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Formation and Compliance of Tax Exempt Organizations

The formation of a tax exempt organization can be very complicated compared to other entity types. Unless the planned entity is a church, the taxpayer must obtain tax exempt status. The term “non-profit” is a state concept and refers to the formation of the entity at the state level. Tax exempt status is a federal concept that allows the entity the non-recognition of income relating to their exempt purpose. The rules for determining if a purpose is tax exempt are complicated and ever changing. It is very important to retain experienced counsel to prepare an application for tax exemption.

Once a tax exempt entity is formed, there are strict rules as to what the entity can and cannot do. Having deals that funnel income to the taxpayer’s for profit businesses can cause the entity to lose its status, which can have disastrous retroactive consequences for the years in which the exemption was in place. Insight Law can help you maintain compliance with these stringent rules, yet still accomplish the goals of your Private Foundation, or Charitable Organization.