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Мń2LńĢń2Lńń4Lń›ń4Lńń2LńĢń2Lńń5Lń›Ģń5LńŌ#†¼öm¼xx4Ńd#ŌŌ‡XĒzX¼¼ömŌDisclaimer:›€Educational€Only:€This€outline€is€Educational€Only€and€no€part€of€this€presentation€can€be€considered€asŠ c*“' Šfederal€or€state€tax€advice,€opinion,€or€position€and€is€not€intended€or€written€to€be€used,€and€may€not€be€used,€for€theĻpurpose€of€(I)€avoiding€tax„related€penalties€under€the€internal€revenue€Code€or€(ii)€promoting,€marketing€orĻrecommending€to€another€party€any€tax„related€matters€addressed€herein,€nor€(iii)€constituting€guidance€on€any€tax€orĻintellectual€property€matter.Š §-×* МŌ#†¼öm¼XXĒzx#ŌŌ‡x4Ńx¼¼ömŌń6LńĢń6Lń›œń6LńĢń6Lńń3LńĢń3LńŌ#†¼öm¼xx4ŃÕ#ŌņņŌ‡XĒzX¼ömŌI.›ą „ ąThe€Table€of€ContentsóóŠ Š ŠĢŌ#†¼öm¼XXĒz=#ŌŌ‡ ½ ¼¼ömŌPageą „ ąą Ü ąDescriptionŌ#†¼öm¼  ½¼#ŌņņŠ × Мóó3›ą „ ąœņ ņII.ó ó›ą Ü ąWhy€a€Table€of€Contents?Š ź М3ą „ ąņ ņIII.ó óą Ü ąTypes€of€NonprofitsŠ ā Šą „ ąą Ü ąA.ą0 4 ąThe€main€type€of€nonprofit€is€€charitable€nonprofit€under€šš501(c)(3)ŠŚ 4¬&4¬& Šą „ ąą Ü ąB.ą0 4 ąOther€entities€are€described€ŠĪž4¬&4¬& Š4›ą „ ąœņ ņIV.ó ó›ą Ü ąOverview€of€Nonprofits€in€the€U.S.Š Ā ņ Мą „ ąą Ü ąA.ą 4 ąFederal€and€State€Overlap€&€InteractionŠ ŗ ź Š5ą „ ąą Ü ąB.ą0 4 ąIndependent€Nature€under€both€Federal€and€StateŠ® Ž 4¬&4¬& Šą „ ąą Ü ąC.ą0 4 ąThe€nonprofit€sits€across€a€line€of€deductibilityŠ¢ Ņ 4¬&4¬& Šą „ ąą Ü ąD.ą0 4 ąOwnershipŠ– Ę 4¬&4¬& Šą „ ąą Ü ąE.ą0 4 ąAttorney€General€(or€state€agency)€as€Interested€MemberŠŠŗ 4¬&4¬& Šą „ ąą Ü ąF.ą0 4 ąEconomic€Rationale€for€nonprofitsŠ~® 4¬&4¬& Š6ą „ ąą Ü ąG.ą0 4 ąGeneral€Prohibition€on€competing€with€for„profit€businessesŠr¢ 4¬&4¬& Šą „ ąą Ü ąH.ą0 4 ąGeneral€Economics€of€having€nonprofits€associate€with€for„profit€businessesŠf–4¬&4¬& Š7ą „ ąą Ü ąI.ą0 4 ąJoint€Ventures€between€for„profit€organizations€and€nonprofits?ŠZŠ4¬&4¬& Š8ą „ ąą Ü ąJ.ą0 4 ąIncreased€Level€of€Scrutiny€(nosiness)€with€the€new€form€990€ŠN~4¬&4¬& Šą „ ąņ ņV.ó óą Ü ąFormation€of€a€Nonprofit€in€CaliforniaŠ Br Šą „ ąą Ü ąA.ą 4 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ąVoluntary€dissolution€of€€nonprofit€corporation€by€an€election€to€dissolveŠ2+b(*4¬&4¬& Šą „ ąą Ü ąB.ą0 4 ąA€Certificate€of€Dissolution€&€letter€from€the€Attorney€GeneralŠ&,V)+4¬&4¬& Šą „ ąą Ü ąC.ą0 4 ąProperty€and€assets€of€the€nonprofit€can€only€go€to€another€nonprofitŠ-J*,4¬&4¬& ЇŌ‡XĒzX¼¼ömŌņņII.ą „ ąWhy€a€Table€of€Contents?óóŠ Š ŠŌ#†¼öm¼XXĒz:#ŌĢą „ ąA.ą Ü ąIt€enables€Preview,€Interview,€Post€ViewŠ ś* ŠĢą „ ąą Ü ą1.ą0 4 ąBy€reviewing€all€of€the€categories,€you€will€be€able€to€see€what€is€coming€in€theŠ ā Špresentation,€and€when€it€will€be€presented.€€It€will€help€to€mark€your€questions€atĻcoming€categories,€the€questions€to€be€asked€if€they€were€not€already€answered€inĻadvance€in€that€category.Š 4¬&4¬& ŠĢą „ ąą Ü ą2.ą0 4 ąThe€Table€of€Contents€enables€a€quicker€find,€based€upon€the€location€in€variousŠ ¦ Ö  Šaspects€of€the€identity,€formation€and€life€cycle€of€a€non„profit.Š 4¬&4¬& ŠĢą „ ąB.ą0 Ü ąIt€helps€to€organize€a€body€of€materials€which€are€generally€disjointed,€in€some€logicalŠ ‚²  Šway.Рܬ&ܬ& ŠĢŌ‡XĒzX¼¼ömŌņņIII.ą „ ąTypes€of€€Nonprofits€in€the€U.S.óóŠ ^Ž ŠĢŌ#†¼öm¼XXĒz!#Ōą „ ąA.ą0 Ü ąThe€main€type€of€nonprofit€which€comes€to€mind€is€a€charitable€nonprofit€underŠ e• Ššš501(c)(3)€of€the€Internal€Revenue€Code.€€These€include€community€chests,€funds,€andĻfoundations€which€are€organized€and€operated€exclusively€for€religious,€charitable,Ļscientific,€public€safety€testing,€literary€or€educational€purposes.Рܬ&ܬ& ŠĢą „ ąB.ą0 Ü ąOther€entities€are€described€beginning€with€šš501(c)(4)€and€which€can€have€variousŠ )Y Šindividualized€rules€and€prohibitions,€but€which€generally€require€that€they€are€operatedĻas€a€not€operated€for€profit,€and€for€the€benefit€of€its€members.€The€idea€is€that€these€typesĻof€entities€should€exist€without€an€expectation€that€they€produce€a€profit.€€ContributionsĻto€these€organizations€do€not€result€in€a€šš170(c)€deduction€to€the€donors.€€€These€include:Рܬ&ܬ& ŠĢą „ ąą Ü ą1.ą 4 ąšš501(c)(4)€civic€leagues€(social€welfare€promotion).Š į ŠĢą „ ąą Ü ą2.ą 4 ąšš501(c)(5)€labor,€agricultural€or€horticultural€organizations.Š Éł ŠĢą „ ąą Ü ą3.ą 4 ąšš501(c)(6)€business€leagues€&€chambers€of€commerce.Š ±!į  ŠĢą „ ąą Ü ą4.ą 4 ąšš501(c)(7)€recreational€clubsŠ ™#É " ŠĢą „ ąą Ü ą5.ą 4 ąšš501(c)(8)€fraternal€lodge€societies€and€for€life,€accident,€sickness€benefits.Š %±"$ ŠĢą „ ąą Ü ą6.ą 4 ąšš501(c)(9)€employees€beneficiary€associations€for€life,€accident,€sickness€benefits.Š i'™$& ŠĢą „ ąą Ü ą7.ą0 4 ąšš501(c)(10)€fraternal€societies€which€earn€money€for€religious,€charitable,Š Q)&( Šscientific,€literary,€educational€&€fraternal€purposes€but€which€do€not€provide€forĻlife,€accident,€sickness€benefits.Š 4¬&4¬& ŠĢą „ ąą Ü ą8.ą 4 ąšš501(c)(11)€teachers€retirement€fund€associationsŠ !-Q*, Їą „ ąą Ü ą9.ą 4 ąšš501(c)(12)€local€life€insurance,€irrigation,€telephone€associationsŠ Š ŠĢą „ ąą Ü ą10.ą 4 ąšš501(c)(13)€cemetery€companies€for€memberššs€burial€benefits.Š øč ŠĢą „ ąą Ü ą11.ą 4 ąšš501(c)(14)€nonprofit€credit€unions.Š  Š ŠĢą „ ąą Ü ą12.ą 4 ąšš501(c)(15)€insurance€companies€other€than€life€insurance.Š ˆø ŠĢą „ ąą Ü ą13.ą 4 ąšš501(c)(16)€crop€operations€corporation.Š p   ŠĢą „ ąą Ü ą14.ą 4 ąšš501(c)(17)€supplemental€unemployment€compensation€benefit€trust.Š X ˆ  ŠĢą „ ąą Ü ą15.ą 4 ąšš501(c)(18)€pension€plan€benefits€trust.Š @p  ŠĢą „ ąą Ü ą16.ą 4 ąšš501(c)(19)€armed€forces€or€auxiliary€post.Š (X  ŠĢą „ ąą Ü ą17.ą 4 ąšš501(c)(20)€nonprofit€group€legal€service€plan.Š @ ŠĢą „ ąą Ü ą18.ą 4 ąšš501(c)(21)€black€lung€trust.Š ų( ŠĢą „ ąą Ü ą19.ą 4 ąšš501(c)(22)€multiemployer€plan€trust.Š ą ŠĢą „ ąą Ü ą20.ą 4 ąšš501(c)(23)€prior€armed€forces€insurance€&€benefits€association.Š Čų ŠĢą „ ąą Ü ą21.ą 4 ąšš501(c)(24)€ERISA€trustŠ °ą ŠĢą „ ąą Ü ą22.ą 4 ąšš501(c)(25)€real€property€income€trust€benefiting€a€retirement€plan.Š ˜Č ŠĢą „ ąą Ü ą23.ą 4 ąšš501(c)(26)€medical€care€membership€insurance€organization.Š €° ŠĢą „ ąą Ü ą24.ą 4 ąšš501(c)(27)€workers€compensation€supplemental€fund.Š h˜ ŠĢą „ ąą Ü ą25.ą 4 ąšš501(c)(28)€National€Railroad€Retirement€Investment€trust.Š P!€  ŠĢŌ‡XĒzX¼¼ömŌĢņņIV.›ą „ ąOverview€of€Nonprofit€Charities€in€the€U.S.óóŠ  $9!# ŠŌ#†¼öm¼XXĒz1#ŌĢą „ ąA.ą Ü ąFederal€and€State€Overlap€&€InteractionŠ 3&c#% ŠĢą „ ąą Ü ą1.ą0 4 ąTreatment€of€non„profits€is€based€upon€Federal€and€State€Overlap.€It€operates€inŠ (K%' Šmuch€the€same€way€that€citizens€are€subject€to€federal€taxation€and€state€taxation.ĻHowever,€there€is€a€bit€more€blending€of€characterization€because€of€the€fact€thatĻstate€law€rules€dictate€the€form€of€entity.Š 4¬&4¬& ŠĢą „ ąą Ü ą2.ą0 4 ąCalifornia,€for€example,€favors€the€shareholder„less€C€corporation€form.