Starting a Tax Exempt Organization

The term 501(c)(3) refers to Section 501(c)(3) of the Internal Revenue Code, where the rules and regulations governing exempt organizations are found. Tax exempt organizations are commonly referred to as 501(c)(3). 501(c)(3) includes both public charities and private foundations.

Being a tax exempt organization is not an astatic thing. It’s a process with a lifecycle to it. The normal five steps to the life cycle of a tax exempt organization include:-

  • Starting out
  • Applying for exemption
  • Required filings
  • Ongoing compliance and
  • Significant events.

Starting out and applying for exemptions are unique because you should only do them once for any single organization. You need to create an organization under your state’s law. Your state will have rules that you would likely make your organizations purpose to qualify as a non-profit, which is a state level classification. The organizations, organizing documents are its Articles of Incorporation. For unincorporated organizations, it’s Charter, Constitution, and Articles of Association. The organizing document must have a clause that limits the organization’s purposes to one or more of the exempt purpose listed in the IRS code. It’s most not expressly empowers the organization to engage in activities that are not in furtherance of its exempt purposes. It should have a dissolution clause. Assets of the organization must be permanently dedicated to an exempt purpose described under Section 501(c)(3). By-laws are different from the organizing documents. By-laws are organization’s internal operating rules. Federal law doesn’t require specific language in the by-laws of most organizations. However, state law may require you to have by-laws, so it’s a good idea to contact the state to find out its specific requirements.

When you are creating your organization, you may need to create organization documents based upon the requirements of your state. You will need these when you apply for tax exemption. When you apply for tax exemption, which is a federal level status, you will need to acquire an employer identification number (EIN). Even though you don’t have any employees you would still need an EIN which is similar to your personal social security number, but it’s only for your business. It would identify you to the IRS. It’s normally issued by the IRS. Apply for EIN through different ways.

  • Apply online.
  • Complete the required form and fax it to the IRS.
  • Mail the form to the IRS.
  • You can even apply for EIN by telephone.

All EIN applications must disclose the name and tax payer identification number of the true principal officer, general partner, grantor, or owner, whom the IRS would call as “Responsible Party”.

In order to apply for tax exempt status under Section 501(c)(3), you have to fill out relevant forms and submit with user fees. User fees are based upon the gross receipts. Total money an organization receives from all sources before taking out costs or expenses. It’s based upon the gross receipts an organization received/plants to receive over a four year plan. Generally an organization is required to apply for recognition of exemption with the IRS within 27 months from the end of the month in which it was organized for its exemption to be effective from its date of formation. When certain requirements are met, this deadline can be extended. Normally on receipt of application and user fees, the IRS approves simple applications within 90 days or less. IRS would have an Exempt Organization Specialist assigned to process complex application which needs substantial data and takes more than 90 days to process. In some cases, it may take up to six months. Determination letter recognizing exempt status which shows foundation classification and permanent records required for public disclosures would be issued by the IRS.

Churches, including synagogues, temples and mosques are not required to apply, yet they are still exempt from federal income tax and the contributions they receive are tax deductible, but they can still apply. Most of them apply to receive the determination letter that proves their tax-exempt status and specifies that contributions to them are tax deductible.

Churches, schools, organizations providing medical or hospital care are statutory charities. Other public charities are organizations that receive significant public support including organizations that provide support to other public charities.

In order to qualify an organization as a public charity, it has to pass the organization and operational test, broad public support etc.

Organizational test:- The organization limits its purpose to one or more of the exempt purpose listed in Section 501(c)(3). It does not permit the organization to engage in non-exempt activity and assets of the organization must be permanently dedicated to an exempt purpose. For the operational test, the organization must show that its principal activities will be to further its exempt purpose. The organization also has to limit the participation in certain types of activities and absolutely refrain from other prohibited activities.

To demonstrate public support the organization has to show that it receives substantial support and contributions from publicly supported organization, governmental units and or the general public or no more than 1/3 support from gross investment income and unrelated business income combined and more than 1/3 support from contributions, membership fees and gross receipts from activities related to exempt functions. In this a good record keeping is an important factor.

