What is Not-For-Profit Law?
Not-For-Profit Law deals with taxation and the special problems faced by organizations whose central motivation is service and not profit. No part of a Not-For-Profit’s income is redistributed as salaries to its members, directors, or officers. Not-For-Profits can take the form of a corporation, unincorporated association, partnership, foundation, or condominium. These organizations must be designated as a nonprofit entity upon creation, and may only pursue permissible purposes as defined by statute.
Not-For-Profit organizations include churches, public schools, public charities, public clinics and hospitals, political organizations, legal aid societies, volunteer services organizations, labor unions, professional associations, universities, research institutes, museums, and some governmental agencies.
Where does federal tax law apply?
Under federal tax policy, Not-For-Profit organizations are exempt from taxation if they are organized and administered solely for religious, charitable, scientific, public safety, literary, educational, prevention of cruelty to children or animals purposes, and/or to develop national or international sports.
What is the role of state law?
Not-for-Profits are organized under state law. Each state defines Not-for-Profits differently. These definitions will dictate what legal privileges are afforded the nonprofit organization. Some states have adopted the Uniform Unincorporated Non-Profit Association Act and the Revised Model Non-Profit Corporation Act to provide legislation governing Not-For-Profit organizations in their state.
States may exempt Not-For-Profit organizations from state tax and state employment programs. Other perks include limited immunity from tort liability and tort liability damages caps. These privileges vary by state. State law also governs solicitation privileges and accreditation requirements such as licenses and permits.