€€It€hasŠ ß,*, Šprovisions€for€an€LLC€form,€but€has€rules€which€cause€the€LLC€form€to€be€subjectŠ Ó-+- Što€the€minimum€annual€franchise€tax€unless€and€until€it€can€satisfy€the€state€that€itĻis€charitable€in€nature.€€The€LLC€form€is€generally€a€pass„thru€entity€and€isĻphilosophically€at€war€with€the€š šseparatenessšš€desired€of€nonprofits€by€both€theĻfederal€and€state€authorities.Š 4¬&4¬& ŠĢą „ ąą Ü ą3.ą0 4 ąAcross€the€states€and€territories€of€the€U.S.€other€forms€are€encouraged,€includingŠ ”Ä Šthe€trust€form,€and€many€others.€€Each€form€has€an€integration€with€the€stateššsĻother€laws,€and€is€one€aspect€of€nonprofits€which€tends€to€prohibit€movement€of€theĻnonprofit€from€one€state€to€the€other.Š 4¬&4¬& ŠĢą „ ąą Ü ą4.ą0 4 ąRiding€on€the€Federal€determination.€€Using€the€patent€system€as€an€example,€itŠ X ˆ  Šwas€not€unusual€for€lesser€technological€countries€in€which€a€patent€is€filed,€toĻsimply€wait€until€the€more€technological€country€(the€U.S.)€had€performed€itsĻexamination,€and€then€simply€š šcopyšš€the€more€technological€countryššsĻrejections/approach/level€of€claim€allowance€at€the€time€of€the€less€technologicalĻcountryššs€examination.€€€Most€states€follow€this€rule€with€respect€to€the€FederalĻDetermination€of€entitlement€to€exemption.€€The€state€jurisdiction€typicallyĻcontacts€the€nonprofit€and€says€š šI€have€your€paperwork,€and€when€you€get€yourĻfederal€determination,€send€it€to€œusšš.Š 4¬&4¬& Š›Ģą „ ąB.ą0 Ü ąIndependent€Nature:€Because€of€the€tax€advantages€inherent€in€a€nonprofit€there€is€aŠ ą Šnatural€tendency€for€entrepreneurs€to€want€to€š šusešš€the€nonprofit€for€their€own€benefit.€ĻThis€is€not€only€prohibited€by€the€rules€(to€be€discussed),€but€the€very€formation€andĻoperation€of€the€nonprofit€needs€to€be€independent€of€any€individual€entities€control,€andĻcontrol€should€be€had€only€to€benefit€the€exempt€purpose.Рܬ&ܬ& ŠĢą „ ąC.ą0 Ü ąThe€nonprofit€sits€across€a€line€of€deductibility,€along€with€all€nonprofits.€€As€an€entity,Š ˜Č Šthe€nonprofit€GENERALLY€has€the€same€benefits€and€rights€as€a€for€profit€entity.€€It€canĻsue€and€be€sued;€it€can€hold€trademarks,€patents€and€copyrights,€and€it€can€formĻcontractual€relationships€with€other€entities.Рܬ&ܬ& ŠĢą „ ąD.ą0 Ü ąOwnership:€Nearly€all€other€entities€have€some€form€of€ownership,€be€it€shares€of€stock,Š \ Œ Šor€units€of€LLC€ownership€and€the€like.€€California€nonprofit€corporations€donššt€haveĻshares€of€stock,€so€particular€attention€should€be€paid€to€drafting€articles€and€bylaws€toĻinsure€the€type€and€continuity€of€management€desired.€€Some€organizations€do€this€byĻcreating€ex„officio€management€or€board€slots,€as€well€as€some€mechanism€for€selectionĻand€approval€of€new€and€retiring€board€positions.€Š ܬ&ܬ& ŠĢą „ ąE.ą0 Ü ąAttorney€General€as€Interested€Member:€The€State€Attorney€Generalššs€office€isŠ '8$& Šconsidered€to€be€an€ultimate€member€of€each€California€non„profit.€€That€office€has€theĻability€to€enter€to€enforce€compliance€with€state€law€(which€is€more€specific€and€narrowĻthan€federal€law).€€The€State€Attorney€General€canššt€be€written€out€of€this€role€in€theĻarticles€or€bylaws.€€The€State€Attorney€General€even€has€oversight€over€unincorporatedĻassociations.€€See€also€California€Govt€Code€šš12584.Рܬ&ܬ& ŠĢą „ ąF.ą0 Ü ąEconomic€Rationale€for€nonprofits.€€There€are€a€number€of€stated€justifications€for€havingŠ “-ä*- Šnonprofits,€with€a€major€one€being€that€nonprofits€perform€services€which€governmentĻwould€otherwise€have€to€perform.€€It€is€also€believed€that€even€though€many€nonprofitsĻare€inefficient,€that€they€achieve€their€purpose€more€efficiently€than€government€would.€ĻIt€is€also€believed€possible€that€nonprofits€can€appear€in€response€to€a€public€need€muchĻearlier€than€government€legislation€could€provide€and€that€it€can€change€more€rapidlyĻwith€the€changing€times€to€serve€the€public€much€more€effectively€than€government.Рܬ&ܬ& ŠĢą „ ąG.ą0 Ü ąGeneral€Prohibition€on€competing€with€for„profit€businesses.€€Charities€are€expected€toŠ | ¬ Šconduit€funds€in€support€of€the€main€purpose.€€Charities€are€also€allowed€to€AttorneyĻGeneral€as€Interested€Member:€The€State€Attorney€Generalššs€office€is€considered€to€be€anĻultimate€member€of€each€California€non„profit.€€That€office€has€the€ability€to€enter€toĻenforce€compliance€with€state€law€(which€is€more€specific€and€narrow€than€federal€law).€ĻThe€State€Attorney€General€canššt€be€written€out€of€this€role€in€the€articles€or€bylaws.Рܬ&ܬ& ŠĢą „ ąą0 Ü ąAs€to€the€continuum€between€for€profit€and€non€profit€businesses€and€for€profitĻbusinesses,€where€the€business€is€the€central€purpose€of€the€organization€see€GoldsboroĻArt€League,€75€T.C.€337€(1980).Рܬ&ܬ& ŠĢą „ ąH.ą0 Ü ąGeneral€Economics€of€having€nonprofits€associate€with€for„profit€businesses.€€GenerallyŠ ų( Šthis€raises€the€issue€of€advertising€as€a€business.€€€Nonprofits€are€encouraged€to€seek€for„¼profit€organizations€which€will€run€ad€campaigns€showing€the€good€works€and€donationsĻthe€for„profits€give€to€the€nonprofit.€€Example?€€Say€that€an€airline€adopts€the€humaneĻsociety€and€promises€to€give€$1€each€time€a€customer€takes€a€flight€if€it€is€requested€at€theĻtime€that€the€reservation€is€made.€€So€long€as€the€total€of€the€$1€contributions€are€withinĻthe€airlines€normal€deduction€limit€(10%€of€annual€profits),€the€airline€is€allowed€toĻdeduct€the€contribution,€and€the€humane€society€has€taken€in€a€donation€that€it€could€haveĻhad€from€any€source.€€The€airline€may€gather€more€business€than€it€would€have€otherwise,Ļbut€this€results€in€more€taxable€income,€and€more€tax€to€the€government.Рܬ&ܬ& ŠĢą „ ąą0 Ü ąConversely,€what€if€a€nonprofit€adopted€an€airline?€€The€nonprofit€starts€spending€itsĻmoney€toward€advertising€how€great€the€airline€is€because€the€more€people€who€fly€theĻairline€and€mentions€the€humane€society,€the€more€money€the€charity€will€collect.€€InĻmany€ways,€though€not€to€the€extent€of€100%€of€its€airline€budget,€the€non„profit€hasĻbecome€an€advertising€agency€for€the€airline.€€The€airlineššs€contribution€to€the€charityĻwould€be€deducted€by€the€airlines€as€would€any€money€that€the€airline€spent€onĻadvertising.€€However,€an€AD€agency€would€earn€profits€and€be€taxed€on€them,€whereasĻthe€charity,€a€nonprofit,€would€not.€€In€essence€the€nonprofit€is€usurping€a€non„charitableĻadvertising€business.Рܬ&ܬ& ŠĢą „ ąą0 Ü ąIn€general,€a€charity€can€list€its€donors€on€a€donor€list,€or€sponsors€of€an€event€on€aĻsponsor€list.€€However,€any€touting€which€goes€beyond€simple€listing€is€subject€to€anĻš šUnrelated€Business€Income€Taxšš,€or€UBIT.€€The€UBIT€tax€rate€is€imposed€at€theĻcorporate€rate€(which€will€depend€upon€total€income)€except€for€charitable€trusts€whichĻare€subject€to€the€tax€rate€for€estates€and€trusts€IRC€šš511,€512,€513.