The IRS assesses the activities and the test is conducted when you are first applying for tax-exempt status. When the organization after receiving the 501(c)(3) status engages in prohibited activities, you could lose your tax-exempt status and would be subjected to both taxes and penalties. Churches, their integrated auxiliaries, and conventions or associations of churches and an organization that is not a private foundation and the gross receipts of which in each taxable year are normally not more than $5000 are normally treated under public charity. When an organization qualifies as a 501(c)(3) organization, the IRS presumes it’s a private foundation unless it can show that it’s a public charity.

The main difference is where the organization’s financial support comes from. Generally a public charity has a broad base of support while a private foundation has very limited sources of support. There are also different tax rules like private foundations are subject to excise taxes that aren’t imposed on public charities.

Normally the IRS grants public charity status when it passes the public charity test for the initial five years, based upon the predicted support is treated as a public charity regardless of actual support. From year 6 onwards, the IRS based on information provided in annual reporting, it’s calculated for current year plus four previous years.

Group exemption letters are issued by IRS for smaller group associated with a single central group. They can apply as a group and there is no need for individual application. Group exemption letters have the same effect as individual letters.

Post application, organizations may operate as a tax exempt organization while waiting for approval. Donors have no assurance that their contributions will be deductible until application is approved. While waiting for the approval, the organization may follow the procedure for record keeping, keeping detailed records of financial and non-financial activities.

The benefits of Section 501(c)(3) status is that, the organization gets exemption from federal income tax, tax-deductible contributions and reduced postal rates. Possible exemption from State income, sales and employment taxes. The organization can receive tax-exempt financing.

The status comes with responsibilities. 501(c)(3) organization is organized and operated exclusively for exempt purpose that are: Religious, Charitable, Scientific, Testing for public safety, literacy or educational, designed to foster national or international amateur sports competitions, for the prevention of cruelty to children or animals. Recordkeeping is another important aspect. The organization has to keep detailed records of financial and non-financial records. IRS Publication, compliance guide has information on why you need to keep records, what records you should keep, and how long to keep your records. Most public charities recognized as tax-exempt are required to file an annual information return. Good records make it easier to complete your required annual filings. The organization is required to make public certain documents that you file with the IRS, but not all of your records. Following documents on request have to be provided. The organization’s annual returns for its three most recent years after the due date, including any extensions. All Form 990 schedules (except for donor names and address), their attachments, and supporting documents. Determination letter from the IRS showing that the organization has been granted tax-exempt status. The organization is not responsible for providing free meeting space.

How Home Insurance Lawyers Can Help Resolve Your Case

Terri-Lynn Robinson’s entire life was turned upside down when a dispute with her ex-husband went disastrously wrong. As he packed to move out, he decided to take revenge. He retrieved a BBQ lighter and lit the entire length of their bed skirt on fire. With her in the room. Within minutes, her bedroom went up in flames. While Terri was able to escape, her home and life were in shambles. Her house, an object of arson, was uninhabitable. She turned to her insurance company, who responded by denying her claim. Their reason was that, since her ex-husband was on title, the damage was caused by the home-owner and thus was not covered. Terri is a victim of spousal abuse; she lost her home during the dissolvement of her marriage. When things couldn’t get worse, she was told that she was on her own. Insurance that she had paid for would not be stepping in. Terri was left to pay the mortgage on a “rotting shell” while she lived in a shelter. She could not afford the repairs on her income, and she now faces the very real possibility of bankruptcy and the loss of the rest of her possessions. If you’ve found yourself in a similar situation, a home insurance lawyer can help.

This Happens More than you Think

Terri-Lynn is not the first woman to be a victim of spousal abuse and arson. She is definitely not the first to have claims wrongfully denied. The tragic outcome of these denials can be complete loss of quality of life and home. Home insurance lawyers are the connecting link between these horrible tragedies and a successful outcome. Lawyers fight for your rights and your insurance claims. Insurance is paid so that it is there when you need it the most. It is a tragedy that this money is lost, leaving you out of pocket for additional expenses that you cannot afford during the worst periods in your life.

