Best Nonprofit & Charitable Organizations Lawyers in Philadelphia

About Nonprofit & Charitable Organizations Law in Philadelphia, United States

Nonprofit and charitable organizations in Philadelphia operate under a mix of federal, Pennsylvania state, and City of Philadelphia laws. These laws govern formation, governance, fundraising, taxation, property use, employment, and reporting. At the federal level, most charities seek recognition under Internal Revenue Code section 501(c)(3) to receive tax-exempt status and tax-deductible contributions. At the state level, nonprofits follow Pennsylvania corporate law for nonprofit corporations, registration and reporting rules for charitable solicitation, and state tax rules that affect sales and other transactions. Philadelphia imposes local rules and administrative processes that affect zoning, property tax exemptions, local business taxes, permits, and the use of public property. Together these layers shape how an organization forms, raises money, hires staff and volunteers, owns or leases property, and winds up or changes operations.

Why You May Need a Lawyer

Nonprofit work can touch on many legal areas. You may need a lawyer when you are forming a nonprofit and want to draft articles of incorporation and bylaws that meet both IRS and Pennsylvania requirements. Lawyers are essential if you seek federal tax-exempt status, because an application mistake can cause delays or denial. Legal advice helps when negotiating leases or buying property, applying for property tax exemptions, or dealing with zoning and permits in Philadelphia.

Crisis situations and compliance matters also call for counsel, such as responding to IRS or state inquiries, addressing alleged misuse of funds, resolving board disputes, conducting internal investigations, or handling employment claims. Lawyers can also help draft policies for conflict-of-interest, document retention, whistleblower protection, and volunteer liability. Finally, if you plan to run gaming fundraisers, solicit donations across state lines, pursue government contracts or grants, or merge or dissolve organizations, specialized legal guidance reduces risk and ensures compliance.

Local Laws Overview

Federal law sets the framework for tax exemption and donor deductibility. Pennsylvania law regulates nonprofit corporate formation and governance through the Pennsylvania Nonprofit Corporation Law, and it requires registration for charitable solicitations through the Department of State - Bureau of Charitable Organizations. The Pennsylvania Attorney General enforces charitable trust and consumer protection rules related to fundraising and charity operations.

In Philadelphia, local rules matter for taxes and real estate. Nonprofits should review eligibility for property tax exemption for charitable use and follow the application processes of the City of Philadelphia Office of Property Assessment and the city tax authorities. Local business and activity taxes may affect certain nonprofit revenue streams, including the Philadelphia Business Income and Receipts Tax in limited circumstances, and unrelated business income may trigger federal and state taxation.

Licenses and permits from Philadelphia Licenses and Inspections are relevant when you alter buildings, operate special events, serve food, or open facilities to the public. Zoning rules affect where a nonprofit can operate or hold events. Charitable gaming is regulated by Pennsylvania state law and often requires state-level licensing for raffles, bingo, and similar activities. Employment and volunteer issues follow Pennsylvania and federal employment laws, including wage and hour, background check requirements for working with vulnerable populations, and workers compensation rules.

Recordkeeping and public disclosure are important. Registered charities generally must keep financial records, file annual state reports if required, and make federal Form 990 returns available to the public. Conflict-of-interest and governance policies should be in place to meet best practices and reduce the risk of enforcement actions.

Frequently Asked Questions

What is the difference between a nonprofit and a charity?

A nonprofit corporation is a business entity organized without owners who receive profits. A charity is a nonprofit that carries out activities that qualify as charitable under tax law, such as relief of the poor, education, or religion. Many charities seek 501(c)(3) status to gain federal tax exemption and make gifts tax-deductible for donors. Not all nonprofits are charities for tax or legal purposes.

How do I form a nonprofit in Pennsylvania and operate in Philadelphia?

Forming a nonprofit generally involves: choosing a name; preparing and filing articles of incorporation under Pennsylvania law; drafting bylaws; appointing an initial board; obtaining an Employer Identification Number from the IRS; applying for federal tax-exempt status with Form 1023 or Form 1023-EZ; registering for charitable solicitation with the Pennsylvania Department of State if you will solicit contributions; and complying with applicable local permits and registrations in Philadelphia. Legal counsel can help ensure that formation documents meet both state incorporation rules and IRS requirements for exempt purposes.

How do I obtain federal 501(c)(3) tax-exempt status?

Apply to the IRS using Form 1023 or 1023-EZ, depending on eligibility. The application requires detailed information about governance, programs, finances, and planned activities. The IRS evaluates whether your organization is organized and operated exclusively for exempt purposes and whether its earnings and activities meet the private inurement and political activity restrictions. Many organizations use an attorney or accountant to prepare the application to avoid errors that can delay approval.

