1. Starting and Maintaining Nonprofit Organizations Attorney Ronald Nesbitt, LL.M., Tax Public Allies Friday, 04/29/2011

2. AgendaStarting and Maintaining Nonprofit Organizations Nonprofit and tax exempt status Creating the Bones for a Great Organization The 501(c)(3) Application Jeopardizing tax exempt status IRS Compliance Activity 5/29/11 2 Attorney Ronald Nesbitt, LL.M. Tax Source: IRS.gov

3. Nonprofit and Tax Exempt Status Starting and Maintaining Nonprofit Organizations Nonprofit Organization Fla. Stat. 617 – Corporation Not for Profit Corporations for any lawful purpose or purposes not for pecuniary profit and not specifically prohibited to corporations under other laws of Florida. 5/29/11 3 Attorney Ronald Nesbitt, LL.M. Tax Source: IRS.gov

4. Nonprofit and Tax Exempt Status Starting and Maintaining Nonprofit Organizations Nonprofit Organization: Examples Corporations whose purposes include, without limitation, charitable, benevolent, eleemosynary, educational, historical, civic, patriotic, political, religious, social, fraternal, literary, cultural, athletic, scientific, agricultural, horticultural, animal husbandry, and professional, commercial, industrial, or trade association purposes. But nonprofit organizations are not automatically tax-exempt. They must file a special application with the IRS, requesting to be exempt from paying Federal tax. Some states also require a separate filing in order to be tax-exempt from paying state taxes. 5/29/11 4 Attorney Ronald Nesbitt, LL.M. Tax Source: IRS.gov

5. Nonprofit and Tax Exempt Status Starting and Maintaining Nonprofit Organizations Tax Exempt Organizations Internal Revenue Code 501(c)(1) – (28), (d)(religious org) or 401(a) – Qualified Pension, Profit-Sharing, and Stock Bonus Plans 5/29/11 5 Attorney Ronald Nesbitt, LL.M. Tax Source: IRS.gov

6. Nonprofit and Tax Exempt Status Starting and Maintaining Nonprofit Organizations Tax Exempt Organization A business that does not have to pay Federal taxes is considered to be "tax exempt.” Examples of 501(c)(3) organizations: Religious, Educational, Charitable, Scientific, Literary, Testing for Public Safety, to Foster National or International Amateur Sports Competition, or Prevention of Cruelty to Children or Animals Organizations 5/29/11 6 Attorney Ronald Nesbitt, LL.M. Tax Source: IRS.gov

7. Creating Good Bones Starting and Maintaining Nonprofit Organizations Organizational Infrastructure Bet on the Jockey and the Trainers Benefits of Directors and Advisors 5/29/11 7 Attorney Ronald Nesbitt, LL.M. Tax Source: IRS.gov

8. Creating Good Bones Starting and Maintaining Nonprofit Organizations Have a Clear Vision Mission Purpose Reduce the Vision to a Plan 5/29/11 8 Attorney Ronald Nesbitt, LL.M. Tax Source: IRS.gov

9. Creating Good Bones Starting and Maintaining Nonprofit Organizations Light the Way to Success Through Order Articles of Incorporation Bylaws Corporate Governance 5/29/11 9 Attorney Ronald Nesbitt, LL.M. Tax Source: IRS.gov

10. Creating Good Bones Starting and Maintaining Nonprofit Organizations By-Laws The Board of Directors (“The Board”) shall consist of not fewer than three (3) persons, and of not more than a maximum number determined in the Constitution or By-Laws of the Corporation as amended from time to time 5/29/11 10 Attorney Ronald Nesbitt, LL.M. Tax Source: IRS.gov

11. Creating Good Bones Starting and Maintaining Nonprofit Organizations Majority. A majority is fifty-one (51) percent or greater. Term. The term of each Director shall be established in the Constitution or By-Laws. Unless otherwise provided, each Director shall serve on the board for an indefinite period of time. Election. Unless the Constitution or By-Laws provide differently (in which case such Constitution or By-Laws shall control), Directors shall be elected by the remaining Directors by a majority vote upon the expiration of a Director’s term or a vacancy for any reason. 5/29/11 11 Attorney Ronald Nesbitt, LL.M. Tax Source: IRS.gov

12. Creating Good Bones Starting and Maintaining Nonprofit Organizations Corporate Governance Audit Committee CONTRACT REVIEW AND SIGNATURE AUTHORITY POLICY BOARD OF DIRECTORS CORPORATE GOVERNANCE GUIDELINES COMPANY POLICY STATEMENT ON REPORTING AND PROTECTION FROM RETALIATION 5/29/11 12 Attorney Ronald Nesbitt, LL.M. Tax Source: IRS.gov

