As exempt organizations become more aggressive and innovative in undertaking income-producing or entrepreneurial activities, their participation in business transactions has increased. An essential component of this new entrepreneurialism is the creation of complex structures of affiliated exempt and taxable entities. These business transactions and structures almost always have significant tax considerations and consequences. With years of experience in representing exempt organizations in business transactions, our lawyers are as skilled in dealing with the unrelated business income tax and other tax considerations in these transactions as they are in dealing with the business, strategic, structural and other non-tax considerations.
Tax-exempt organizations have discovered the power of the Internet. So prevalent are exempt organization websites that the IRS now asks for an organization's web address in its application for recognition of exemption. Like their for-profit counterparts, exempt organizations have begun to experiment with activities that can harness the power of new technology to advance their causes. These include recruiting corporate sponsors, operating online stores, accepting payments for referrals to web merchants, receiving payments for purchases made through charity malls, online auctions and fundraising. Although many of these activities are not themselves new, carrying them out on the Internet raises new legal issues and pitfalls with which we are intimately familiar. Not only can our lawyers help exempt organizations understand and deal with the risks and complexities of the Internet, but we can help you discover all the opportunities the web has to offer as well.
Exempt organizations are subject not only to complex federal tax laws, but also to myriad federal, state and local laws and regulations that have nothing to do with taxes. From federal and state laws regulating fundraising and solicitation to laws governing the organization and operation of nonprofit corporations, limited liability companies and other entities, to laws governing the responsibilities and liabilities of directors and officers of nonprofit organizations—these legal areas have been a staple of our exempt organizations practice for many years. Just as our exempt clients depend on us to ensure compliance with federal tax laws, they also know they can rely on us for advice and guidance in these other areas. We can conduct a comprehensive “legal audit” to identify any particular aspect of an organization’s activities that might warrant further guidance or change.
Tax-exempt hospitals represent the largest category of section 501(c)(3) organizations other than churches. The nonprofit health care field also includes managed care organizations, medical groups and faculty practice plans, nursing homes, homes for the aged, cooperative hospital services organizations, fundraising organizations, parent organizations, medical research organizations and many other kinds of health care organizations.
During the last three decades, significant changes have occurred in the way hospitals conduct their business and in the structures and operations of health care organizations. Those changes have brought increased complexity to corporate and other legal structures; an increase in the relative importance of an emphasis on outpatient services; a proliferation of non-hospital-based services; and a dramatic increase in collaborative efforts between hospitals, their medical staffs and proprietary and investor-owned organizations. In response to these dramatic changes in the health care industry, federal tax laws have had a significant impact on hospitals and health care organizations as they have been applied to these increasingly complex operations.
Working closely with Alston & Bird's health care lawyers, our exempt organizations lawyers have been intimately involved in the development and evolution of the nonprofit health care industry. We regularly advise our hospital and health care clients on issues including obtaining and maintaining tax-exempt status; unrelated business taxable income; planning and designing complex legal structures, transactions, investments and operations; and tax-exempt financing of health care facilities and projects. Throughout the country, we have created public and private hospitals and virtually every kind of nonprofit health care organization, reorganized them, converted them from taxable to tax-exempt status and vice versa, guided them through bankruptcy proceedings and even shepherded them through criminal proceedings. The complexity and sophistication of nonprofit health care organizations and transactions are matched only by the sophistication and creativity of our skilled exempt organizations lawyers.
The world seems to be growing smaller by the day. Not only do we represent tax-exempt section 501(c)(3) organizations throughout the Unites States, but we also represent a number of foreign charitable organizations that are engaged in fundraising and other activities in this country. Our foundation clients—private, community and corporate—have an increasing interest in making grants that affect people and conditions outside the United States. Our business clients, with worldwide operations, are becoming increasingly involved in charitable activities in the foreign countries in which they do business. Because of our extensive, day-to-day experience in these complicated and often difficult to understand areas, our exempt organizations practice extends well beyond the U.S. borders.
Legislation and Policy Making
Guiding exempt organizations through the labyrinth of existing legislative and regulatory requirements is our bread and butter. In addition to compliance issues, our group stands ready and able to assist exempt organizations in shaping the future of the legislative regime and in the formulation of public policy. For example, at the request of a conservation organization concerned about the loss of open space to development, we devised a tax credit mechanism that would enable landowners to receive economic benefits for imposing conservation easements on their property. We then drafted a bill, which has been introduced in Congress, to implement that plan. The bill has been uniformly heralded as a creative and sensible solution to a national crisis. We are also called upon frequently to assist our exempt organization clients in evaluating their political and legislative initiatives. Enabling an exempt organization’s message to be heard without jeopardizing its tax exemption status requires the seasoned judgment and technical proficiency that only a few firms are able to offer. Alston & Bird’s exempt organizations practice group stands at the top of that short list.
Although we try to steer our exempt organizations clients away from litigation whenever possible, we are well-equipped to fight and win on a client's behalf. Our exempt organizations lawyers regularly handle IRS audits, whether they pertain to an organization's tax-exempt status, an exempt organization's liability for unrelated business income tax, a private foundation's liability for any Chapter 42 excise taxes or an exempt organization's compliance with filing and other tax requirements. When IRS audits cannot be resolved through administrative procedures, we have successfully challenged the IRS in the U.S. Tax Court, in the U.S. Court of Federal Claims and in federal district courts.