Lawyers get Results

Insurance companies are just that: companies. Companies exist to make money. In addition to this, there is a lot of scrutiny over insurance claims to insure that a claim is not fraud. Unfortunately, this type of scrutiny often leaves the homeowners on the short end, with their claims denied. Home insurance lawyers are familiar with the laws and regulations surrounding insurance and claims. If your claim is denied, your next best move is to call for help.

Most home insurance lawyers work on a commission basis. This means that they do not get paid until you do. They understand that your current situation has already created financial strain. Hiring a lawyer should not add more stress to your current situation. If you can get the help you need to fight a claim that should be paid. To get the money needed to repair your home and life without the out-of-pocket expenses, make the call. Home insurance lawyers are there to fight for you. They are the middle liaison that understands your situation while having the legal knowledge to work in your favor. You paid for your insurance to be there for you. A home insurance lawyer will take the time needed to make sure that this is exactly what happens.

Probate Attorney – What You Should Know

This is the attorney that you would hire to administer the last will and testament of a deceased person. They will also help to guide the heirs through the probate process in court, which is when a person files a petition for probate. This is the process to determine if the will the deceased left behind is valid. In the probate process the assets that the deceased left behind are distributed to pay any bills and what is left is divided among the heirs as the will states. The probate attorney will assist the heirs during the legal process, including filing any necessary pleadings and motions. If the will is contested by the heirs they will make arguments to the court as to why it is being contested. It the court has any questions about the will’s validity he will answer their questions.

Although this is not required for them to do so sometimes they will be the executor of the will, especially if the deceased has named them as the executor of their estate. When they are the executor of the will they will manage the distribution of any assets the deceased has left behind. Some of his duties can be helping to change the title on some property. It can also be helping to move assets into the person’s name who inherited the items. The probate attorney is also responsible to make sure that all of the funds are accounted for along with the taxation aspect of the will and estate. When the probate attorney is the executor of a will they are generally paid a nominal fee, which could be a percentage based on a percentage of the estate or a flat fee. It is a fee that is separate from the one for preparing the will.

To become a probate attorney you will first have to have a bachelor’s degree and graduate from law school, which can take up to ten years. Before you can apply to take the bar exam you will have to have acquired a specific number of hours work experience for a law firm. Each state has a specific number of hours. Once you have met this requirement you can take the bar exam.

As an added bonus you should have good interview skills. When discussing any requests to change a will or when creating a will having persuasion and oral communication skills can be very helpful. When starting work as a probate attorney many will work as a junior attorney for a law firm that deals with probate work. They will be the ones that review wills, doing paperwork that involves the execution of an estate, and fulfilling change requests. They will also learn how surrogate court works.

The Top Business Lawyers Mean Business

The law also protects consumers from business monopolies, malpractices, price fixing, and other issues.

As a business owner, you need to know about the laws regarding your business type, whether it is a small venture, a franchise, a partnership, or a corporation. There exist several legal considerations. The choices you make while setting up a business influence your business management, operations, finances, taxes, profits, and liabilities in the long run.

The importance of hiring business lawyers

Business lawyers know business laws inside out. They can help you right from the day you have a “blueprint” of your business plan to the day your business roars in the market… and even afterwards.

They can assist you in:

· Buying and selling ventures

· Mergers & acquisitions

· Starting LLC, corporation, and others

· Creating shareholder agreements

· Preparing business contracts

· Creating business plans

· Mediating disputes between you and consumers or business contract breaches

· Preparing and evaluating financial documents

· Collecting debts

· Issuance of stock

· Filing for bankruptcy

A clear idea of business law

A competent business attorney helps you give a picture of business law which would be clear as a crystal. He or she will explain the tax implications, business responsibility, and benefits of each kind of entity. This aids you in setting up an entity that benefits you, your employees, shareholders, and consumers.

Business lawyers harbor meaningful connections with important sources in the business community. Their objective is to promote a healthy business community that features continuous growth.

Of course, you can set up a business on your own, but you still need a lawyer. Only lawyers can give you legal advice. They are authorized and capable of doing so.

A partially-trained lawyer or a layman who claims to know the law may give you poor advice. They are not as acclimatized with legal situations as competent lawyers are. Qualified business lawyers are recognized by the Court of Appeals, which is the highest court of the state. They abide by a code of conduct and display sheer professionalism when handling cases. They are always updated about the changes in laws.