€€A€key€component,Ļhowever,€is€the€š šunrelatednessšš€requirement.€€A€museum€which€operates€a€souvenir€shopĻwhich€is€related€to€the€theme€of€the€museum,€is€not€š šunrelatedšš,€and€would€not€have€itsŠ “-ä*- Šgross€margins€(income€minus€cost€of€goods€sold)€taxed€by€UBIT.€€Further,€a€smallĻsouvenir€shop,€as€a€commercial€enterprise,€is€likely€š šincidentalšš€to€the€main€purpose€ofĻrunning€a€museum.€€It€probably€generates€only€a€fractional€contribution€to€the€overallĻexpenses€of€the€museum.Рܬ&ܬ& ŠĢą „ ąI.ą0 Ü ąJoint€Ventures€between€for„profit€organizations€and€nonprofits?€€As€strange€as€this€mayŠ ”Ä Šseem,€and€as€dangerous€as€it€might€be€in€triggering€a€dozen€potential€penalties€and€taxes,Ļthis€has€been€addressed€in€Rev.€Rul.€2004-51,€as€well€as€in€Rev.€Rul.€1998„15.€€In€Rev.ĻRul.€2004-51€a€nonprofit€education€provider€made€a€joint€operating€agreement€with€aĻvideo€production€company€as€an€LLC.€€It€is€my€belief€that€all€of€the€provisions€of€theĻjoint€venture€could€have€been€accomplished€by€a€simple€licensing€agreement.€€The€jointĻventure,€which€acts€as€somewhat€of€a€proxy€for€the€nonprofit,€risks:Рܬ&ܬ& ŠĢą „ ąą0 Ü ą1.ą04ܬ&ܬ&ąPerforming€activities€that€do€not€further€exempt€purposes€and€which€may€notŠ 4d  Šnecessarily€be€limited€to€a€level€which€is€an€insubstantial€part€of€the€organizationššsĻactivities€(Better€Business€Bureau€of€Washington,€D.C.€v.€United€States,€326€U.S.Ļ279,€283€(1945),Š 4¬&4¬& ŠĢą „ ąą Ü ą2.ą0 4 ąBecoming€an€organization€is€not€organized€or€operated€exclusively€for€exemptŠ ų( Špurposes€unless€it€serves€a€public€rather€than€a€private€interest€as€required€in€theĻRegulations€šš€1.501(c)(3)-1(d)(1)(ii),€i.e.€loss€of€its€exempt€status.Š 4¬&4¬& ŠĢą „ ąą Ü ą3.ą0 4 ąFailure€of€the€Joint€venture€to€further€its€charitable€purposes€on€mutually€beneficialŠ Čų Šterms,€especially€if€the€nonprofit€organization€does€not€thereby€impermissiblyĻserve€private€interests€of€its€for„profit€partner€(Redlands€Surgical€Services,€113ĻT.C.€47,€92-93€(1999),€affššd€242€F.3d€904€(9th€Cir.€2001))Š 4¬&4¬& ŠĢą „ ąą Ü ą4.ą0 4 ąFailure€of€the€charitable€partner€ensure€that€the€partnership€operations€further€itsŠ Œ¼ Šcharitable€purposes,€irrespective€of€whether€the€joint€venture€partnership€providesĻņņsomeóó€charitable€services.€St.€Davidššs€Health€Care€System€v.€United€States,€349Š t¤ ŠF.3d€232,€236-237€(5th€Cir.€2003)Š 4¬&4¬& ŠĢą „ ąą Ü ą5.ą0 4 ąThe€potential€attraction€of€UBIT€income€under€IRC€šš512.ŠP!€ 4¬&4¬& ŠĢą „ ąą Ü ą6.ą0 4 ąThe€potential€for€UBIT€based€upon€the€manner€in€which€the€exempt€organizationŠ 8#h " Šoperates€its€business€as€a€determiner€of€UBITššs€š šunrelatednessšš€function.€SeeĻUnited€States€v.€American€College€of€Physicians,€475€U.S.€834,€849€(1986).Š 4¬&4¬& ŠĢą „ ąą0 Ü ąEven€more€dangerously,€the€entities€described€in€Rev.€Rul.€2004-51€made€a€general€50/50Ļagreement€on€sharing€investment€and€profits.€€The€ruling€seems€to€further€point€out€thatĻņņbecauseóó€the€relationship€between€the€profit€&€nonprofit€was€one€of€proportion,€that€ņņanyóóŠ š( &( Šactivity€of€the€joint€venture€partnership€were€attributed€to€the€nonprofit€partner.€€TheĻruling€was€based€upon€the€facts€before€it,€but€it€at€least€may€leave€open€a€suggestion€that€aĻstrictly€drafted€joint€venture€where€only€some€activities€are€controlled€and€attributable€toĻthe€nonprofit,€might€make€the€relationship€š šsaferšš.€€I€still€contend€that€nearly€anyĻpartnership€joint€venture€can€be€replaced€by€a€commercial€contract€structured€to€provideŠ “-ä*- Šin€a€better€way,€the€same€objectives.Рܬ&ܬ& ŠĢą „ ąJ.ą0 Ü ąIncreased€Level€of€Scrutiny€(nosiness)€of€the€Federal€government€via€the€new€form€990Š øč Šannual€informational€filing€requirement.€€As€a€result€of€9/11€and€the€potential€for€abuse€ofĻnonprofits,€both€domestically€and€for€nefarious€international€purposes,€the€federalĻreporting€requirement€requires€ņņa€lot€moreóó€operating€details€to€be€reported€each€year.Š ”Ä ŠFurther,€by€asking€pointed€questions€on€several€new€categories€of€information,€the€federalĻgovernment€is€ņņstrongly€inferringóó€that€the€nonprofits€make€themselves€able€to€answerŠ | ¬ Šaffirmatively€to€the€new€categories€of€questions,€and€with€sufficient€detail€to€show€thatĻeach€area€of€inquiry€is€sufficiently€embraced.€€New€Areas€included€in€the€June€20077Ļrevisions€include:Рܬ&ܬ& ŠĢą „ ąą Ü ą1.ą0 4 ąGovernance,€Management€and€Disclosure€invite€an€annual€overt€discussion€ofŠ @p  Šemployee€compensation,€corporate/organizational€conflicts€of€interest,€whistleĻblower€protection€and€more.Š 4¬&4¬& ŠĢą „ ąą Ü ą2.ą0 4 ąThe€extent€to€which€the€directors€are€š šindependentšš.€€In€California,€the€corporateŠ @ Šcode€has€a€more€stringent€standard€than€elsewhere€in€the€U.S.,€and€the€answers€toĻthis€question€could€trigger€problems€with€the€FTB.€€See€Californiaššs€š šNonprofitĻIntegrity€Act€of€2004€affecting€California€Government€Code€šš12585,€12586,€&Ļ12599.Š 4¬&4¬& ŠĢą „ ąą Ü ą3.ą0 4 ąAnswers€on€Policies€include€detailed€questions€on€conflict€of€interest€policiesŠ Čų Šincluding€their€internal€processes€for€dealing€with€them.€€Another€policy€inquiry€isĻthe€Joint€Ventures€policy€whose€most€invited€answer,€in€lieu€of€endless€lists€aĻspecific€aspects€of€this€policy,€would€be€a€simple€policy€on€prohibition€of€same.Š 4¬&4¬& ŠĢą „ ąą Ü ą4.ą0 4 ąMore€disclosures€are€sought€in€order€to€try€and€make€the€operation€of€the€nonprofitŠ Œ¼ Šas€transparent€as€possible.€€The€IRS€also€wants€to€insure€that€the€new€990€form€isĻseen€by€management€and€the€board€before€it€is€filed,€to€insure€that€any€answersĻwould€be€adopted€and€assented€to€by€the€nonprofitššs€management.Š 4¬&4¬& ŠĢœŌ‡XĒzX¼¼ömŌņņV.›ą „ ąFormation€of€a€Nonprofit€in€CaliforniaŠ P!€  ŠóóĢŌ#†¼öm¼XXĒzŠh#Ōą „ ąA.ą Ü ąGeneral€Overall€Steps€Simplified€„€Many€variations€but€these€are€basic€stepsŠ W#‡ " ŠĢą „ ąą Ü ą1.ą 4 ąPrepare€Corporate€Filing€Papers,€including€Articles€of€Incorporation.Š ?%o"$ ŠĢą „ ąą Ü ą2.ą 4 ąPrepare€By€Laws€which€are€consistent€with€the€Articles€of€Incorporation.Š ''W$& ŠĢą „ ąą Ü ą3.ą 4 ąFile€the€Articles€of€Incorporation€with€the€Secretary€of€State€with€fee.Š )?&( ŠĢą „ ąą Ü ą4.ą0 4 ąUpon€acceptance€of€filing,€and€upon€grant€of€a€corporation€number€for€exactingŠ ÷*'(* Šidentification,€file€for€a€tax€ID€number€for€the€entity.€(Form€SS„4)Š 4¬&4¬& ŠĢą „ ąą Ü ą5.ą0 4 ąOnce€the€tax€ID€number€is€available,€prepare€and€file€an€Application€for€FederalŠ Ó-+- ŠExemption€Determination€(Form€1023)€&€Determination€Letter€Request€(FormĻ8718)€and€user€fee€($400€where€gross€receipts€are€expected€not€to€exceed€$10,000Ļand€$900€for€all€others).Š 4¬&4¬& ŠĢą „ ąą Ü ą6.ą0 4 ąPrepare€and€File€an€Application€for€State€of€California€Exemption€DeterminationŠ  Š Š(Form€3500)€&€fee€&€include€all€material€sent€to€the€U.S.€Government.