We also have extensive experience representing our exempt organization clients in state and local disputes, ranging from real and personal property tax exemption, sales and use tax exemption, state law issues and third-party suits.
Our exempt organizations lawyers know their way around a courtroom and are well-practiced in all phases of tax and non-tax litigation.
Exempt organizations are creatures of the tax laws, particularly the federal tax laws. Our exempt organization clients rely on us to advise them on all applicable tax laws—federal, state and local—and to ensure compliance with those that affect them. We form and organize virtually all categories of tax-exempt organizations (in all states) and qualify those organizations for the appropriate tax-exempt status. We advise existing exempt organizations on the tax consequences of their operations and activities, ranging from complex restructuring issues to issues relating to for-profit subsidiaries, unrelated business taxable income, joint ventures, technology transfers and other for-profit activities. Our lawyers are as effective representing exempt organizations before the Internal Revenue Service as they are dealing with federal and state regulatory entities on behalf of our exempt clients.
Click below to learn more about our services to exempt organizations:
Legislative and Policy Making
Among the best-known in the country, our exempt organizations tax lawyers know exempt organizations inside-out. They lecture and publish extensively; serve as directors, trustees and officers of numerous tax-exempt organizations and associations; and have taken leadership roles in the community. Our attorneys include:
- Six attorneys profiled in The Best Lawyers in America
- Four Fellows of the American College of Trust and Estate Counsel
- The chairman-elect and a past chairman of the Fiduciary Law Section of the State Bar of Georgia
- Two members of the Exempt Organizations Committee of the American Bar Association Section of Taxation
- A founding faculty member of the American Institute for Philanthropic Studies
- Author of The Foundation Desk Reference: A Compendium of Private Foundation Rules
Bringing Value to Our Clients
Our exempt organizations practice is as much a business practice as it is a tax practice. Our exempt organizations lawyers lead our exempt clients, including some of the largest and most powerful forces in the United States, through many of the same kinds of business transactions you would find in a corporate or business practice. These transactions include forming and organizing virtually every kind of legal entity, both nonprofit and for-profit; mergers and other combinations; borrowing, lending and other forms of financial transactions; buying and selling assets; structuring investments, both related and unrelated; and other complex business transactions.
We understand the special needs and interests of exempt organizations involved in business transactions, and we see our role as that of problem solver—not just risk assessor. Ours is a "can do" approach: we find ways to make transactions work and to enable our clients to take advantage of opportunities as they arise.
Transaction services we provide for clients:
- Mergers and Acquisitions
- Reorganizations and Dissolutions
- Nonprofit/For-Profit Conversions
- Complex Structures of Affiliated Exempt and Taxable Entities
- Drafting and Negotiating Purchase and Sale Documents
- Exempt Financing
- Purchasing and Selling Real Estate and Other Assets
- Tax-Exempt Entity Leasing Transactions
- Unrelated Business Activities
- Technology Transfers
- Formation and Organization of Nonprofit and For-Profit Corporations, Joint Ventures, Partnerships, LLCs and Trusts
- Private Foundations and Public Charities
- Directors and Officers Liability/Insurance
- Membership and Governance Structures
- Title-Holding Companies
- Business Leagues, Trade Associations and Professional Organizations
- Nonprofit Compliance Audits and Evaluations
- Nonprofit Executive Compensation and Employee Benefits
- Design and Structuring of Family Offices
Our exempt organization clients include organizations in virtually every category within the nonprofit sector (Link to Nonprofit Sector page). Among our clients are many of the largest and most prominent exempt organizations in the United States. These diverse organizations include:
- J. Bulow Campbell Foundation, a private grantmaking foundation with a charitable endowment of more than $700 million;
- The Community Foundation for Greater Atlanta, Inc., the largest community foundation in the Southeast, with assets exceeding $400 million;
- Arthritis Foundation, a national healthcare organization supporting research to find the cure for and prevention of arthritis;
- Foundations sponsored by international and national companies, including the Coca-Cola Foundation, Sabre Holdings Foundation (Sawyer), Arby's Foundation, The Bank of America Foundation, Primerica Foundation (Sawyer) and The UPS Foundation;
- The University of St. Andrews American Foundation, a U.S. foundation sponsored by the oldest university in Scotland;
- Southeastern Council of Foundations, an association of grantmaking foundations throughout the Southeast;
- Emory University, The Emory Clinic and Emory HealthCare, Inc., an internationally recognized university and its healthcare affiliates;
- Georgia Hospital Association, an association of nonprofit and for-profit hospitals throughout Georgia;
- Trust for Public Land, a national nonprofit land conservation organization;
- Grady Hospital, one of the largest charitable hospitals in the United States;
- Technical Association of the Pulp and Paper Industry, an international scientific research organization;
- The Kennedy Krieger Marcus National Foundation, a national organization serving individuals with developmental disabilities;
- World Changers Ministries and World Changers Church International, a worldwide ministry and church;
- Southern Education Foundation, a foundation that traces its origins to funds created shortly after the Civil War to promote equity and equality in education for minorities in the South;
- The University Financing Foundation, a charitable foundation that finances and acquires scientific research facilities and other kinds of educational facilities for the benefit of educational organizations throughout the United States;
- The Arthur M. Blank Family Foundation, a large, independent foundation created by one of the cofounders of The Home Depot;
- The Marcus Foundation, a large, independent foundation created by one of the cofounders of The Home Depot;
- Agnes Scott College; and
- American Institute for Managing Diversity