Non-profit status, as it is commonly understood, actually involves two different levels of consideration. The first is that state law governs how a non-profit is set up. There are laws governing corporate structure, association structure (many older churches often are associations rather than corporations), and other possible structures as well. Compliance with these state laws will determine how the organization is set up and whether or not the organization will qualify for certain state benefits such as exemption from sales tax and, sometimes, exemption from certain property taxes.
Federal law determines whether or not an organization is income tax-exempt, meaning that taxes do not have to be paid on the organization’s income and gifts to the organization do not have to be counted in the income of the person who gives the gift. Filing for income tax exemption, typically 501(c)(3), status can be a very complicated procedure and have a significant impact on how the organization itself should be organized and governed. Our attorneys can help you through the process of obtaining tax-exempt status in an efficient manner.
A non-profit can take a number of different forms. Most frequently, a corporation is formed. However, many of the older churches in Pennsylvania were set up as associations rather than corporations, and, as associations, they can qualify for non-profit status as well. The attorneys at Trinity Law can assist you in all aspects of forming your corporation or association, including filing all of the proper papers with the state and preparing of governance papers such as by-laws and a conflict of interest policy. These documents will help ensure that your organization is run effectively and in such a way as to minimize risk.
Due to concern about abusive fund-raising tactics and multi-level marketing, Pennsylvania has enacted complex and stringent rules to govern virtually all fund-raising other than fund-raising within an organization such as within a church’s congregation. For example, if an organization solicits a certain amount of funds per year, they need to file a registration statement with the state. Our attorneys at Trinity Law are well equipped to provide you with all the guidance you need to satisfy all the rules and requirements.
Unrelated Business Income
A common pitfall for both churches and non-profit organizations is unrelated business income. Unrelated business income is generally defined as Income received by a non-profit organization (including a church) from activities that are not related to organization’s mission and not used to further organization’s exempt purpose. Furthermore, the IRS looks to three things when determining whether an activity is unrelated business income including whether the activity from which the income is derived is a trade or business, whether the activity is regularly carried on, and whether the activity is substantially related to an exempt purpose. The attorneys at Trinity Law can provide guidance on this important issue to ensure tax compliance.
Our attorneys at Trinity Law, have considerable experience in assisting churches with developing governance procedures, including church discipline, that comport with Scripture and state law. The laws governing such matters are getting increasingly complex, and churches that are willing to take a Biblical stance in regard to discipline are increasingly under attack. Our attorneys can assist you as you develop these procedures in a way that is true to Scripture and the particular needs of your church but will also, as far as possible, insulate you from liability from lawsuits and from attacks on your tax-exempt status from the government.
For experienced non-profit law advice and counsel, contact our non-profit law attorneys in York at 717-843-8046, in Lancaster at 717-560-5068, or call toll-free at 866-464-5297.