What to Expect from Figeroux & Associates in Tax-Exempt Organizations and Private Foundations

Introduction
Tax-exempt organizations, including nonprofits and private foundations, play a crucial role in addressing social, educational, and philanthropic needs. These entities enjoy tax-exempt status under IRS regulations but must adhere to strict compliance requirements to maintain their tax benefits. Navigating the complex rules surrounding tax exemption, unrelated business income, and charitable deductions requires specialized expertise. Figeroux & Associates offers comprehensive services tailored to the unique needs of tax-exempt organizations and private foundations, providing guidance on IRS compliance, securing tax-exempt status, and managing critical tax issues like UBTI and charitable deductions.

This article provides an in-depth analysis of what clients can expect from Figeroux & Associates, covering each of these essential services and explaining how the firm supports the success and legal compliance of tax-exempt entities.

1. Helping Clients Navigate IRS Compliance

Compliance with IRS regulations is essential for tax-exempt organizations to maintain their status and avoid penalties. Tax-exempt entities must follow specific operational guidelines, file required forms, and observe rules regarding fundraising, lobbying, and management of assets. Figeroux & Associates offers extensive compliance support to help clients meet these requirements effectively.

Establishing Compliance Policies and Procedures

Creating strong compliance policies and procedures is the foundation for a well-run tax-exempt organization. Figeroux & Associates assists clients in establishing a framework that promotes accountability, transparency, and adherence to IRS regulations.

What Clients Can Expect:

• Review and Assessment of Existing Policies: For established organizations, the firm conducts a thorough review of existing policies to ensure compliance with IRS standards. This includes governance policies, operational guidelines, and conflict-of-interest policies.
• Development of New Compliance Policies: Figeroux & Associates assists new organizations or those without formal policies in developing essential compliance documents, such as whistleblower policies, document retention policies, and ethics guidelines.
• Training for Board Members and Staff: The firm provides training sessions for board members and key staff, ensuring they understand their roles and responsibilities in maintaining compliance and managing the organization’s assets.

IRS Form 990 and Annual Reporting

Most tax-exempt organizations are required to file Form 990 annually to report financial information, operational activities, and governance practices. Figeroux & Associates provides assistance with preparing and submitting Form 990, helping clients meet this critical compliance requirement.

What Clients Can Expect:

• Preparation and Filing of Form 990: The firm assists with accurately completing Form 990, ensuring that all sections are completed correctly to reflect the organization’s finances, programs, and governance practices. This helps prevent IRS scrutiny or penalties for incomplete reporting.
• Guidance on Transparency Requirements: Form 990 requires organizations to disclose certain information about governance and operations. Figeroux & Associates provides guidance on how to accurately report this information while protecting sensitive data.
• Monitoring Compliance with Public Support Tests: Certain tax-exempt organizations must meet a public support test to maintain their status. The firm advises clients on the requirements of this test and helps monitor compliance over time to avoid losing tax-exempt status.

Lobbying, Political Activities, and Compliance with IRS Restrictions

The IRS places limitations on the lobbying and political activities of tax-exempt organizations. Figeroux & Associates provides guidance to ensure clients comply with these restrictions, reducing the risk of penalties or revocation of tax-exempt status.

What Clients Can Expect:

• Review of Permissible Activities: The firm provides detailed guidance on what constitutes permissible lobbying and advocacy activities, helping clients understand the IRS’s limits and avoid penalties for excessive lobbying.
• Structuring of Activities for Compliance: If an organization engages in advocacy, Figeroux & Associates assists in structuring these activities to ensure they fall within the IRS’s guidelines. This includes ensuring that political activities are nonpartisan and directly aligned with the organization’s mission.
• Recordkeeping and Reporting for Lobbying Activities: For organizations that engage in lobbying, the firm advises on required recordkeeping and reporting practices to comply with IRS and state requirements.

Proactive Compliance Monitoring and Updates

In addition to handling immediate compliance needs, Figeroux & Associates offers ongoing support to help clients adapt to changes in IRS regulations or organizational structure. This proactive approach ensures that clients remain compliant as their operations evolve.