€€RememberĻthat€since€the€state€generally€wants€to€follow€the€federal€determination,€having€aĻcopy€of€all€that€was€sent€federally€puts€them€a€bit€more€at€ease€and€reduces€theĻstateššs€later€need€for€š šinformation€about€the€federal€exemption€basisšš.Š 4¬&4¬& ŠĢą „ ąą Ü ą7.ą0 4 ąExpect€receipt€from€the€IRS€or€FTB€or€both,€a€packet€of€material€whichŠ X ˆ  Šcontemplates€withholding€for€employees€of€the€exempt€organization;€regardless€ofĻany€indications€made€on€the€applications€for€exemption.Š 4¬&4¬& ŠĢą „ ąą Ü ą8.ą0 4 ąExpect€some€sort€of€communication€from€the€FTB,€either€before€or€after€the€federalŠ (X  Šexemption€application€is€acted€upon,€requesting€that€any€federal€determination€beĻmade€available€to€the€state€if,€when€&€as€received.Š 4¬&4¬& ŠĢą „ ąą Ü ą9.ą0 4 ąExpect€a€call€from€the€IRS€requesting€more€information.€€In€some€cases€the€callŠ ų( Šwill€request€information€which€seems€either€to€have€already€been€supplied,€orĻasking€some€general€question.€€This€may€be€a€check€call€to€see€if€the€applicant€isĻstill€there€and€viable€(and€represented).€€The€amount€of€information€requested€is€inĻdirect€proportion€to€the€questionability€of€the€nonprofitššs€focus.€€Where€aĻsignificant€number€and€type€of€activities€are€described,€the€questions€and€inquiriesĻwill€be€similarly€complex.Š 4¬&4¬& ŠĢą „ ąą Ü ą10.ą0 4 ąOnce€the€IRS€is€satisfied€about€its€inquiries,€the€Federal€Exemption€ApplicationŠ ˜Č Šshould€then€be€approved€and€a€š šFederal€Recognition€of€Exemption€Letteršš€š šLetterĻ947šš€will€be€issued€which€will€indicate€(a)€whether€you€have€been€approved€forĻexempt€status,€and€(b)€whether€you€have€avoided€private€foundation€status.€(MoreĻabout€this€later).€€Copies€of€this€letter€may€be€provided€to€donors€to€assure€them€ofĻthe€nonprofitššs€status.Š 4¬&4¬& ŠĢą „ ąą Ü ą11.ą0 4 ąA€copy€of€the€š šFederal€Recognition€of€Exemption€Letteršš€should€be€forwarded€toŠ D"t! Šthe€FTB€nonexempt€unit€as€soon€as€possible.Š 4¬&4¬& ŠĢą „ ąą Ü ą12.ą0 4 ąThe€FTB€Exempt€Organizations€Business€Entities€Section€should,€absent€anyŠ  %P"$ Šfurther€questions,€forward€a€similar€letter€stating€that€the€entity€is€š šexempt€fromĻfranchise€or€income€taxšš.ą ģ ąą D ąŠ'8$&4¬&4¬& ŠĢą „ ąB.ą Ü ąSpecific€Aspects€„€Articles€of€Incorporation;€Various€elementsŠ š( &( ŠĢą „ ąą Ü ą1.ą0 4 ąArticles€of€Incorporation€must€be€drafted€to€include€all€the€provisions€required€byŠ Ų*(* Šthe€California€Corporations€Code.€€The€Secretary€of€State€provides€š šsampleššĻnonprofit€articles€which€exemplify€some€of€the€requirements€of€the€state€andĻfederal€statutes.€€Although€compliance€with€nonprofit€law€could€be€achievedŠ “-ä*- Šwithout€any€special€inclusions€in€the€articles,€the€requirement€to€include€suchĻprovisions€adds€the€element€of€an€š šultra€viresšš€to€an€unlawful€act€of€a€nonprofitĻorganization€where€the€act€contravenes€the€provisions€of€the€articles€ofĻincorporation.Š 4¬&4¬& ŠĢą „ ąą Ü ą2.ą0 4 ąArticles€of€Incorporation€Provision:€š šThis€corporation€is€a€nonprofit€Public€BenefitŠ ”Ä ŠCorporation€and€is€not€organized€for€the€private€gain€of€any€person.šš€€ThisĻemphasizes€the€state€and€federal€principle€that€the€money€is€to€be€used€exclusivelyĻfor€the€charitable€purpose€and€that€the€benefits€are€not€to€š šinurešš€to€any€person.€ĻThis€does€not€necessarily€mean€that€a€staff€cannot€be€hired,€but€it€does€mean€thatĻthe€staff€or€anyone€else€associated€with€the€nonprofit€must€deliver€reasonableĻservices,€in€exchange€for€a€justifiable€provable€proper€amount€of€compensation.Š 4¬&4¬& ŠĢą „ ąą Ü ą3.ą0 4 ąArticles€of€Incorporation€Provision:€š šThe€specific€purpose€of€this€corporation€isŠ 4d  Što.....šš.€€€It€is€the€norm€in€for„profit€corporations€to€state€that€the€purpose€is€š šanyĻbusiness€purposešš.€€€For€nonprofits,€it€is€important€that€the€articles€express€aĻspecific€charitable€focus.€€The€specificity€of€the€charitable€purpose€is€tested€atĻstartup€to€see€if€it€benefits€the€public€generally€(even€if€its€a€limited€segment€of€theĻpublic),€and€this€is€tested€throughout€the€operational€life€of€the€charity.€€One€reasonĻthat€this€is€important€is€that€there€needs€to€be€a€correspondence€between€theĻdonative€intent€of€a€donor€and€the€purpose€to€which€any€donated€funds€are€put.€€InĻaddition,€every€action€of€the€nonprofit€board€will€be€tested€against€the€statedĻpurpose€to€see€if€the€nonprofit€is€operating€within€its€mandate.€Š 4¬&4¬& ŠĢą „ ąą Ü ąą0 4 ąGenerally€it€is€easily€conceivable€as€to€why€this€requirement€is€important.€MostĻfounders€of€nonprofits€have€directed€their€charitable€passion€in€a€particularĻdirection,€and€desire€that€the€direction€be€maintained.€€€The€articles€ofĻincorporation€can€be€amended,€but€it€may€be€more€difficult€when€the€nonprofit€hasĻassets€which€were€given€for€purpose€in€effect€at€the€time€of€the€donation.€€It€is€moreĻlikely€expected€that€changes€in€the€purpose€are€expected€to€be€quantum€changesĻrather€than€gross€changes,€and€it€is€preferable€that€any€change€chan€be€justified€dueĻto€changed€circumstances.€€Where€the€change€is€major,€or€where€there€is€someĻworry€that€a€change€might€trigger€an€objection€from€any€quarter,€it€may€be€desiredĻto€obtain€a€court€order€directing€the€change.€€The€š šcy€presšš€doctrine€has€been€usedĻin€the€past€to€change€a€purpose€of€a€charity€in€direct€opposition€to€the€purposeĻstated€by€the€originator/incorporator€of€the€charity.Š 4¬&4¬& ŠĢą „ ąą Ü ą4.ą0 4 ąArticles€of€Incorporation€Provision:€š šThis€corporation€is€organized€and€operatedŠ &D#% Šexclusively€for€charitable€purposes€within€the€meaning€of€Internal€Revenue€CodeĻsection€501(c)(3).šš€€This€sample€provision€has€a€couple€of€effects.€€First,€where€theĻinternal€revenue€code€sections,€including€501(c)(3)€and€modifying€sections€areĻchanged,€it€automatically€forces€the€nonprofit€to€change€with€them,€and€that€changeĻis€fundamental€„„€at€the€level€of€the€articles€of€incorporation.€€Second,€theĻš šexclusively€for€charitable€purposesšš€reinforces€the€prohibition€on€privateĻinurement€rule.Š 4¬&4¬& ŠŠ “-ä*- Šą „ ąą Ü ą5.ą0 4 ąArticles€of€Incorporation€Provision:€š š€No€substantial€part€of€the€activities€of€thisŠ Š Šcorporation€shall€consist€of€carrying€on€propaganda,€or€otherwise€attempting€toĻinfluence€legislation,€and€the€corporation€shall€not€participate€or€intervene€in€anyĻpolitical€campaign€(including€the€publishing€or€distribution€of€statements)€onĻbehalf€of€any€candidate€for€public€office.šš€€This€provision,€which€is€typically€isĻincluded€in€the€articles€of€a€public€charity,€states€several€principles.€€First,Ļpropaganda€and€influencing€legislation€is€a€lobbying€activity.€€Generally€lobbyingĻis€a€for„profit€business€activity,€and€its€deductibility€is€extremely€limited€by€IRC€ššĻ162(e)€.€€€Moving€away€from€the€private€business€of€lobbying,€the€next€type€ofĻentity€is€a€political€organization€which€has€its€own€separate€provisions€in€IRCĻšš527.