)
 
Everything you need to start and manage a non-profit
Starting and Managing a Nonprofit Organization is written to help anyone who's just getting their toes wet in the sector get up to speed on the critical information needed to protect their nonprofit's tax-exempt status--and avoid the many legal traps out there that you probably didn't know exist. Packed with checklists and step-by-step guidance, Starting and Managing a Nonprofit Organization demystifies intricate legal issues with plain-English language explanations for non-legal professionals of the statutes, regulations, court opinions, and other rules comprising nonprofit law.
Nonprofits must comply with stringent federal and state laws due to their special exempt status; the government's ultimate threat is revocation of a nonprofit's tax-exempt status, which usually means the nonprofit's demise. Written in plain English, not "legalese," this all-important guide provides essential guidance for those interested in starting nonprofits, as well as valuable advice for leaders of established organizations.
* Covers all aspects of federal and state nonprofit law
* Discusses significant contemporary issues, including commerciality, private benefit, governance, and unrelated business
* Provides summaries of current IRS ruling policies
* Includes procedures and a glossary of legal terms for fail-safe compliance
Written by the country's legal leading authority on tax-exempt organizations, Starting and Managing a Nonprofit Organization is the reference you'll want to keep close by as you navigate your way through the world of nonprofit and the law.
weitere Ausgaben werden ermittelt
BRUCE R. HOPKINS is the nation's leading legal authority on tax-exempt organizations, serving clients such as charitable organizations, educational organizations, associations, hospitals, religious organizations, and private foundations. He was awarded the Outstanding Nonprofit Lawyer Award from the American Bar Association in 2007, and has consistently been listed among The Best Lawyers in America in Nonprofit Organizations and Charity Law.
Preface vii
PART ONE STARTING A NONPROFIT ORGANIZATION 1
Chapter One: What Is a Nonprofit Organization? 3
Chapter Two: The Nonprofit Organizations' Regulatory Scene 17
Chapter Three: Starting a Nonprofit Organization 27
PART TWO BEING NONPROFIT, LEGALLY 39
Chapter Four: Nonprofit Organizations: Much More Than Charity 41
Chapter Five: Nonprofits and Private Benefit 59
Chapter Six: From Nonprofit to Tax-Exempt 77
Chapter Seven: Charities: Public or Private? 93
Chapter Eight: Nonprofit Governance 111
Chapter Nine: Braving Annual Reporting 137
Chapter Ten: Tax Exemption: Not a Paperwork Exemption 149
Chapter Eleven: Charitable Giving Rules 163
Chapter Twelve: Government Regulation of Fundraising 187
PART THREE TAX-EXEMPT ORGANIZATIONS CAN BE TAXABLE, AND SO CAN THEIR MANAGERS 211
Chapter Thirteen: Related or Unrelated? 213
Chapter Fourteen: Lobbying Constraints--And Taxes 231
Chapter Fifteen: Political Campaign Activities--And More Taxes 243
Chapter Sixteen: Donor-Advised Funds, Tax Shelters, Insurance Schemes--And Still More Taxes 253
PART FOUR HELPFUL HINTS AND SUCCESSFUL TECHNIQUES 261
Chapter Seventeen: For-Profit and Nonprofit Subsidiaries 263
Chapter Eighteen: Joint Venturing and Other Partnering 275
Chapter Nineteen: Wonderful World of Planned Giving 291
Chapter Twenty: Putting Ideas into Action 303
PART FIVE SIDESTEPPING TRAPS 313
Chapter Twenty-One: Watchdogs on the Prowl 315
Chapter Twenty-Two: Potpourri of Policies and Procedures 329
Chapter Twenty-Three: Commerciality, Competition, Commensurateness 343
Chapter Twenty-Four: IRS Audits of Nonprofit Organizations 355
Chapter Twenty-Five: Avoiding Personal Liability 375
PART SIX CONSTITUTIONAL LAW PERSPECTIVE 383
Chapter Twenty-Six: Nonprofit Organizations and the Constitution 385
Glossary 409
Index 421

CHAPTER ONE
What Is a Nonprofit Organization?


One of the most striking features of life as we settle into the third millennium is the awesome sweep of societal reform around the globe. Freedom of thought and action is now permitted in societies that previously knew only totalitarianism and suppression. Frequently, a country earns the label emerging democracy by introducing startling economic and political changes. Sometimes, this is accomplished by elections; sometimes, a revolution is necessary. Struggles for individual freedom are today commonplace throughout the world, whether in Eastern Europe, on the African continent, or in the roiling Middle East.

Countries that are planning transitions to a democratic state are discovering a fact that some Western countries learned a long time ago: In order to create and maintain economic and political freedom, which is the essence of a true democracy, the power to influence and cause changes cannot be concentrated in one sector of that state or society. There must be a pluralization of institutions in society, which is a fancy way of saying that the ability to bring about changes and the accumulation of power cannot belong to just one sector-namely, the government. A society that has achieved this type of pluralization is sometimes known as a civil society.

A strong democratic state has three sectors: (1) a government sector, (2) a private business sector, and (3) a nonprofit sector. Each sector must function effectively and must cooperate with the others, to some degree, if the democracy is to persist for the good of the individuals in the society. A democratic society must be able to make and implement policy decisions with the participation of all three sectors. Ideally, a democratic society can solve some of its problems with minimal involvement of government if there is a well-developed and active nonprofit sector-charitable, educational, scientific, and religious organizations; associations and other membership organizations; advocacy groups; and similar private agencies.

