1. About Nonprofit & Charitable Organizations Law
Nonprofit and charitable organizations law governs how entities are formed, governed, funded, and regulated. It covers formation, fiduciary duties, fundraising, reporting, and tax-exempt status. These rules help ensure charities operate for public benefit and avoid private gain.
At the federal level, most organizations seek tax-exempt status under the Internal Revenue Code Section 501(c)(3). To qualify, an organization must be organized and operated for charitable, religious, educational, scientific, or similar purposes. The Internal Revenue Service enforces compliance, including limits on private inurement and political activity.
“No part of the net earnings of the organization shall inure to the benefit of any private shareholder or individual.”
Source: IRS guidance on 501(c)(3) organizations.
https://www.irs.gov/charities-non-profits/501c3-organizations
State law complements federal rules by requiring formation documents, ongoing governance, fundraising regulation, and annual reporting. Many states require registration to solicit charitable donations and annual filings with the attorney general or secretary of state. Forming a nonprofit often involves preparing articles of incorporation, bylaws, and a conflict of interest policy. See IRS and state resources for specifics in your jurisdiction. https://www.irs.gov/charities-non-profits/applying-for-tax-exempt-status-IRS
Because nonprofit law varies by state and purpose, many organizations engage legal counsel to navigate federal and local requirements. A qualified attorney can tailor governing documents, advise on compliance, and help with state registrations and annual reports. This reduces the risk of penalties and delays in grants, contracts, and donations. For authoritative guidance, consult the IRS and state agencies cited below. IRS Charities & Non-Profits
2. Why You May Need a Lawyer
A lawyer helps ensure your nonprofit meets formal requirements and remains compliant as it grows. Here are concrete, real-world scenarios where legal counsel is essential.
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Starting a community nonprofit and applying for 501(c)(3) status - A neighborhood food pantry wants to accept tax-deductible donations. A lawyer helps you draft Articles of Incorporation, Bylaws, and a conflict of interest policy, and guides you through Form 1023 or 1023-EZ filing with the IRS. This reduces the chance of IRS delays or rejection due to misclassification.
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Drafting governance documents and ethical safeguards - A new charity creates a Board with diverse members and needs clear fiduciary duties, officer roles, and meeting procedures. An attorney can prepare tailored bylaws and a formal conflict of interest policy aligned with state corporate law.
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Cross-state fundraising and state registration compliance - A regional charity plans to solicit donations in California and New York. You need timely registrations, annual reports, and awareness of each state’s fundraising laws to avoid penalties.
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Managing unrelated business income tax (UBIT) concerns - A nonprofit operates a bookstore alongside its charitable programs. An attorney helps determine whether activities create unrelated business income and how to file Form 990-T if required.
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Dissolving or merging nonprofits and distributing assets - Two small charities plan a merger and asset transfers to another qualified charity. Counsel ensures compliant dissolution or merger documentation and proper charitable recipient designations to prevent private inurement or jeopardizing tax status.
In addition to formation and compliance, a nonprofit lawyer can assist with governance audits, contract reviews for service providers, grant agreements, and risk management strategies. See official resources for grant and compliance considerations. IRS Charities & Non-Profits
3. Local Laws Overview
Nonprofit regulation includes federal tax rules and state statutes governing governance, fundraising, and reporting. The following laws are central in many U.S. jurisdictions and are frequently referenced by nonprofits planning civic activities.
Federal law: Internal Revenue Code 501(c)(3) - Establishes tax-exempt status for charitable organizations and sets rules on governance, private inurement, and political activity. The current framework is codified as 26 U.S.C. § 501(c)(3). Federal guidance is provided by the Internal Revenue Service. IRS 501(c)(3) overview
California: Nonprofit Public Benefit Corporation Law - Cal. Corp. Code § 5000 et seq governs formation and governance of nonprofit public benefit corporations in California. It covers articles of incorporation, bylaws, director duties, and corporate actions. Official code text is available through California Legislative Information. Cal. Corp. Code § 5000 et seq
California: Charitable Solicitation Act - California law requires charitable organizations to register and file annual reports when soliciting contributions from the public. This is typically administered by the California Attorney General and can be found under the Business and Professions Code. California Attorney General Charities
New York: Not-for-Profit Corporation Law (N-PCL) - New York regulates formation, governance, and activities of nonprofit corporations under the N-PCL. The New York Department of State provides guidance and filing requirements for not-for-profit corporations. NY Department of State - Not-for-Profit Corporations
Recent trends across jurisdictions include enhanced fundraising disclosures, mandatory annual reporting, and stricter governance standards for boards of directors. Federal and state regulators increasingly focus on preventing private inurement and ensuring donor intent is honored.
“State charity official programs emphasize ongoing reporting and registration for fundraising activities.”
Source: state regulator guidance and nonprofit compliance resources.