2. Obtaining Tax-Exempt Status

Obtaining tax-exempt status is a critical step for nonprofit organizations and private foundations, as it allows them to operate free of federal income tax on activities that further their mission. The process of securing this status requires a comprehensive application to the IRS, often involving extensive documentation. Figeroux & Associates guides clients through every step of this process to increase the likelihood of a successful application.

Application for 501(c)(3) Status

Section 501(c)(3) of the Internal Revenue Code provides tax-exempt status to organizations operating for charitable, educational, religious, or other public-benefit purposes. Figeroux & Associates assists organizations in applying for 501(c)(3) status, ensuring they meet all requirements.

What Clients Can Expect:

• Review of Organizational Purpose and Activities: The firm works with clients to clarify their purpose, structure, and activities, ensuring that they meet the requirements for 501(c)(3) status. This includes establishing that the organization operates exclusively for exempt purposes and that its earnings do not benefit private individuals.
• Preparation of Form 1023 or 1023-EZ: Figeroux & Associates assists in preparing Form 1023, the primary application form for 501(c)(3) status, or the streamlined Form 1023-EZ for eligible organizations. This includes compiling documentation on governance, finances, and activities to support the application.
• Guidance on Supporting Documentation: The firm helps clients gather and organize the necessary supporting documents, including articles of incorporation, bylaws, financial statements, and a description of the organization’s programs.
• Drafting Conflict-of-Interest Policies and Other Governing Documents: As part of the application process, the IRS requires tax-exempt organizations to have certain governance policies. Figeroux & Associates drafts and reviews policies to ensure compliance with IRS standards.

Specialty Applications for Private Foundations

Private foundations, which are also eligible for tax-exempt status, face additional requirements compared to public charities. Figeroux & Associates assists private foundations with the application process, ensuring they meet the unique requirements for this classification.

What Clients Can Expect:

• Distinguishing Between Public Charities and Private Foundations: The firm advises on the classification of the organization as a public charity or private foundation, helping clients understand the regulatory implications of each status.
• Guidance on Self-Dealing Rules and Minimum Distribution Requirements: Private foundations are subject to self-dealing rules and must meet annual distribution requirements. Figeroux & Associates provides guidance on these requirements to ensure compliance and avoid excise taxes.
• Application Support for Exempt Activities: The firm assists private foundations in demonstrating that their activities further their exempt purposes, providing clear documentation for the IRS to review.

Responding to IRS Requests and Follow-Up

In some cases, the IRS may request additional information before granting tax-exempt status. Figeroux & Associates provides support in responding to these requests, ensuring that the organization’s application remains strong and clear.

What Clients Can Expect:

• Preparation of Responses to IRS Inquiries: The firm prepares detailed responses to IRS inquiries, addressing any gaps or questions that arise during the review process.
• Appeals and Reconsideration Support: If an application is denied, Figeroux & Associates can assist with an appeal or reconsideration request, helping clients present their case effectively.

Ongoing Guidance for Maintaining Exempt Status

Once an organization secures tax-exempt status, Figeroux & Associates offers guidance on maintaining it, including advice on annual filings, governance practices, and program activities that comply with IRS requirements.

3. Managing Issues Related to Unrelated Business Taxable Income (UBTI) and Charitable Deductions

Tax-exempt organizations are allowed to engage in income-generating activities, but any income not directly related to their exempt purpose may be subject to unrelated business income tax (UBIT). Additionally, tax-exempt organizations must manage charitable deductions effectively to support their donors’ tax benefits. Figeroux & Associates provides comprehensive support for these complex tax issues.

Understanding and Managing Unrelated Business Taxable Income (UBTI)

UBTI is income generated from activities unrelated to an organization’s primary mission and is generally subject to tax. Too much UBTI can jeopardize an organization’s tax-exempt status, so careful management is essential.