A reputable business lawyer has the legal expertise to interpret law for their clients and represent their interests in the courtroom and outside. You can benefit a lot from hiring such a lawyer. In other words, he or she can make things easier for you in the legal world.

Thanks to reputable law firms going online, it is easy to contact the best lawyer in town. You can schedule an initial consultation with him or her. You can discuss with them about your dream venture. It is time to put your idea on legal papers and out in the market.

Limits of Human Laws

The evolution of man necessitates that he form communities where he can live in relation with his neighbors. And since human beings are of varied in nature, it became pertinent that each community must organize itself to take care of both the weak and strong, and therefore a legal system gradually evolved in each society based on the spiritual maturity of the people. But the more mankind fell from grace, the more removed the laws became from natural laws that govern all creation. Thus it is that these laws became so different from one community to the other, that what is unlawful in one country may be accepted in the next country.

This was possible because man, in his evolution, succumbed to the Lucifer principle of letting himself go, where they try to accommodate their weakness in their mundane laws. But in actual sense, there ought to be one law in existence, the law of nature, which, if all people chose to follow it, could manifest differently in different parts of the world based on the spiritual maturity of the people involved. But the intellect insists on discrepancy in the legal system, where arbitrariness rules. For example, the natural laws insist that whatever a man sows, that shall he reap. This the legal system ought to have followed up in their administration of justice, but it is not so. This is partly their fault and partly not their fault.

Take an example. A man commits murder. He is arrested and brought to court. Every evidence, real and circumstantial, points to his guilt. The judge has no option than to find him guilty and sentence him to death. But in actual sense, the Judge does not have all the facts. For one, the murderer is only an executor and not the originator. All over the world, far away from the seat of justice, people who have experienced similar issues like the ones that provoked the murderer may have wished their victims murdered silently. All these wishes rises up as thoughts to a power center where they are intensified. The murderer happens to be the person who was just in a position to execute his own action. So he drew strength from the power center and physically carried out the deed.Every other person involved in the thought are also guilty. But because we believe that thoughts are free, they cannot be tried. But in the eyes of Natural laws-some would say eyes of the Creator, it is one and the same-they are guilty and must reap what they have sown according to the Law of sowing and reaping.

That is why keeping the thoughts pure at all times is the only way we can be free. For every action must begin with a thought. As a Man Thinket…

DUI Lawyer – What They Do

DUI stands for Driving Under the Influence but in some states it is called DWI, Driving While Intoxicated. There are strict laws in all of fifty states for those that are caught doing driving when they are intoxicated. If you are stopped for suspicious behavior the law enforcement officer can do a field sobriety test if the drive has slurred speech, has a strong odor of alcohol on them or general incoherence. They can also ask permission to do a BAC, which stands for Blood Alcohol Content test if the driver does not demonstrate good motor skills or judgment during the field tests. The BAC test will show the percentage of alcohol that is in their bloodstream and if it is over the legal limit, which in many states is 0.10% BAC, the driver can be arrested for DWI.

If a person is caught DUI it can have severe consequences. This is why many hire a DWI lawyer to help them get the minimum required sentence. The DUI lawyer is the type of lawyer that will handle all aspects of the case from the beginning to the end. When you hire them they will set up a consultation so they can explain all the possible scenarios that you could face if convicted of this crime. It could result in a revoked or suspended driving license, jail time, fines, fees, or a combination of any of these. An experienced DUI lawyer will generally challenge the arrest and try to convince the Court to lower the charges. They may even attempt to have the sentence against the defendant, one charged with the DUI, reduced. The DUI lawyer will also dispute whether the law enforcement officer was within their constitutional rights to stop the car. The lawyer may also in court question whether the test done was accurate or not.

They will also clarify any legal issues and make sure that you understand what is happening now and what could happen in the months following. For example, the lawyer can give you the details on what type of sentence is expected for someone who is convicted of DUI for the first time versus one who has been convicted before. With a DUI there are generally several hearings in Court, starting with the hearing with the Department of Motor Vehicles, ending with the State or County Court. At each hearing the DUI lawyer will be there to advocate for the defendant.