13. Creating Good Bones Starting and Maintaining Nonprofit Organizations Audit Committee – Corporate Governance (a) To assist the Board in its oversight of (1) the quality and integrity of the Company's financial statements, financial reporting and disclosure controls and procedures, including internal controls; (2) the performance of the Company's internal audit function; and (3) the Company's compliance with legal and regulatory requirements; (b) To interact directly with and evaluate the performance of the independent auditors, including to determine whether to engage or dismiss the independent auditors and to monitor the independent auditors' qualifications and independence; and (c) To prepare annually the report(s) required by the by State and Federal laws. 5/29/11 13 Attorney Ronald Nesbitt, LL.M. Tax Source: IRS.gov

14. Creating Good Bones Starting and Maintaining Nonprofit Organizations CONTRACT REVIEW AND SIGNATURE AUTHORITY POLICY Corporate Governance This policy defines and describes the guidelines and procedures to be followed by officers, managers and other employees of ______ (the "Company") for creation and review of contracts to which the Company will be a party and designates who, within the Company, is to authorized to sign contracts on behalf of the Company. This policy also describes the procedures that must be followed with respect to retention and administration of contracts to which the Company becomes a party. 5/29/11 14 Attorney Ronald Nesbitt, LL.M. Tax Source: IRS.gov

15. Creating Good Bones Starting and Maintaining Nonprofit Organizations Share the Vision Unseen, Untold…Unsold 5/29/11 15 Attorney Ronald Nesbitt, LL.M. Tax Source: IRS.gov

16. Creating Good Bones Starting and Maintaining Nonprofit Organizations Meet and Measure Regularly Scheduled Organizational Meetings Measure What You Do, What You’ve Done and Adjust 5/29/11 16 Attorney Ronald Nesbitt, LL.M. Tax Source: IRS.gov

17. The 501(c)(3) Application Starting and Maintaining Nonprofit Organizations 30 + Page Application $400 for organizations whose gross receipts do not exceed $10,000 or less annually over a 4-year period. $850 for organizations whose gross receipts exceed $10,000 annually over a 4-year period. 5/29/11 17 Attorney Ronald Nesbitt, LL.M. Tax Source: IRS.gov

18. The 501(c)(3) Application Starting and Maintaining Nonprofit Organizations Section 501(c)(3) requires that your organizing document state your exempt purpose(s), such as charitable, religious, educational, and/or scientific purposes. 5/29/11 18 Attorney Ronald Nesbitt, LL.M. Tax Source: IRS.gov

19. The 501(c)(3) Application Starting and Maintaining Nonprofit Organizations Section 501(c)(3) requires that upon dissolution of your organization, your remaining assets must be used exclusively for exempt purposes, such as charitable, religious, educational, and/or scientific purposes. 5/29/11 19 Attorney Ronald Nesbitt, LL.M. Tax Source: IRS.gov

20. The 501(c)(3) Application Starting and Maintaining Nonprofit Organizations The Application is a Planning Opportunity “Using an attachment, describe your past, present, and planned activities in a narrative.” 5/29/11 20 Attorney Ronald Nesbitt, LL.M. Tax Source: IRS.gov

21. The 501(c)(3) Application Starting and Maintaining Nonprofit Organizations The Application is a Planning Opportunity Financial Data Ideas About Sources and Uses of Funding (Page 9 - 10 of 1023) 5/29/11 21 Attorney Ronald Nesbitt, LL.M. Tax Source: IRS.gov

22. The 501(c)(3) Application Starting and Maintaining Nonprofit Organizations BEWARE: Public Inspection of Exemption Applications, Annual Returns, and Political Organization Reporting Forms 5/29/11 22 Attorney Ronald Nesbitt, LL.M. Tax Source: IRS.gov

23. Jeopardizing Tax Exempt Status Starting and Maintaining Nonprofit Organizations There are five types of activities that can jeopardize that status. Private benefit or inurement Lobbying Political campaign activity Activities generating excessive unrelated business income (UBI) Failure to comply with annual reporting obligation 5/29/11 23 Attorney Ronald Nesbitt, LL.M. Tax Source: IRS.gov

33. Any income-producing activity that does not directly furtherthe organization’s exempt purpose could generate UBI.

34. Sometimes, activities that ARE related to exempt purposes can still generate UBI if they are conducted on a larger scalethan is reasonably necessary to perform an exempt function. In this instance, the portion that is more than needed is considered an unrelated trade or business.5/29/11 32 Attorney Ronald Nesbitt, LL.M. Tax Source: IRS.gov

36. If the hospital auxiliary health food stand operates daily, it will likely generate both related and unrelated business income.

37. Sales to hospital staff and patients could escape UBI tax—due to an exception explained later—while sales to the general public would be subject to UBI tax.5/29/11 33 Attorney Ronald Nesbitt, LL.M. Tax Source: IRS.gov

43. Denial of Tax Exempt Status

44. Revocation of Tax Exempt Status

45. Imposition of Excise Tax for UBI5/29/11 38 Attorney Ronald Nesbitt, LL.M. Tax Source: IRS.gov

46. Contact Information Ronald Nesbitt Ronald C. Nesbitt, PA Phone: 407.803.1140 Fax: 407.233.4679 rnesbitt@rcnesbittlaw.com 5/29/11 39 Attorney Ronald Nesbitt, LL.M. Tax Source: IRS.gov