What Clients Can Expect:

• UBTI Assessment and Income Classification: Figeroux & Associates analyzes revenue sources to determine which income is subject to UBIT, helping clients categorize income accurately and avoid unnecessary tax liabilities.
• Structuring Income to Minimize UBIT Exposure: The firm advises on structuring income-generating activities to minimize UBTI exposure. This may include separating unrelated activities from exempt operations or creating a taxable subsidiary to manage such activities.
• UBIT Compliance and Reporting (Form 990-T): Organizations with UBTI must file Form 990-T to report this income and pay applicable taxes. Figeroux & Associates assists with Form 990-T preparation and filing, ensuring that UBIT is reported accurately.
• Guidance on Exemptions for Passive Income: Certain types of passive income, such as dividends, interest, and royalties, are typically exempt from UBIT. The firm provides guidance on structuring investments to classify income as passive and avoid UBIT.

Maximizing Charitable Deduction Compliance

Donors are eligible for tax deductions on contributions made to tax-exempt organizations, but these deductions come with IRS requirements for acknowledgment and documentation. Figeroux & Associates helps clients establish practices for managing charitable deductions effectively.

What Clients Can Expect:

• Guidance on Donation Receipt Requirements: The IRS requires organizations to provide donors with written acknowledgment for tax-deductible contributions. Figeroux & Associates assists clients in drafting acknowledgment letters that meet IRS requirements, ensuring donors receive the documentation needed to claim deductions.
• Managing Contributions of Non-Cash Assets: For non-cash donations, such as real estate or artwork, specific valuation and acknowledgment rules apply. The firm advises on compliance with these rules to support donor deductions and prevent IRS challenges.
• Advice on Donor Advised Funds and Restricted Gifts: Donor advised funds and restricted gifts come with unique regulatory requirements. Figeroux & Associates provides guidance on managing these contributions in compliance with IRS rules, helping clients support donor intentions while avoiding tax issues.

Planned Giving and Estate Contributions

Planned giving, such as bequests, trusts, and annuities, can provide significant financial support for tax-exempt organizations. Figeroux & Associates advises on managing these contributions to maximize tax benefits for both the organization and the donor.

What Clients Can Expect:

• Drafting of Planned Giving Policies: The firm assists organizations in establishing policies for planned giving, helping them structure bequests and annuities in compliance with IRS guidelines.
• Estate Contribution Management: For contributions made through estates, Figeroux & Associates provides guidance on valuation and acknowledgment, ensuring that all documentation supports the donor’s intended tax benefits.
• Compliance with Charitable Remainder Trust and Lead Trust Requirements: Charitable remainder trusts (CRTs) and charitable lead trusts (CLTs) provide tax benefits for donors while supporting tax-exempt organizations. The firm advises on structuring these trusts to ensure compliance and meet donor objectives.

Periodic Reviews of UBTI and Charitable Deduction Compliance

To maintain compliance, Figeroux & Associates conducts periodic reviews of clients’ UBTI and charitable deduction management practices. This proactive approach helps clients adapt to changing regulations and optimize their tax-exempt benefits.

Conclusion

Figeroux & Associates offers comprehensive legal services in tax-exempt organization and private foundation law, helping clients navigate IRS compliance, secure tax-exempt status, and manage complex tax issues like unrelated business taxable income (UBTI) and charitable deductions. Through expert guidance, the firm supports organizations in maximizing the benefits of tax-exempt status while adhering to regulatory requirements.

For organizations seeking to maintain compliance, Figeroux & Associates offers ongoing support, including the development of governance policies, training for board members, and preparation of Form 990. The firm also provides extensive assistance with securing 501(c)(3) status, guiding clients through the application process and ensuring compliance with IRS requirements for tax-exempt eligibility. When organizations engage in unrelated business activities or receive charitable donations, the firm offers guidance on managing UBTI and charitable deductions effectively, ensuring that income and contributions align with IRS rules and support the organization’s mission.

By partnering with Figeroux & Associates, tax-exempt organizations gain access to a team of professionals dedicated to supporting their compliance needs and enhancing their ability to serve the public. Through proactive tax planning and personalized service, Figeroux & Associates helps clients focus on their charitable objectives while navigating the complexities of nonprofit tax law with confidence and success.