When you are charged with a DUI take the time to research lawyers that specialize in this field. When choosing a DUI lawyer choose one that has a good track record with a lot of wins in court. You also should consider the fees they charge, per hour or a flat fee.

Do Current Law Students Need: Remedial Study – And Different External Bar Preparation?

The short answers are: it depends; and probably. Why? Because, students, circumstances, and bar results have changed in the last decade.

Traditionally, because of the general difficulty of state bar exams, a majority of law school graduates had chosen to take some form of external bar preparation course. Despite the rigors of law school and the emphasis on legal analysis, culminating in writing essay exams, state bar exams were found to be difficult to pass.

Within the traditional setting, law schools had emphasized the precepts of IRAC (Issue, Rule, Analysis, Conclusion), and thus concentrated their classes on these precepts to culminate in training students to be very adept at approaching, analyzing, and writing essay exams. For bar exam takers, this left a gap – the dreaded multiple choice questions called the MBE.

As a result, commercial companies targeted law graduates with bar preparation courses. Although most companies advertised overall bar preparation courses, the courses emphasized how students could approach and answer the MBE questions. Obviously, this was the logical extension for these bar preparation courses since those students were already well immersed in essay writing from their three years in law school.

With regard to teaching how to master the MBE, some of these companies were good, and others not so much. However, because of these courses, many students were able to successfully navigate the morass of those dreaded MBE questions. To this day, those companies who continue to offer external bar preparation courses have remained true to their original academic/business plan. Thus, their course emphasis remains with the MBE questions.

During the past decade, circumstances have changed. First, as widely reported in publications such as the New York Times, Los Angeles Times, the ABA Journal and others, law school enrollment has been on a steady decline. As a result, many law schools have lowered entrance requirements. This change, coupled with other academic and societal changes have helped create a different environment for the law student today.

As a consequence, bar pass rates in many states (e.g. California, New York and several others) have been on a steady decline. As reported in the JD Journal in October 2015, “law schools have lowered their admission standards. Fewer people are applying to law school. In order to keep up enrollment numbers, schools are admitting students with low LSAT scores they previously would have rejected. In 2014, schools saw the result of their action – bar pass rates were the lowest in decades.”

The trend of lower pass rates continues, and law school deans are concerned for a couple of reasons. First, a published high pass rate is a marketing incentive to attract new students to their school, and if it is declining, students will look elsewhere. In addition, for those schools accredited by the ABA, there lurks a proposal to increase the accreditation standards for a school to maintain a 75 percent pass rate – a rate in which not many schools currently enjoy.

In California, the second largest state in terms of bar examination takers, law school deans have a solution. They have come together and proposed to the State Bar to lower California’s bar pass cut line from its current of 1440 to anywhere from 1350 to 1390. This proposal has created quite a controversy and consequently the State Bar commissioned several studies and conducted opinion polls of lawyers, students and the general public.

A detailed report was developed and recently forwarded to the State Supreme Court for their decision. In the report, the State Bar recommends keeping the cut pass line at 1440 and commission more studies, while the committee of law school deans recommends reducing the cut pass line. As for the public opinion polls, more than 80 percent of current attorneys support keeping the current cut line or increasing it, while almost 55 percent of the general public are in accord, with only about 20 percent of current law students wishing to keep the current cut line.

In addition, the California State Bar Board of Trustees has recently declared “public protection” as one of the most important missions of the State Bar, and “public protection” was also at the forefront of the discussion concerning lowering the bar examination pass cut line. Given the “public protection” issue, coupled with the State Bar recommendation, and the public opinion polls, I will go out on a limb and predict that the California Supreme Court will not lower the cut line.

However, an interesting fact did emerge from all of this analysis – generally the decline in the bar pass rate is not due to lower scores on the MBE. In fact, the pass rate for just the MBE questions have remained relatively steady over the last twenty years. It was determined that the lower bar pass rates were due to a higher failure rate on the essay questions.

This revelation started the blame game. As discussed in recently published periodicals, some authors attribute poor essay writing to the lowered standards in law schools. Others point the finger at the general knowledge and writing skills of “those Millennials.” And others say it is a combination of both.