€€For€political€parties,€their€expenditures€and€donation€receipts€there€are€aĻmyriad€number€of€federal,€state€and€local€law€requirements€(not€mentioned€here).Š 4¬&4¬& ŠĢą „ ąą Ü ąą0 4 ąCharities€are€allowed€some€small€amounts€of€lobbying€if€it€touches€on€theirĻpurpose,€but€IRC€šš4912€imposes€a€special€excise€tax€of€5%€of€the€amount€of€suchĻexpenditures€to€be€paid€by€the€organization,€and€an€additional€5%€to€be€paid€by€theĻmanagement€of€the€organization€if€the€management€willful.€€Second,€intervening€anĻany€political€campaign€between€candidates€is€absolutely€forbidden.Š 4¬&4¬& ŠĢą „ ąC.ą Ü ąSpecific€Aspects€„€Form€1023Š ģ ŠĢą „ ąą Ü ą1.ą0 4 ąRecent€changes€(w/in€last€two€œyears):ń7LńŠŌ4¬&4¬& Šń7Lń›Ģą „ ąą Ü ąą 4 ąa.ą0 Œ ąAddress;€all€requests€have€been€relocated€to€Covington,€Kentucky.Š¼ģŒ ¬&Œ ¬& ŠĢą „ ąą Ü ąą 4 ąb.ą0 Œ ąMore€burdensome€requirement€to€wait€several€years€before€a€showing€thatŠ ¤Ō Šthe€non„profit€is€expected€to€be€a€publicly€supported€nonprofit€areĻeliminated.€€A€showing€based€upon€reasonable€expectation€can€be€shownĻfrom€the€start€(more€on€private€foundation€versus€publicly€supportedĻnonprofit€will€be€shown€later).Š Œ ¬&Œ ¬& ŠĢą „ ąą Ü ąą 4 ąc.ą0 Œ ąIncreased€financial€data€now€required.€€Previously€required€was€current€yearŠ \ Œ Š+€2€more€years,€where€in€existence€for€less€than€5€years.€€Current€is€3€years€ifĻless€than€one€tax€year€completed,€but€4€years€if€one€tax€year€is€completed.Š Œ ¬&Œ ¬& Šą „ ąą Ü ąą 4 ąĢą „ ąą Ü ąą 4 ąd.ą0 Œ ąAs€an€example,€the€base€application€in€2001€had€9€pages.€€The€currentŠ ,$\!# Šapplication€is€expanded€to€12€pages.€€The€new€pages€include€a€lot€of€theĻinquiry€of€the€new€990€form.€€These€include€questions€on€foreignĻconnections,€the€elimination€of€space€for€the€description€of€charitableĻactivities€since€it€is€naturally€expected€to€be€quite€lengthy,€a€dedicatedĻcompensation€section,€and€other€aspects€similar€to€the€990€annual€reportingĻform€which€strongly€suggests€adoption€of€policy€and€the€like.Š Œ ¬&Œ ¬& ŠĢœń8LńĢń8Lń›ą „ ąD.ą Ü ąSpecific€Aspects€„€BylawsŠ Ģ+ü(+ ŠĢą „ ąą Ü ą1.ą0 4 ąRemember€that€the€bylaws€have€to€accompany€the€Form€1023€request€forŠ “-ä*- Šexemption€recognition.€€€Therefore€it€MUST€be€consistent€with€the€programĻdescription€which€accompanies€the€Form€1023.Š 4¬&4¬& ŠĢą „ ąą Ü ą2.ą0 4 ąThe€bylaws€have€to€create€stability€in€an€organization,€despite€having€noŠ ¬Ü Šownership.€€Where€an€organization€has€ownership,€the€ownership€creates€bothĻstability€through€ownership€and€preservation€of€valuable€shares,€and€stable€votingĻof€those€shares€by€individuals€who€have€a€strong€desire€to€preserve€theirĻinvestment,€and€thus€œthe€›organization.€€You€have€to€be€more€creative€with€the€byĻlaws.Š 4¬&4¬& ŠĢą „ ąą Ü ąą 4 ąa.ą0 Œ ąConsider€a€mechanism€which€limits€board€members€to€those€who€areŠ X ˆ  Šapproved€by€a€majority€of€a€small€board.Š Œ ¬&Œ ¬& ŠĢą „ ąą Ü ąą 4 ąb.ą0 Œ ąConsider€other€limits€for€board€membership€to€individuals€who€have€shownŠ 4d  Ša€level€of€loyalty€to€the€organization.Š Œ ¬&Œ ¬& ŠĢą „ ąą Ü ąą 4 ąc.ą0 Œ ąWhere€your€organization€would€benefit€from€support€of€local€government,Š @ Šconsider€š šex€officiošš€board€positions€in€which€local€leaders€take€positions€onĻyour€board.€€This€should€be€done€only€if€the€organization€is€such€that€itĻwould€always€be€supported€by€the€ex€officio€board€member.Š Œ ¬&Œ ¬& ŠĢą „ ąą Ü ąą 4 ąd.ą0 Œ ąConsider€other€š špoison€pillšš€provisions€to€prevent€hostile€takeover.€€JustŠ Ō Šbecause€its€a€nonprofit€doesnššt€mean€that€it€wonššt€be€raided€by€another€non„¼profit€for€its€assets.€€A€local€case€in€Long€Beach,€š šKhmer€BuddhistĻAssociation€v.€Larry€SARšš€is€an€example€of€a€Buddhist€church€owning€aĻsignificant€real€estate€asset,€and€which€did€not€remain€as€organized€as€itĻotherwise€might€have,€only€to€have€another€non„profit€attempt€to€take€it€overĻin€order€to€get€control€of€its€assets.€€This€should€be€a€reminder€thatĻnonprofits€can€benefit€not€only€from€public€donations€and€governmentĻgrants,€but€also€from€corporate€raiding.Š Œ ¬&Œ ¬& ŠĢœń9LńĢń9Lń›ą „ ąą Ü ąą 4 ąe.ą Œ ąBylaws€are€the€perfect€place€to€include€major€policies.€€This€should€include:Š \ Œ ŠĢą „ ąą Ü ąą 4 ąą Œ ąI„.ą ä ąAuditor€Standards.Š D"t! ŠĢą „ ąą Ü ąą 4 ąą Œ ąii.ą ä ąAudit€committeesŠ ,$\!# ŠĢą „ ąą Ü ąą 4 ąą Œ ąiii.ą ä ąMismanagement/€Sarbanes€Oxley€provisions.Š &D#% ŠĢą „ ąą Ü ąą 4 ąą Œ ąiv.ą ä ąConflicts€of€Interest€PoliciesŠ ü',%' ŠĢą „ ąą Ü ąą 4 ąą Œ ąv.ą ä ąInternal€&€External€Disclosures€policy.Š ä)') ŠĢą „ ąą Ü ąą 4 ąą Œ ąvi.ą0 ä ąInternal€procedures€and€internal€timing€to€make€sure€that€all€boardŠ Ģ+ü(+ Šmembers€see€and€are€familiar€with€all€reporting.€€No€significantĻreporting€or€significant€action€should€be€performed€without€boardŠ “-ä*- Šmember€oversight.Š ä ¬&ä ¬& ŠĢą „ ąą Ü ąą 4 ąą Œ ąvii.ą0 ä ąDefine€the€officers€fully€and€their€annual€duties.€€Apprise€any€officersŠ øč Šof€their€duties€before€having€them€take€office.Š ä ¬&ä ¬& ŠĢą „ ąą Ü ąą 4 ąą Œ ąviii.ą0 ä ąSolicitation€and€Fund€Raising€policies.€€These€are€critical.€€There€areŠ ”Ä Šspecial€rules,€procedures,€applications€and€approvals€imposed€by€theĻState€Attorney€General€and€the€IRS.€€For€example,€raffles,€bingo,Ļcasino€games€and€the€like€sound€trivial,€but€there€are€stringentĻrequirements€for€holding€these€types€of€events.€€By€laws€shouldĻidentify€that€these€requirements€will€be€met,€and€identify€the€person€orĻpersons€responsible€for€complying€with€the€rules.Š ä ¬&ä ¬& ŠĢą „ ąą Ü ąą 4 ąą Œ ąix.ą0 ä ąDocument€Retention.€€This€policy€is€more€important€than€ever€givenŠ 4d  Šthe€heightened€involvement€and€responsibility€of€nonprofits€forĻkeeping€track€of€the€donors,€keeping€track€of€donors€who€donate€in„¼kind€property,€insuring€that€the€in„kind€property€is€tracked€toĻdetermine€when€it€stops€being€used€for€the€exempt€purpose,€and€ifĻsold€is€reported€back€to€the€donor€and€to€the€IRS.Š ä ¬&ä ¬& ŠĢœŌ‡XĒzX¼¼ömŌņņVI.›ą „ ąOperation€of€a€Nonprofit€in€CaliforniaŠ ą ŠóóŌ#†¼öm¼XXĒz§#ŌĢą „ ąA.ą0 Ü ąOverall€Budget€Categories.€€In€general,€the€budgetary€categories€for€a€nonprofit€includeŠ  : ŠAdministrative€Costs,€Fund€Raising€Costs,€and€Program€Expenditures.€€Nonprofits€areĻcontinuously€examined€for€how€well€they€score€in€each€category.€€€The€split€betweenĻAdministrative€Costs€and€Fund€Raising€Costs€may€depend€upon€how€much€staff€time€isĻspent€œfund€›raising.€€However€Program€Expenditures€compared€to€all€money€collectedĻgive€some€measure€of€the€efficiency.€€Donššt€fail€to€understand€that€Program€ExpendituresĻcan€result€in€graft€and€waste€„„€a€program€to€feed€the€homeless€which€purchases€$1000Ļgourmet€meals€is€not€operating€efficiently,€even€if€its€Administrative€Costs€and€FundĻRaising€Costs€are€zero.