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How could we lose our nonprofit status?

On Behalf of | Feb 6, 2023 | Business Litigation |

Fighting the Internal Revenue Service is scary. After all, there is nothing in life that is guaranteed except death and taxes, so it might seem that if you cannot fight death, you cannot fight the IRS either. However, that is simply not the case. Indeed, if you get a notification that the IRS is investigating your nonprofit status, you can and should fight back before you need to escalate it to Albany, New York, business litigation.

Section 501(c)(3) of the Internal Revenue Code

To maintain your tax-exempt status, you must be compliant with Section 501(c)(3) of the IRC. This must mean that you are operating in accordance with Section 501(c)(3). None of your earnings may go to “any private shareholder or individual.” You also operate the Albany, New York, business for a tax-exempt purpose, and not a lobbying purpose.

Tax-exempt purposes

There are several tax-exempt purposes allowable under Section 501(c)(3), and they all fall under the generally accepted legal definition of charitable purpose. Specifically, this can be for any educational, scientific or religious purpose. It could also be to increase community literary, prevent cruelty to children or animals, public safety testing and fostering amateur sports competition.

Again, however, it can be for any charitable purpose. So, it can be for any relief of the distressed, poor, underprivileged, government burdens, etc. It could also be to lessen Albany, New York, neighborhood blights, juvenile delinquency, defend human and civil rights, etc.

Lobbying purposes

Nonetheless, a key distinction is that your nonprofit cannot be used for lobbying purposes, which includes both political and legislative activities. In other words, you cannot use your tax-exempt business in an attempt to influence the political process or a policy candidate.