Nonprofit & Church Law Frequently Asked Questions (FAQ)
Introduction
At Ingraham Pautienus & Tidwell, PLLC we have assisted in the creation of numerous Nonprofit Corporations. We know the process and the possible pitfalls of forming and maintaining Nonprofit Corporations. This is a complex area of law and the financial penalties of nonconformance can be significant. We will be happy to discuss your current or planned Nonprofit Corporation circumstances.
At Ingraham, Pautienus, & Tidwell our Senior Partner, Nashville Nonprofit & Church Law Attorney Robert Pautienus leads our team for all matters related to Nashville and Tennessee Nonprofit Corporation concerns.
You may contact Robert directly through this website at Robert Pautienus, you may use our firm's on-line Contact Form, or call us at (615) 370-3010 for immediate action on your case.
F.A.Q.
Frequently Asked Nashville Tennessee Nonprofit Law Questions
The following questions are among the most frequently asked of our firm relating to Nonprofit Corporations and how the Nashville Tennessee Business Practice Law Firm of Ingraham, Pautienus, & Tidwell addresses these issues.
If your questions are not answered here or you need more information please call us or send them through our Contact Form.
You may click on each FAQ below to see or hide an answer or ...
A non-profit organization (abbreviated as NPO, also known as a not-for-profit organization) is a corporation formed for some charitable or benevolent purpose and not for profit. Such corporations are afforded special tax treatment. NPOs do not distribute their surplus funds to owners or shareholders, but instead uses them to pursue their exempt purposes. Examples of NPOs include charity, religion, health, science, literature, wildlife protection, the arts, even sports.
NPOs are normally exempt from corporate income taxes, property taxes, sales taxes, franchise and excise taxes, and donations to these groups may be tax deductible. They receive exemptions from various taxes in recognition of their contributions to bettering the general social fabric of the community.
Creating any nonprofit corporation is not too different from establishing one's own business. It is a big and important undertaking, and it should be done carefully and properly. The first thing to do is choose a category of tax-exempt status to match its functions. There are 33 forms of NFP organizations including the 501(C)(3) Corporation . Here is a link to a site that lists them all, based on the 1986 Tax Code, including the types of applications required.
Although it appears easy there are a number of substantial pitfalls for 501(C)(3) corporations that do not incorporate or function properly. The penalties can be severe. You need to include specific language to ensure that you'll receive tax-exempt status and not all states have the same structure and requirements.
Our attorneys can assist you through the process or, at a minimum, review your structure and filings. Give us a call and we can guide you through the process.
The Tennessee Non-Profit Corporation Act requires a nonprofit corporation to have at least three directors, one president, and one secretary. The same person cannot be both the president and secretary. Officers and directors must be natural persons.
Yes. Any corporation, including NFP corporations, may pay reasonable compensation for services rendered to the corporation. However, with a NFP, the critical question is whether or not the compensation for services is reasonable.
Yes, but there are restrictions on political contributions by nonprofit corporations. They are too complex to address on this FAQ page - contact us for complete information.
The Tennessee Open Records Act describes in detail which records may remain confidential and which must be open to internal and public inspection. There are different rules for different corporations. If you have specific questions on this issue please contact our firm
To find information about the rules and procedures for nonprofits go to the IRS website, use the term -- "exempt organizations" in your search. A useful starting point for looking up this information is at Tax Information for Charities & Other Non-Profits
A church is not required to file Form 1023 to be recognized as tax exempt. Most NFP organizations are required to publish their financial reports detailing their income and expenditure for the public (Form 990). Churches are generally exempt from the filing of Form 990. Additionally, because of the separation of church and state, courts are restricted in how they can become involved in church disputes among its members. This often times raises complex issues because of the court system's lack of power in helping to resolve internal church disputes and issues.
The IRS is restricted by the Internal Revenue Code on how it must conduct civil tax inquiries and examinations of churches. The IRS may only initiate a church tax inquiry if the Director, Exempt Organizations Examinations, reasonably believes>, based on a written statement of the facts and circumstances, that the organization: (a) may not qualify for the exemption; or (b) may not be paying tax on unrelated business or other taxable activity.
If your church receives a written notice from the IRS notifying the church of an inquiry, we strongly recommend that you immediately contact our law firm.
The housing allowance is only available to "ministers." Merely performing the functions of a minister is not enough to be eligible for a housing allowance. A minister must meet the requirements of the tax code.
This is answered in full through the IRS's Publication on Charities, Churches and Politics.
In summary, currently, the law prohibits political campaign activity by charities and churches by defining a 501(c)(3) organization as one "which does not participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of (or in opposition to) any candidate for public office." Churches may engage in issue advocacy, but it needs to be done very carefully in order not avoid any issues with the Internal Revenue Code.
Total compensation to any church employee must be "reasonable." There is little guidance for what constitutes reasonableness. However, there are methods that a board of directors can employ to support the reasonableness of compensation, before an issue has arisen with the IRS. Since compensation that is determined to be unreasonably high or "excessive" may jeopardize the tax-exempt status of the church, if you have any question as to the amount of compensation being paid, we recommend that you contact our firm to discuss your compensation packages.
Disclaimer
The information you obtain at this site is not, nor is it intended to be, legal advice. You should consult an attorney for advice regarding your individual situation. We invite you to contact us and welcome your calls, letters and electronic mail. Contacting us does not create an attorney-client relationship. Please do not send any confidential information to us until such time as an attorney-client relationship has been established.
At Ingraham Pautienus & Tidwell, PLLC, we represent people throughout Middle Tennessee, including clients in Nashville, Brentwood, Franklin, Murfreesboro, Gallatin, Clarksville, Davidson County, Williamson County, Rutherford County, Robertson County, Sumner County, Wilson County, Putnam County, Maury County, Coffee County, and Cheatham County.