€Program€Expenditures€and€their€efficiency€represent€the€mostРܬ&ܬ& ŠĢą „ ąB.ą0 Ü ąOf€course,€the€optimum€œefficiency€of€a€›€non„profit€œń0Lńisń0Lńń1Lńoccurs€when€it€isń1Lń›€operated€by€unpaidŠ ’!Ā  Švolunteers,€managed€by€uncompensated€boards,€and€which€have€100%€of€its€donationsĻspent€directly€upon€its€nonprofit€purpose.€€Where€it€is€necessary€to€compensate€eitherĻboards€or€staff,€the€key€is€being€able€to€justify€the€most€extreme€scrutiny€on€equivalentĻsalaries.€€Annual€surveys€for€each€employee€in€the€organization€is€the€norm.€€TheirĻclassification,€education,€talents€and€equivalent€jobs€are€measured,€and€justified.€€Data€isĻavailable€by€several€services€and€give€not€only€the€average€in€several€locations,€butĻspecial€percentile€data.€€Instead€of€a€situation€where€the€employer€and€employee€are€onĻopposite€sides€of€the€bargaining€table,€the€nonprofit€is€more€closely€aligned€with€and€areĻcontinually€trying€to€justify€the€salaries€paid€to€staff.Рܬ&ܬ& ŠĢą „ ąC.ą0 Ü ąAnnual€Reporting€Requirements€will€include€Form€990,€990EZ€(organizations€with€grossŠ ,>)+ Šreceipts€of€under€$25,000€need€not€file€the€990's€but€may€be€required€to€file€a€š špost€cardššĻtype€electronic€form€which€is€š šsimplified.šš€€Penalties€for€non€filing€required€informationŠ ö-&+- Šreturns€can€include€$20€per€day€with€a€maximum€of€$10,000€or€5%€of€gross€receipts€forĻthe€year€(IRC€šš6652(c)(1)(A).Рܬ&ܬ& ŠĢą „ ąD.ą0 Ü ąTransaction/Inurement€Penalties.€€Nonprofit€officers€and€board€members€(and€others)Š ¬Ü Šmay€be€š šdisqualified€personsšš.€€Transactions€by€which€a€š šdisqualified€personšš€receivesĻimproper€benefits€are€subject€to€penalties€as€an€excise€tax€of€25%€of€the€excess€benefit.€ĻManagers€would€get€an€excise€tax€of€10%€of€the€excess€benefit€up€to€$20,000€maximum.€ĻIRC€šš4958.€€But€the€idea€is€truly€to€have€these€transactions€reversed€at€the€earliestĻpossible€moment.€€If€the€excess€benefit€is€not€corrected€within€the€taxable€period,€anĻadditional€penalty€of€200%€of€the€excess€benefit€is€imposed.Рܬ&ܬ& ŠĢą „ ąE.ą0 Ü ąNonprofits€are€not€given€any€special€treatment€as€to€failure€to€withhold€taxes€for€staff.€€InŠ L |  Šfact,€nonprofits€will€suffer€more€severely€than€a€for„profit€corporation.€€€In€a€for„profitĻcorporation,€the€corporation€is€liable,€as€well€as€officers€who€knew€or€should€have€knownĻthat€the€withheld€taxes€were€not€paid.€€However,€with€the€requirements€of€the€990€form,Ļthe€requirement€that€the€board€and€officers€be€intimately€involved€in€knowing€everythingĻand€every€policy€in€organization,€the€persons€who€š šknew€or€should€have€knownšš€within€aĻnonprofit€will€include€all€of€the€board€and€all€of€the€officers.€€This€is€one€reason€thatĻvolunteering€to€serve€on€a€board€is€something€that€should€be€done€with€eyes€wide€open.€ĻSimply€š šriding€alongšš€on€a€board,€and€without€asking€hard€questions,€may€result€in€yourĻš švolunteer€servicešš€turned€into€a€guarantor€for€the€debts€of€the€nonprofit.Рܬ&ܬ& ŠĢą „ ąF.ą0 Ü ąAnother€reason€to€keep€a€nonprofits€financial€š šhealthšš€well€maintained€is€that€the€publicŠ Čų Šcan€request€and€receive€copies€of€the€nonprofitššs€tax€returns.€€Moreover,€the€IRS€has€beenĻworking€on€a€project€which€will€make€the€nonprofits€returns€readily€available€on€theĻworld€wide€web€so€that€those€returns€can€be€inspected€by€anyone€simply€by€identifyingĻand€clicking€on€the€corresponding€link.Рܬ&ܬ& ŠĢą „ ąG.ą0 Ü ąAs€previously€discussed,€nonprofits€which€endorse€a€candidate€for€public€office€willŠ €° Špotentially€cause€loss€of€the€exempt€status€for€the€organization.€€However,€nonprofitĻorganizations€that€lobby€in€manner€which€is€local€and/or€related€to€their€own€interest€areĻnot€penalized.€€The€key€is€determining€and€setting€parameters€so€that€the€lines€are€drawnĻbrightly€and€so€that€the€nonprofit€does€not€exceed€its€permitted€level€of€lobbying.€SeeĻIRC€šš4911,€š šTax€on€Excess€Expenditures€to€Influence€Legislationšš.€€The€tax€is€25%€ofĻexpenditures€over€the€nonprofitššs€š šgrass€roots€nontaxable€amountšš.€€IRC€šš4911(c)€has€aĻtable€setting€forth€the€corresponding€š šnontaxable€amountšš€and€its€based€upon€andĻproportional€(but€not€linearly)€to€the€level€of€š šexempt€purpose€expendituresšš.Рܬ&ܬ& ŠĢą „ ąH.ą0 Ü ąContinuously€Exerting€Oversight€over€fund€raising,€and€especially€gaming.€€ContractsŠ '8$& Šwith€fund€raisers€are€required€to€be€in€writing.€€Gaming€activities€are€required€to€beĻpermissible€under€state€law,€and€not€a€principal€activity€of€the€nonprofit.€€ThisĻrequirement€meshes€with€overseeing€fund€sources€which€might€attract€Unrelated€BusinessĻIncome€Tax€(UBIT).Рܬ&ܬ& ŠĢą „ ąI.ą0 Ü ąCarefully€monitoring€the€disposition€of€assets.€€Any€asset€owned€by€a€nonprofit€has€to€beŠ Ą,š), Šeither€sold€for€fair€market€value,€with€the€proceeds€of€the€sale€taken€back€into€the€non„Š “-ä*- Šprofit,€or€it€must€be€donated€to€another€nonprofit.€€Once€an€asset€or€its€financialĻequivalent€is€created€on€the€nonprofit€side€of€the€money€line,€it,€or€its€benefit€must€beĻmaintained€on€the€nonprofit€side.€€It€is€generally€the€position€of€the€IRS€(and€onceĻremarked€by€its€counsel)€that€once€the€assets€move€into€the€nonprofit€realm,€that€the€IRSĻdoesnššt€really€care€which€nonprofit€eventually€ends€up€with€it€so€long€as€the€rules€(i.e.Ļcore€purpose,€or€adjusted€basis€to€the€donee€upon€sale)€are€observed.€€IRC€šš170(e)Ļrequires€that€an€in„kind€donation€of€personal€property€get€special€attention€from€theĻnonprofit.Рܬ&ܬ& ŠĢą „ ąą0 Ü ąFor€charitable€donations,€the€donor€has€previously€been€able€to€write€off€the€fair€marketĻvalue€of€tangible€personal€property,€perhaps€the€theory€being€that€a€donor€should€not€beĻforced€to€sell€an€appreciated€item€even€at€a€15%€capital€gains€rate€and€then€donate€theĻleftover€cash€to€the€charity,€especially€where€such€a€sale€followed€by€cash€donation€mightĻresult€in€a€limitation€on€the€deduction€where€the€amount€exceeds€the€50%,€30%€or€20%Ļlimits.€€IRC€€šš170(e)(7)€includes€a€provision€for€recapture€of€deduction€of€certainĻdispositions€of€exempt€use€property.€€The€š šrecapture€periodšš€extends€for€three€yearsĻbeginning€on€the€date€of€contribution€of€he€property.€€The€recapture€will€be€the€amount€ofĻdeduction€allowed€to€the€donor€over€the€donorššs€basis.€The€triggering€event€is€aĻdisposition,€unless€the€donee€nonprofit€makes€a€certification€that€the€use€of€the€propertyĻby€the€nonprofit€was€substantial€and€related€to€the€exempt€purpose€of€the€nonprofit.€€As€aĻresult€of€šš170(e),€there€will€be€a€3€year€umbilical€cord€between€the€nonprofit€and€theĻdonor€as€to€tangible€personal€property.Рܬ&ܬ& ŠĢą „ ąJ.ą0 Ü ąRealization€of€the€type€of€category€of€œ501(c)›€fits,€and€keeping€the€books€accordingly.€€ForŠ ¼ģ Šexample,€a€š šPrivate€Foundationšš€has€a€less€beneficial€tax€treatment€than€a€public€charityĻbecause€it€is€more€suspect€that€it€is€not€being€operated€for€the€public€benefit.