Of all countries, the United States has the most highly developed sector of nonprofit organizations. The reach of the U.S. government is often curbed by the activities of nonprofit organizations, but that is a prime mark of a free and otherwise democratic society. The federal, state, and local governments acknowledge this fact (sometimes grudgingly) by exempting most nonprofit organizations from income and other taxes and, in some instances, allowing tax-deductible gifts to them. These tax enhancements are crucial for the survival of many nonprofit organizations.

When an individual in the United States perceives either a personal problem or one involving society, he or she does not always have to turn to a government for the problem's resolution. The individual, acting individually or with a group, can attempt to remedy the problem by turning to a nongovernmental body. There are obvious exceptions to this sweeping statement: Governments provide a wide range of services that individuals cannot, such as national defense and foreign policy implementations. Still, in U.S. culture, more so than in any other, an individual is often likely to use nongovernmental means to remedy, or at least address, personal and social problems.

A BIT OF PHILOSOPHY


For most Americans, this mind-set stems from the very essence of our political history-distrust of government. We really do not like governmental controls; we prefer to act freely, as individuals, to the extent it is realistic and practical to do so. As the perceptive political philosopher Alexis de Tocqueville wrote in 1835, "Americans of all ages, all conditions, and all dispositions constantly form associations" (meaning nonprofit organizations) and "whenever at the head of some new undertaking you see the government in France, or a man of rank in England, in the United States you will be sure to find an association." About 150 years later, John W. Gardner, founder of Common Cause, observed: "In the realm of good works this nation boasts a unique blending of private and governmental effort. There is almost no area of educational, scientific, charitable, or religious activity in which we have not built an effective network of private institutions."

This "effective network of private institutions" (the nation's nonprofit organizations) is called the independent sector, the voluntary sector, or the third sector of U.S. society. For-profit organizations are the business sector; the governmental sector is made up of the branches, departments, agencies, and bureaus of the federal, state, and local governments.

Nonprofit organizations, particularly charitable ones, foster pluralization of institutions and encourage voluntarism. Society benefits not only from the application of private wealth to specific public purposes but also from the variety of programs that individual philanthropists, making gifts of all sizes, make available for support. Program choice-making is decentralized, efficient, and more responsive to public needs than the cumbersome and less flexible government allocation process. As John Stuart Mill observed, "Government operations tend to be everywhere alike. With individuals and voluntary associations, on the contrary, there are varied experiments, and endless diversity of experience."

At the time a constitutional income tax was coming into existence, in 1913, Congress legislated in spare language and rarely embellished on its statutory handiwork with legislative histories. Therefore, there is no contemporary record in the form of legislative history of what members of Congress had in mind when they started creating categories of tax-exempt organizations. It is generally assumed that Congress saw itself adhering to the political philosophical policy considerations that many other governments have adopted over the centuries pertaining to nonprofit organizations, which is that taxation of these entities is inappropriate, considering their contributions to the well-being and functioning of society.

Thus, in the process of writing the Revenue Act of 1913, Congress apparently viewed tax exemption, at least for charitable organizations, as the only way to consistently correlate tax policy with political theory, and viewed exemption of charities in the federal tax statutes as an extension of comparable practice throughout history. Presumably, Congress simply believed that these organizations ought not be taxed, and found the proposition sufficiently self-evident that an explanation of its actions was not necessary.

The Supreme Court has infrequently ruminated about the rationale for tax exemption for nonprofit organizations. Soon after enactment of the (constitutional) income tax, the Court concluded that the foregoing rationale was the basis for the federal tax exemption for charitable entities. In 1924, it stated that "[e]vidently the exemption is made in recognition of the benefit which the public derives from corporate activities of the class named, and is intended to aid them when [they are] not conducted for private gain."1

One of the most significant of the Court's considerations of the rationale for tax exemption appears in a case concerning the constitutionality of a state's real estate tax exemption for the real property of religious organizations.2 The majority opinion in this case focused primarily on the constitutionality of this tax exemption, because the law accorded exemption to churches and other religious entities, but included observations about tax exemption for nonprofit organizations generally.

The real estate tax exemption at issue came into being, wrote the Court, because the state, "in common with the other States,.determined that certain entities that exist in a harmonious relationship to the community at large, and that foster its 'moral or mental improvement,' should not be inhibited in their activities by property taxation or the hazard of loss of those properties for nonpayment of taxes."3 The state granted exemption with respect to a "broad class of property owned by non-profit, quasi-public corporations which include hospitals, libraries, playgrounds, scientific, professional, historical, and patriotic groups."4 The Court continued: "The State has an affirmative policy that considers these groups as beneficial and stabilizing influences in community life and finds this classification useful, desirable, and in the public interest."5 Also: "Qualification for tax exemption is not perpetual or immutable; some tax-exempt groups lose that status when their activities take them outside the classification and new entities can come into being and qualify for exemption."6

A concurring Court opinion observed that a "range" of "private, nonprofit organizations contribute to the well-being of the community in a variety of nonreligious ways, and thereby bear burdens that would otherwise either have to be met by general taxation, or be left undone, to the detriment of the community."7 It was stated that nonprofit groups that receive tax exemption contribute to the "diversity of association, viewpoint, and enterprise essential to a vigorous, pluralistic society."8

Another concurring opinion referred to a "class of nontaxable entities whose common denominator is their nonprofit pursuit of activities...

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