Do I need to register with Pennsylvania before fundraising?

Yes, if you solicit contributions in Pennsylvania you must typically register with the Department of State - Bureau of Charitable Organizations unless an exemption applies. Registration requires financial information and annual reporting. Soliciting donors from Philadelphia residents also means following any local rules and disclosure requirements. Check registration deadlines and renewals to avoid fines or enforcement actions.

Are donations to my organization tax-deductible?

Donations are tax-deductible for donors only if the organization is recognized as a 501(c)(3) public charity or private foundation by the IRS. Some states also grant tax benefits, but federal 501(c)(3) status is the key factor for deductible charitable contributions for federal tax purposes. Donors should obtain acknowledgement letters for gifts, and nonprofits should provide receipts that meet IRS standards for noncash and large donations.

Can a nonprofit in Philadelphia get a property tax exemption?

Possibly. Property used exclusively for charitable purposes may be eligible for property tax exemption under state and local rules. Philadelphia has its own application and eligibility criteria, and property use restrictions often apply. Exemptions can be lost if property is used for substantial noncharitable activity. Legal and tax advice can help you apply for exemption and document ongoing compliance.

What are the board of directors responsibilities and liability?

Directors owe fiduciary duties of care and loyalty to the nonprofit. They must act in the charity's best interest, avoid self-dealing, and exercise reasonable diligence in oversight and decision-making. Pennsylvania law provides standards for director conduct and may allow reliance on reports from officers and professionals. Directors can face liability for breaches of duty, improper distributions, or willful misconduct, although many nonprofits maintain director and officer liability insurance to reduce personal exposure.

How does unrelated business income tax affect my nonprofit?

Income from activities that are regularly carried on and not substantially related to the organization’s exempt purposes may be taxable as unrelated business taxable income (UBTI) at the federal and possibly state level. Examples include certain sales or advertising activities. Occasional or substantially related income may be excluded. Proper accounting and separation of unrelated activities help limit tax exposure. Consulting a tax advisor is recommended to classify income correctly and file Form 990-T if needed.

What rules apply to volunteers and paid staff?

Volunteers and employees are treated differently under labor laws. Pennsylvania and federal wage and hour laws regulate minimum wage, overtime, and classification of employees versus independent contractors. Volunteers are not paid, but you must still follow liability, safety, and background screening rules where applicable, especially for work with children or vulnerable adults. Understand volunteer protections and limitations on volunteer duties to avoid inadvertent violations.

What should we do if the IRS or state asks for records or opens an investigation?

Respond promptly and seek legal counsel. Do not destroy records and preserve all relevant documents. An attorney experienced in nonprofit law can help you prepare responses, negotiate with authorities, and reduce the risk of penalties. Early legal involvement is especially important during audits, allegations of misuse of funds, or inquiries about governance or fundraising compliance.

Additional Resources

Pennsylvania Department of State - Bureau of Charitable Organizations for registration and reporting requirements. Pennsylvania Attorney General - Charitable Trusts or Consumer Protection unit for enforcement and guidance on charitable solicitations. Internal Revenue Service - Exempt Organizations for federal tax-exempt applications, Form 1023 instructions, and Form 990 filing rules. Pennsylvania Department of Revenue for state tax questions including sales tax exemptions and unrelated business income issues. City of Philadelphia - Department of Revenue and Office of Property Assessment for local tax and property exemption matters. Philadelphia Licenses and Inspections for permits, occupancy and building use questions. Community Legal Services of Philadelphia and the Philadelphia Bar Association for legal clinics, referrals, and pro bono programs. Pennsylvania Association of Nonprofit Organizations for training and best practices on governance and nonprofit management. Philadelphia Foundation and other community foundations for capacity-building resources and grantmaking guidance.

Next Steps

If you need legal assistance, start by clarifying your goals - formation, tax-exempt application, real estate or lease negotiation, contracts, employment policies, fundraising compliance, or crisis response. Gather core documents before meeting a lawyer - draft articles of incorporation, bylaws, financial statements or budgets, fundraising materials, grant agreements, leases, and employee policies.

Search for an attorney experienced in nonprofit and tax-exempt organization law. Use the Philadelphia Bar Association referral service or local nonprofit networks to find specialists. Ask about fee structures - flat fees for discrete tasks like forming the organization or preparing a 1023, hourly rates for complex matters, and possible pro bono or reduced-fee options for small charities. Request a written engagement letter that describes scope, fees and expected timeline.

In the meantime, adopt basic governance best practices: create a conflict-of-interest policy, keep clear financial records, hold regular board meetings with minutes, use written agreements for staff and contractors, and set up internal controls for donations and grants. These steps reduce legal risk and help position your organization for sustainable success.