Non-profit law
Nonprofit Organization as Business Owner
Can a nonprofit own a for-profit business? Yes—501(c)(3) organizations can use taxable subsidiaries to manage commercial activity, reduce liability, and protect tax-exempt status. This article explains how nonprofit subsidiaries work, the legal risks boards should watch for, and the key rules around governance, private benefit, and charitable asset protection.
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Political Challenges for Nonprofits
The legal environment for nonprofits has undergone significant changes under the Trump administration. These changes are not overt bans or direct defunding but rather subtle tactics—referred to as "lawfare"—that weaponize compliance regulations, redefine national security parameters, and blur the line between advocacy and extremism. This article explores the evolving challenges nonprofits face, from traditional regulatory frameworks to the emerging threats of today. It also provides practical strategies for enhancing organizational resilience.
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Nonprofits and the Public Interest
President Donald Trump yesterday suggested another weapon in his battle against Harvard University. Invoking a decades-old precedent from the United States Supreme Court, he railed against what he called a “Sickness” presumably at Harvard. If you are associated with a nonprofit, then you undoubtedly know that the purpose of the organization must be exclusively for charitable purposes. The Supreme Court has also ruled that a nonprofit must be in harmony with the public interest.
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Nonprofit Law Developments in Excess Benefit Transactions
Taxes for excess benefit transactions are to deter insiders otherwise known as disqualified persons from using a nonprofit for unreasonable compensation. Recent tax court cases underscore that apart from those named in the law as disqualified persons who were obvious targets—such as directors and certain officers, members of their families, and certain affiliated entities—there may be others who qualify as “disqualified persons.” The question whether an individual is a disqualified person generally “depends upon all relevant facts and circumstances.” The same guidance that goes for nonprofits goes for every legal entity: keep the entity separate. It may be obvious, but you should not use the nonprofit’s funds to buy groceries for the officers or directors or other insiders. You should not pay…
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Nonprofit Law Developments in Private Inurement
This article discusses recent developments in nonprofit law in private inurement and private benefits. Private inurement issues typically arise in connection with an IRS proceeding seeking to revoke the tax-exempt status of the organization. The IRS will not tolerate even a little private inurement. In short, insiders may not unjustly enrich themselves at the organization’s expense. The other side of the tax-exempt requirement is in the purpose of the organization. Under the private benefit doctrine, an organization is not operated for an exempt purpose unless it serves a public rather than private interest. The IRS recognizes that private benefits to third parties may incidentally arise from the nonprofit’s activities consistent with its proper purpose. Any transaction will result in some benefit to a third…
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Nonprofit Management: Legal Challenges Galore
I recently came across a nonprofit in which the chairperson, who had recently died, bequeathed her interest in the nonprofit to a close relative. Little did she realize that a nonprofit is not property that you can transfer or otherwise give away. A nonprofit is fundamentally different from a for profit organization, such a corporation which issues stock. This article describes some corporate governance aspects of nonprofits.
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