€€€A€generalĻnonprofit€can€be€a€š špublic€charity€if€it€meets€two€tests:Рܬ&ܬ& ŠĢą „ ąą Ü ą1.ą0 4 ąOne„Third€of€Donations€and€support€are€from€public€sources,€i.e.€donations,Š €° Šmemberships,€sale€of€goods€&€merchandise.Š 4¬&4¬& ŠĢą „ ąą Ü ą2.ą0 4 ąLess€than€One„Third€of€the€donative€support€is€from€a€single€source,€investments€,Š \ Œ Šor€UBIT€classified€income.Š 4¬&4¬& ŠĢą „ ąą0 Ü ąPrivate€Foundations€must€spend€85%€of€its€income€or€investment€returns€on€its€programĻexpenditures.Рܬ&ܬ& ŠĢą „ ąœK.›ą0 Ü ąIf€the€nonprofit€is€one€of€the€types€of€organizations€which€are€automatically€exempt€fromŠ &D#% Šbeing€a€private€foundation,€care€should€be€taken€to€make€certain€that€any€aspect€necessaryĻto€meet€that€exception€is€maintained.€€For€example,€educational€institutions€must€offerĻeducation€on€a€regularly€scheduled€basis.€€Categories€which€are€automatically€excludedĻfrom€the€threat€of€š šfoundation€statusšš€are:Рܬ&ܬ& ŠĢą „ ąą Ü ą1.ą0 4 ąChurches.ŠĢ+ü(+4¬&4¬& ŠĢą „ ąą Ü ą2.ą0 4 ąHospitals.Š“-ä*-4¬&4¬& Їą „ ąą Ü ą3.ą 4 ąMedical€Research€Organizations.Š Š ŠĢą „ ąą Ü ą4.ą 4 ąEducational€Institutions.Š øč ŠĢą „ ąœL.›ą0 Ü ąFocus€on€maintaining€exempt€status€at€all€times€by€monitoring€court€decisions,€newŠ  Š Šlegislation€and€other€factors.€€Notify€donors€properly€about€the€status€of€the€nonprofit.€ĻWhere€exemption€is€removed,€or€not€yet€granted,€inform€the€donors€that€their€donationĻmay€not€be€allowed€as€a€deduction.€€Donors€should€demand€to€see€a€valid€exemptionĻletter€issued€by€the€IRS.€€Nonprofits€are€not€generally€required€to€file€a€request€for€anĻexemption€(subject€to€some€exceptions),€but€if€donors€are€enticed€to€donate€and€are€notĻable€to€deduct€the€donation,€the€nonprofit€may€be€liable€for€fraud.€€Organizations€whoĻperform€specific€activities€(such€as€bingo)€are€required€to€apply.Рܬ&ܬ& ŠĢą „ ąœM.›ą0 Ü ąComply€with€š šGood€Governancešš.€€The€IRS€released,€in€January/February€2007Š 4d  Šš šSuggested€Guidelines€of€Good€Governance€Practices€for€501(c)(3)€organizations.€€ItĻincludes€topics€far€deeper€into€the€Maslowššs€hierarchy€than€the€minimum.€€It€includesĻtopics€such€as€š šmission€statementšš,€š šCode€of€Ethics€and€Whistle€blower€policiesšš,€š šDueĻDiligencešš,€š šDuty€of€Loyaltyšš,€š šTransparencyšš,€š šFundraising€Policyšš,€š šFinancialĻAuditsšš,€š šCompensation€Practicesšš€and€š šDocument€Retention€Policyšš.Рܬ&ܬ& ŠĢą „ ąą0 Ü ąThis€is€somewhat€a€realization€that€even€the€categories€set€forth€in€the€990€can€beĻminimally€met€and€surreptitiously€circumvented,€and€that€only€a€culture€of€openness€canĻand€transparency€can€truly€achieve€an€ideal€of€highly€efficient€public€service.€€€FederalĻand€State€government€desires,€but€cannot€œmicro€›manage€a€nonprofits€efficiency.Рܬ&ܬ& ŠĢą „ ąą0 Ü ąHowever,€the€new€990,€and€these€aspirational€š šgovernancešš€guidelines€has€spawned€aĻcottage€industry€of€š šnonprofit€management€consultantsšš€who€are€either€hired€to€come€intoĻthe€nonprofit€and€beat€the€staff€over€the€head,€or€either€provide€a€series€of€educationalĻvignettes€in€a€teaching€setting.€€We€contend€that€anything€that€improves€canššt€hurt,€butĻthis€type€of€consultancy€is€less€needed€where€the€nonprofit€organization€is€100%Ļvolunteer€and€small.€€In€a€large€organization,€it€is€much€easier€to€lose€focus€on€theĻmission,€and€end€up€to€a€point€where€employees€consider€it€š šjust€another€jobšš.Рܬ&ܬ& ŠĢą „ ąœN.›ą0 Ü ąSome€State€issues:ŠD"t!ܬ&ܬ& ŠĢą „ ąą Ü ą1.ą0 4 ąCollateral€Estoppel€may€be€raised€where€state€litigation€has€occurred€regarding€aŠ ,$\!# Šnonprofitššs€standards€for€exemption€where€they€are€substantially€the€same€as€theĻfederal€standards.€€Syanon€Church€v.€United€States,€820€F2d€421€(DC€Cir.€1987)Š 4¬&4¬& ŠĢą „ ąą Ü ą2.ą0 4 ąState,€County,€&€City€permits€for€fundraising.€€These€often€overlap€and€conflict.€Š ü',%' ŠThe€nonprofit€organization€has€to€take€special€care€as€to€the€areas€in€which€itĻperforms€fundraising€activities€and€insure€that€all€levels€of€permit€are€obtained.Š 4¬&4¬& ŠĢ.ą „ ąą Ü ą3.ą0 4 ąWhere€donations€are€made€for€a€stated€purpose,€the€nonprofit€must€honor€thoseŠ Ģ+ü(+ Šrequests€within€state€law.€€Federal€law€on€š šdonative€intentšš€is€much€more€broadlyĻcouched€in€favor€of€nonprofit€organizations.€€Remember€generally€that€taxŠ “-ä*- Šexemptions€and€exempt€organizations€is€an€area€where€federal€and€state€rules€areĻhighly€interrelated.€€The€federal€authorities€can€and€will€act€upon€an€activity€doneĻin€violation€of€state€law€(like€bingo),€but€the€state€subsumes€most€of€the€federalĻrequirements€into€its€own€requirement€for€recognition€of€exemption.€€The€federal„¼state€relationship€is€therefore€not€pre„emption,€and€is€not€isolated€co„existence,€IĻcontend€that€it€is€a€form€of€interrelated€dual€authorization.€€This€generally€differsĻfrom€other€areas€of€federal„state€tax€law.€€For€example,€in€Private€Letter€RulingĻ9110016,€the€IRS€ruled€that€a€donor€canššt€deduct€a€premium€paid€on€a€lifeĻinsurance€policy€intended€to€irrevocably€be€assigned€to€a€charity€where€theĻpurchase€violated€New€York€Insurance€Law.€€This€example€of€a€š šcharitable€effectššĻfrom€violation€of€a€non„charitable€unrelated€law€illustrates€the€extent€to€which€bothĻstates€and€federal€government€react€š šdouble„negativelyšš.Š 4¬&4¬& ŠĢą „ ąą Ü ą4.ą0 4 ąState€Exemption€excludes€the€nonprofit€from€property€tax€both€real€and€personal.Š 4d  ŠIn€instances€where€the€physical€facilities€are€significant,€obtaining€the€stateĻexemption€is€quite€valuable,€and€losing€the€state€exemption€can€bankrupt€aĻnonprofit.€€There€are€many€real€property€issues€which€arise€from€the€method€ofĻownership€of€real€property€and€the€uses€to€which€the€real€property€is€put.€€PartialĻdenial€of€a€tax€exemption€may€be€denied€where€the€property€is€put€to€nonexemptĻuses.€€Sales€and€use€tax€exemptions€are€also€granted€in€some€states,€but€notĻCalifornia€(œCal.€›Rev.€&€Tax€Code€šššš€6361,€6363,€6365,€&€6366.€€Strangely,€CAĻdoes€exempt€from€tax€food€served€to€students€of€educational€institutions.Š 4¬&4¬& ŠĢą „ ąą Ü ą5.ą0 4 ąCalifornia€State€Corporation€Code€Sections€5914€and€5915€restricts€transfer€of€aŠ ¼ģ Šlease,€option€or€conveyance€of€a€health€facility€subject€to€Attorney€GeneralĻconsent.Š 4¬&4¬& ŠĢą „ ąą Ü ą6.ą0 4 ąCalifornia€State€Corporation€Code€Section€5000€and€following€set€up€special€rulesŠ Œ¼ Šfor€nonprofit€š šmembersšš€with€similar€characteristics€as€shareholders,€establishingĻrights,€insulation€from€liability€of€the€nonprofit€organization€and€more.Š 4¬&4¬& ŠĢą „ ąą Ü ą7.ą0 4 ąCalifornia€State€Government€Code€section€12580€&€following€sets€forth€theŠ \ Œ ŠAttorney€General€rights€with€regard€to€a€trust€created€when€a€donor€makes€aĻdonation€for€a€specific€purpose.