Attorneys Brandon Grysko and Jim Fausone recently assisted a high-net-worth client in establishing IRS approval for a family foundation, meaning the foundation is exempt from Federal Income Tax. To qualify under Internal Revenue Code Section 501(c)(3), an organization must be organized and operated exclusively for charitable purposes.

There are a few differences between public charities and private foundations. Public charities generate funds from the support of the general public. Private foundations, however, are typically supported by funds from more limited sources, such as family member contributions. Although both public charities and private foundations are exempt from income taxation, donors to public charities may enjoy a higher tax deduction, and there are different ongoing compliance requirements.

Just because a business has obtained tax-exempt status does not mean it will stay that way forever. Organizations should perform ongoing compliance to make sure they don’t run afoul of often complicated IRS rules. A loss of tax-exempt status would, of course, have severe consequences for a nonprofit. Questions? A business attorney at Fausone & Grysko, PLC can help your nonprofit with its legal and business needs. Contact Brandon Grysko online or by phone at (248) 380-0000.