Frankly, I do not see any positive outcome in expending energy on pointing fingers. Time would be better spent on finding a solution. From my point of view, the best solution would be one which both resolves the problem of the lower bar pass rate, and preserves “public protection.”

In examining the problem a little closer, what has surfaced are four factors which are causing the lower essay scores: Students are having difficulty following the call of the question; they are not spotting a sufficient number of issues in the fact patterns; they are having trouble applying the law to the facts and analyzing them; and their grammar and spelling is not up to par.

The last factor, some call the “millennial” factor. This is because, today texting, tweeting, instagraming and emailing are the major form of writing. As a result, good composition writing is rapidly becoming a lost art, especially the ability to express logically and critically what’s at issue. Concerning the first three factors, they are skills which traditionally were developed in law school.

The merging of these events has demonstrated a need for remedial law school tutoring, but most importantly better and different bar preparation courses which stand on their own, separate from the law school academic work and provide all the skills necessary to pass the bar examination. This is a solution which would satisfy both the lower pass rate and the public protection aspects of the problem.

As a result, a new company has recently emerged to address these new issues. The company, Side-Bar, has introduced both a remedial law school program and a bar examination preparation program based upon new principals never before offered to the law student. Each of the programs are separate, and all inclusive. They are 100% on-line, self-paced, and contain no lectures to attend or listen to.

According to the company, their programs include new methods for learning and retaining the law, while teaching new methods of how to master: writing essay exams; performance exams; and the MBE multiple choice questions, including tips never before released.

Their bar preparation course, in addition to having a comprehensive MBE program, delves deeply into the art of essay writing, and walks students through a step by step process broken down by subject, giving the students the requisite skills to write quality essays and ultimately pass the bar examination.

Evolution of Military Law in the United States

While in service I visited the United States as a guest of the US Air Force. As I was sometimes a presiding officer of Court Martial in India (being legally qualified), I was interested how the US military law functions. One significant difference is that in the US, there is at the moment one Unified Military Code which is applicable to all the 4 service arms namely the army, airforce, navy and coast guard, while in India we have a separate military code for each service.

The Unified Military code is a comparatively recent occurrence and was signed into law by President Truman only in 1951. Prior to this the code was amorphous and had very fewer checks and balances. The US military law took almost 175 years to evolve to the present Unified Military Code.

The US was a colony of England till 1776, till a war of Independence by the settlers against the English army led to the creation of the American state.As the American state emerged, a set of laws to regulate the army were considered essential. to start with the new state adopted the British codes for the US armed force. The US army now adopted what is known as the Articles of War 1775. These were derived from the British law and consisted of 69 sections. the American military code is credited to John Adams, who was a lawyer at that time. Later he became the President of the United States. The Articles of War found wide acceptance and at the Conference of the Continental Army, they were ratified.

The Articles of War were an exact copy of the British law, underwent a change and some amendments were incorporated in 1806. A team of military experts and lawyers studied codes of many nations including the French and raised the sections from 69 to 101. The code provided for summary execution and in some cases the Commanding Officer of Unit at the time of battle if convinced, could order execution of a combatant. There was no appeal. The code was effective and it instilled discipline in the US army. it was widely used in the US civil war from 1861-65.

The beauty of this code was that it continued for almost 150 years, without any questions being raised. The first time the code was questioned was in the period of the First World War when 13 black soldiers were summarily hanged for ” mutiny”. Later it came to notice that the punishment was excessive and as there was no appeal the sentence was carried out immediately. It was also mentioned that the bigger crime of the soldiers was that they were black.

To avoid a dip in morale the Secretary of defense Newton D Barker intervened. He ordered that henceforth no executions could be carried out without referring the matter to Washington. Thus a major change was effected in the military code.

After the end of the Second World War, the three Chiefs of Staff appointed a committee to streamline US military law. The committee came up with the Unified Military Code which became law from 1951. One significant change was that a series of checks and balances was introduced and the code made more humane. Death was made an exception and not a rule. This code is now in vogue in the USA. In India also experts are working on a Unified code for all 3 services.