Council of Nonprofits (org)
For more information, consult the following official sources on federal and state requirements: IRS Charities & Non-Profits, California Nonprofit Public Benefit Corporation Law, and New York Not-for-Profit Corporation Law.
4. Frequently Asked Questions
What is a 501(c)(3) organization and what does it do?
A 501(c)(3) organization is a nonprofit that operates for charitable, religious, educational, or similar purposes. It may receive tax-deductible contributions and must follow strict governance and reporting rules. Eligibility is determined by the IRS based on functions and activities.
How do I apply for tax-exempt status with the IRS?
To apply, file Form 1023 or the streamlined Form 1023-EZ if you meet the eligibility criteria. The IRS requires detailed information about your organizational structure, programs, finances, and governance. The process typically takes several months from submission to approval, depending on complexity and workload.
How much does Form 1023 filing cost and how is it paid?
Filing fees vary by form type and organization size, with Form 1023 generally costing several hundred dollars, and Form 1023-EZ priced lower. Fees are paid electronically through the IRS system when you submit your application.
How long does it take to obtain 501(c)(3) status after filing?
Processing times vary by workload and form type. Complex applications can take 6 to 12 months or more, while streamlined filings may be faster. The IRS provides current processing estimates on its website.
Do I need to incorporate as a nonprofit before applying for 501(c)(3) status?
Yes, most organizations incorporate as a nonprofit corporation under state law before applying for federal tax-exempt status. Incorporation creates a legal entity and supports governance and liability protection for trustees and staff.
What is a conflict of interest policy and why is it required?
A conflict of interest policy identifies situations where personal interests could influence decisions. It helps protect the organization from private benefit and supports fiduciary duties of directors and officers.
What is unrelated business income tax and who pays it?
Unrelated business income tax (UBIT) applies to income from a trade or business that is not substantially related to the charity's exempt purpose. If UBIT applies, the organization may owe tax and must file Form 990-T with the IRS.
How do I register to solicit charitable contributions in California?
In California, most fundraising activities require registration with the state and annual reporting. Organizations must file with the California Attorney General and comply with annual disclosure requirements for charitable solicitations.
What is the difference between a nonprofit corporation and a charitable trust?
A nonprofit corporation is a legal entity formed under state corporate law with a board and operations. A charitable trust is a trust arrangement where assets are held and managed for charitable purposes, often with a trustee. The choice affects governance, liability, and tax treatment.
What is the difference between 501(c)(3) and 501(c)(4) organizations?
501(c)(3) organizations are tax-exempt for charitable purposes and donations are typically deductible for donors. 501(c)(4) organizations can engage in more lobbying and political activity, but donations are generally not deductible. The two have different governance and reporting requirements.
Can a nonprofit award grants to other charities and individuals?
Yes, nonprofits can award grants, but they must ensure the grants align with their exempt purposes, do not create private benefit, and comply with grant governance and reporting standards. Clear grant agreements and recipient monitoring are essential.
Should I hire a nonprofit lawyer to handle federal and state filings?
Yes, a nonprofit lawyer can help you tailor documents, navigate multiple jurisdictions, and reduce the risk of noncompliance. This is especially important for complex operations, cross-state fundraising, or anticipated mergers or dissolutions.
5. Additional Resources
- Internal Revenue Service (IRS) - Charities and Non-Profits - Official federal guidance on tax-exempt status, filings, and compliance for nonprofit organizations. IRS Charities & Non-Profits
- California Attorney General - Charities - Regulates charitable organizations in California, including registration, reporting, and enforcement. California Attorney General Charities
- New York Department of State - Not-for-Profit Corporations - Guidance and filing information for not-for-profit corporations in New York. NY Department of State Not-for-Profit
6. Next Steps
- Define your mission and choose a structure - Clarify your charitable purpose and decide whether to organize as a nonprofit corporation or other entity. Estimate a 1-2 week planning window.
- Gather foundational documents - Collect potential articles of incorporation, desired by-laws, and a draft conflict of interest policy. Plan for 2-4 weeks of document prep.
- Consult an attorney with nonprofit experience - Seek a proposal and discuss your jurisdictional needs and fundraising plans. Set expectations for timing and budget within 1-2 weeks of outreach.
- File for federal tax-exemption and obtain an EIN - Prepare Form 1023 or 1023-EZ, and apply for an Employer Identification Number (EIN) from the IRS. Allocate 6-12 weeks for preparation and filing, plus IRS processing time.
- Register to solicit in states where you will operate - Complete state fundraising registrations and annual reporting requirements in each jurisdiction. Allow 1-3 months for initial registrations depending on state processing times.
- Establish governance and compliance systems - Implement bylaws, board policies, financial controls, and recordkeeping. Schedule annual board meetings and audits as needed to maintain compliance.
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