Exempt Organizations
One of the fastest growing sectors of the U.S. economy, the nonprofit sector is vast and diverse. With assets measured in the trillions of dollars, tax-exempt organizations range from charities to churches to schools to health care organizations to foundations to social welfare organizations to professional and trade associations.
As exempt organizations become an increasingly powerful force in the national economy, their programs and operations are becoming far more complex. They are becoming more sophisticated in their approach to business operations and financial management. They are participating more often in business transactions and interacting more often with for-profit organizations, raising complex tax issues. They are looking for more creative sources of revenue to support their activities, again facing tax consequences in many instances. And they are dealing with a variety of problems, such as labor, real estate, and intellectual property, that may have nothing at all to do with taxes.
To operate successfully in this environment, an exempt organization needs attorneys who understand exempt organizations as a whole and can offer strategic advice on the array of tax, business, cultural, and political issues that are distinct to them. Alston & Bird can fulfill those needs.
Our exempt organizations practice is second to none. No other firm in this region and only a few in the country can offer the range of experience and expertise we have developed in representing exempt organizations for more than 35 years. In addition to providing tax lawyers who are among the best in the nation, we call on other experts throughout our firm – in wealth planning, real estate, corporate law, employment, technology, intellectual property, health care, public finance, litigation and dispute resolution, and environmental law – to give the most inclusive advice, as each client's situation demands.
OUR SERVICES
Business Transactions
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 on the part of exempt organizations is their 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 exempt organizations 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.
E-Business
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 website 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 the Internet and 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 online 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 Internet activities, but they can help them exploit the new opportunities afforded through the Internet as well.
Government Regulation
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 staples of our exempt organizations practice for many years. Just as our exempt clients depend on us to ensure compliance with federal tax laws, so they know that they can rely on us for advice and guidance in these other areas.
Health Care
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 of 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 ranging from obtaining and maintaining tax-exempt status to unrelated business taxable income to planning and designing complex legal structures, transactions, investments, and operations, to 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; we have reorganized them; we have converted them from taxable to tax-exempt status and vice versa; we have guided them through bankruptcy proceedings; and we have 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.
International
The world seems to be growing smaller by the day, even for exempt organizations. Certain organizations may qualify for exemption from federal income tax even though they are not organized under U.S. law. Similarly, a domestic organization that otherwise qualifies as a section 501(c)(3) organization and that conducts some or all of its activities in foreign countries is not precluded from qualifying as a section 501(c)(3) organization. In addition, the deductibility for income tax purposes of charitable contributions depends on whether the donee organization is a domestic section 501(c)(3) organization. However, individuals and corporations may make tax deductible contributions to U.S. charities to finance charitable activities in foreign countries. And special rules govern grants made by U.S. private foundations to non-U.S. charitable organizations.
Not only do we represent tax-exempt section 501(c)(3) organizations throughout the U.S., 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 U.S. 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 Public Policy
Guiding exempt organizations through the labyrinth of existing legislative and regulatory requirements is our bread and butter. In addition to helping with 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 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.
Litigation and Dispute Resolution
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, including 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 to the courthouse and are well practiced in all phases of tax and non-tax litigation.
Tax
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 the tax laws 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 in representing exempt organizations before the IRS as they are in dealing with federal and state regulatory entities on behalf of our exempt clients.
OUR LEADERSHIP
Among the best known in the country, our exempt organizations tax lawyers know exempt organizations inside out. They lecture and publish extensively; they serve as directors, trustees, and officers of numerous tax-exempt organizations and associations; and they have taken leadership roles in the community.