Š 4¬&4¬& ŠĢą „ ąą Ü ą8.ą0 4 ąAspects€of€California€Trust€law€in€the€Probate€Code€are€applicable€to€nonprofits.€Š ,$\!# ŠSections€of€the€unfair€Competition€Law€applicable€to€nonprofits€include€BusinessĻ&€Professions€Code€Section€17,200;€&€17,500€and€following.Š 4¬&4¬& ŠĢą „ ąą Ü ą9.ą0 4 ąThe€state€of€California€allows€š šforeignšš€(other€state)€corporations€to€qualify€forŠ ü',%' Šrecognition€using€special€nonprofit€forms.€€The€converse€problem€of€a€nonprofitĻentity€in€one€state€moving€to€another€(unlike€a€typical€corporate€reorganization)Ļcanššt€happen€as€smoothly€because€the€IRS€causes€the€new€state€organization€toĻš šstart€overšš€by€filing€a€Form€1023€as€if€it€were€applying€for€exemption€for€the€firstĻtime.Š 4¬&4¬& ŠŠ “-ä*- МŌ‡XĒzX¼¼ömŌņņVII.›ą „ ąForeign€Related€Nonprofits.Š Š ŠĢą „ ąóóŌ#†¼öm¼XXĒz×ē#ŌA.ą0 Ü ąSince€9/11,€the€federal€government€has€been€highly€conscious€of€the€potential€for€abuseŠ <l Šof€nonprofits€in€financing€international€terrorism.€€The€š šnew€990šš€came€into€existenceĻlargely€due€to€the€concerns.Рܬ&ܬ& ŠĢą „ ąB.ą0 Ü ąThe€general€rule€for€nonprofits€is€that€any€organization€which€is€foreign€based€and€whichŠ  < Šwould€meet€U.S.€standards€for€exemption,€can€itself€be€treated€as€an€exempt€organization.€ĻHowever,€donors€to€such€organizations€who€have€not€qualified€in€the€U.S.€may€face€anĻuphill€task€in€obtaining€deductibility.€€Likewise,€U.S.€based€nonprofits€that€makeĻdonations€to€other€overseas€nonprofits€will€be€subject€to€extreme€scrutiny€from€the€IRS€asĻwell€as€homeland€security.€€Any€donation€from€a€U.S.€based€nonprofit€to€a€foreign€entityĻwhich€is€held€not€to€be€an€exempt€organization€can€trigger€a€domino€effect€of€violationsĻfor€the€donor€nonprofit.€€These€would€include€diverting€money€for€private€use,€punitiveĻtax€on€the€management€for€diversion€and€the€200%€tax€if€the€money€is€not€replacedĻwithin€a€year.€€The€aforementioned€does€not€even€consider€the€potential€criminalĻsanctions.Рܬ&ܬ& ŠĢœŌ‡XĒzX¼¼ömŌņņVIII.›ą Ü ąDissolution€of€a€Nonprofit.Š |¬ ŠĢą „ ąóóŌ#†¼öm¼XXĒz.ķ#ŌA.ą0 Ü ąVoluntary€dissolution€of€a€domestic€nonprofit€corporation€is€initiated€by€an€election€toŠ č Šdissolve€made€by€the€vote€of€a€majority€of€all€the€members€of€the€corporation€or,€if€thereĻare€no€members,€by€the€board€of€directors.€€Dissolution€is€governed€by€CaliforniaĻCorporate€Code€section€9680€which€dictates€filings€with€the€Secretary€of€State.Рܬ&ܬ& ŠĢą „ ąB.ą0 Ü ąA€Certificate€of€Dissolution€may€issue€and€must€be€accompanied€by€a€letter€from€theŠ ¬Ü ŠAttorney€General€that€either€waives€objections€to€the€distribution€of€the€corporationššsĻassets€pursuant€to€California€Corporations€Code€section€6716(c)€or€confirms€that€theĻcorporation€has€no€assets.€(California€Corporations€Code€sections€6615€and€9680.)€Š ܬ&ܬ& ŠĢą „ ąC.ą0 Ü ąInasmuch€as€property€and€assets€of€the€nonprofit€can€only€go€to€another€nonprofit,€it€canŠ p   Šbe€readily€seen€that€the€dissolution€process€would€be€helped€by,€and€it€would€be€naturalĻfor€the€dissolving€nonprofit€to€donate€its€remaining€assets€to€the€nonprofits€of€its€choice.Рܬ&ܬ& ŠĢŠ  @$p!" ŠĢĢŃšŠŃŃ,ŠŃą@µ µ 1ģąņ ņņņCurtis€L.€Harringtonóóó óˆŠ č ŠŅą,ŅŅą,ŅÓøŽfęÓņ ņŌ‡ŠóŠŠ¼¼ömŌOfficeó ó:€ą  ąHarrington€&€Harrington;€€6300€State€University€Drive,€€Suite€250,€€Long€Beach,€CAŠ öŹ Šą 8 ąą  ą90815;€€€Tel.€(562)€594„9784;€€Fax€(562)€594„4414Ģą 8 ąą  ącurt@patentax.com€ņ ņPATENTAXņņššó óóóą   ąą ų ąą P ąhttp://www.patentax.comŠ ­ ŠÓfføŽÓĢņ ņÓšŁffÓSpecialtyó ó:ą  ąHigh€Technology€Patent€/€Trademark€/€Intellectual€Property€Law€&€TaxationŠ īĀ ŠÓffšŁÓĢÓšŁffÓņ ņEducationó ó:ą  ąņ ņB.S.€ó óChemistry€„€Auburn€University€(1974)Š * ž  Šą 8 ąą  ąņ ņM.€S.€Electrical€Engineeringó 󀄀California€State€University€Long€Beach€(1990)Š  Ö  Šą 8 ąą  ąņ ņM.S.€Chemical€Engineeringó 󀄀Georgia€Institute€of€Technology€(1977)Š Ś ®  Šą 8 ąą  ąņ ņJ.D.ó 󀄀University€of€Houston€School€of€Law€(1983)Š ² †  Šą 8 ąą  ąņ ņM.B.A.ó 󀄀University€of€Oklahoma€(1985)Š Š ^  Šą 8 ąą  ąņ ņLL.M.€ó óņņTaxationó󀄀University€of€San€Diego€School€of€Law€(1997)Š b 6  ŠÓffšŁÓĢÓšŁffÓņ ņAdmittedó óą  ąSupreme€Courts€of€California,€Arizona,€Texas,€&€NevadaŠ žr  Šņ ņto€Practiceó ó:€ą0  ąU.S.€Supreme€Court;ą š ąą H ąU.S.€District€Court,€Central€District€of€CaliforniaŠvJų%ų% Šą 8 ąą  ąInternal€Revenue€Service€ą š ąU.S.€Patent€and€Trademark€OfficeŠ N" Šą 8 ąą  ąU.S.€Court€of€Appeals€for€the€Federal,€Fifth€&€Ninth€CircuitsĢą 8 ąą  ąCalifornia€Department€of€Real€Estate€„€BrokerĢą 8 ąą  ąLos€Angeles€County€California€EMT„BasicĢą 8 ąą  ąU.S.€Tax€Courtą ˜ ąą š ąą H ąFCC„Commercial€&€Amateur€ExtraŠ ¢v Šą 8 ąą  ąCertified€by€The€State€Bar€of€California€Board€of€Legal€Specialization:€TaxationĢÓffšŁÓĢÓšŁffÓņ ņLanguagesó óą0  ąJapanese€Language€Proficiency€Examination,€Approved€by€Japan€Foundation,€Level€4;Š °„ ŠKanji€Proficiency€Exam€of€the€Japan€Kanji€Aptitude€Testing€Foundation,€passed€Level€7,Ļrecognized€by€the€Japan€Ministry€of€Education,€mastery€of€640€kanji;€some€technicalĻRussian€reading€ability.Š ų%ų% ŠÓffšŁÓĢÓšŁffÓņ ņPatentsó óą  ąPrepared€and€prosecuted€more€than€100€patents,€in€the€electrical€andŠ k? Šņ ņPreparedó óą0  ąchemical€technologies;€specialty€areas€include€optics,€fiber€optics,€cryogenicsŠ C Šelectromagnetics,€natural€gas€processing€and€computers,€&€trademark€and€copyrightĻpreparation€and€prosecution.€€Patents€include:€Chemical:€4,957,634;€4,851,077;€Electrical:Ļ4,876,892;€4,833,351;€4,837,525;€Mechanical:€4,879,895;€4,906,199;€and€Optical:Ļ4,919,512;€4,898,468.Š ų%ų% ŠÓffšŁÓĢÓšŁffÓņ ņLitigationó óą0  ąAssociate€counsel€in€patent€matters,€trade€secret€litigation;€Judge€pro€tem,€Long€BeachŠ Ó§% ŠMunicipal€Court;€Superior€Court€Mediation€program,€Long€Beach;€Attorney„Client€feeĻDispute€Arbitrator,€Long€Beach€Bar€Association;€Patent€Panel,€American€ArbitrationĻAssociation.Š ų%ų% ŠÓffšŁÓĢÓšŁffÓņ ņTeachingó óą0  ąAdjunct€Law€Professor,€ņņGolden€Gate€University€School€of€Lawóó,€LL.M.€Taxation€Program;Š Ž"b!* ŠņņGeorgia€Institute€of€Technologyó󀄀previously€taught€heat€and€mass€transfer€laboratories,€andŠ f#:"+ Šanalog€and€digital€computer€laboratory.Š ų%ų% ŠÓffšŁÓĢÓšŁffÓņ ņMember:ó óą0  ąState€bars€of€California,€Arizona,€Texas€and€Nevada;€Vice€Chair€of€the€California€Board€ofŠ t%H$. ŠLegal€Specialization€Taxation€Advisory€Committee€(member€2006„2011).€Fellow,€NationalĻTax€Practice€Institute;€€€ņ ņFormer€Membershipsó ó:€Long€Beach€Bar€Association€(Board€ofŠ !'õ%0 ŠGovernors,€1994„95);€Orange€County€Bar€Association,€Taxation€Section,€(Co„ChairĻTechnology€Law€Section€1996);€Orange€County€Chapter€of€California€Society€of€EnrolledĻAgents€„€President€2003„2004;€California€Bar€Association:€CEB€committee€(1999„2000);ĻIncome€&€Other€Tax€subcommittee€(Chair€2000„2002);€Taxation€Section€ExecutiveĻCommittee€(2002„2005).Ō#†¼öm¼ŠŠóŠńņ#Ō