Tax-Exempt, Charity, and Nonprofit Attorney Services in Lancaster, PA
Nonprofit organizations—such as 501(c)(3) charities and other tax-exempt entities—face unique legal challenges not typically encountered by for-profit businesses. Whether you are launching a new organization or navigating compliance concerns, having an experienced nonprofit attorney by your side is essential.
At May Herr & Grosh, we understand nonprofits’ legal complexities and offer practical, tailored solutions to help protect your tax-exempt status while advancing your mission. Based in Lancaster, PA, our nonprofit legal services support organizations at every stage of growth.
- Forming a Nonprofit Organization
- Obtaining or Reestablishing Tax-Exempt Status
- Determining Appropriate Compensation for Key Employees
- Governance and Compliance with the Internal Revenue Code
- Recruiting, Vetting, and Maintaining a Quality Board of Directors
- Day to Day Business Operations
WHAT IS A NONPROFIT ORGANIZATION?
A nonprofit organization, foundation, or association is a non-business organization dedicated to operation for something other than profit, usually social or public good. Each state has laws that define an organization as a nonprofit, which is why choosing to work with a lawyer for nonprofits is essential in your planning. Many nonprofits are charity operations dedicated to helping relieve poverty in the community, introducing more educational opportunities to the area, or preventing disease, among other things.
Your state has an official government website that can provide more specific information about what an organization must do to be considered a nonprofit. For Pennsylvania residents, more information can be found on the Department of State website. The United States Internal Revenue Service (IRS) has over 30 classifications for nonprofit organizations, primarily tax-exempt. Nonprofit organizations operate under the premise that all their revenue goes back into their programs to benefit the common good. Any extra money earned by the nonprofit may not be distributed for the benefit of an individual, corporation, or other entity.
WHAT DOES APPROPRIATE COMPENSATION FOR A NONPROFIT MEAN?
Nonprofit organizations are permitted to compensate their employees, but that compensation must be reasonable and aligned with the nature and size of the organization. Excessive salaries or benefits can trigger scrutiny from regulatory agencies and may even put a nonprofit’s tax-exempt status at risk.
The key distinction is that a nonprofit must not be operated for the private benefit of individuals. However, this does not mean that employees—or even founders—cannot earn a livable wage. In fact, many nonprofit roles require competitive compensation to attract and retain qualified talent who help the organization fulfill its mission.
For instance, a nonprofit animal shelter might have paid staff to manage operations while relying on volunteers for daily animal care. Both paid employees and volunteers play vital roles in sustaining the organization’s impact. A knowledgeable nonprofit lawyer at May Herr & Grosh can guide you in determining appropriate salary structures for your team. With deep experience in nonprofit legal services, our attorneys help you stay compliant with IRS guidelines and avoid potential risks associated with overcompensation.
WHAT DOES TAX-EXEMPT STATUS MEAN?
When an organization is granted tax-exempt status, it is exempt from paying federal income tax on revenue that directly supports its charitable, educational, or social mission. However, tax exemption does not mean the organization is free from all taxes. Income generated through activities unrelated to the core mission—known as Unrelated Business Income (UBI)—may still be subject to taxation.
Understanding what qualifies as tax-exempt income and what does not is critical for maintaining compliance and avoiding penalties. Working with an experienced nonprofit attorney can help ensure your organization remains on solid legal and financial ground.
NONPROFIT VS TAX-EXEMPT: WHAT IS THE DIFFERENCE?
Although the terms nonprofit and tax-exempt are often used interchangeably, they are not the same. A nonprofit designation is granted at the state level, typically when an organization is formed for charitable, educational, or religious purposes. Tax-exempt status, on the other hand, is determined by the Internal Revenue Service (IRS) at the federal level.
It is important to note that not all nonprofits automatically qualify for tax-exempt status. A separate application to the IRS is required, and organizations must meet specific criteria to maintain that exemption. Additionally, an organization can be recognized as a nonprofit under state law but lose its federal tax-exempt status—or vice versa.
Because these distinctions can be complex, it is wise to consult a lawyer for nonprofits who can evaluate your situation, ensure proper filings, and help you understand your organization’s current legal standing. The nonprofit legal team at May Herr & Grosh is here to help guide you through the process with clarity and confidence.
Maintaining Tax-Exempt Status:
What You Need to Know
Once an organization receives tax-exempt status from the IRS, it is recognized as exempt from federal income taxes. In many cases, states also offer their own tax exemptions, but these are often dependent on the organization maintaining its federal exemption. Losing one could jeopardize the other.
To preserve tax-exempt status, it is critical for organizations to file Form 990 annually—especially those with revenue exceeding $25,000. Failure to file for three consecutive years results in automatic revocation of tax-exempt status. This means the organization could be subject to corporate income taxes on all revenue until reinstatement.
Avoiding this situation starts with proper legal oversight. A skilled nonprofit attorney from May Herr & Grosh can review your records, ensure ongoing compliance, and help you maintain your organization’s good standing. With our trusted nonprofit legal services, you can focus on your mission—while we handle the regulations.
How Does a Nonprofit Organization Reestablish Tax-Exempt Status?
Suppose a nonprofit organization loses its tax-exempt status. In that case, it is no longer exempt from paying federal income tax—and in many cases, any related state tax exemptions may be revoked as well. This lapse can significantly disrupt operations and funding opportunities. Having a lawyer for nonprofits available to help you navigate this situation is essential.
Most organizations must reapply with the IRS to reestablish tax-exempt status by filing the appropriate form, often Form 1023 or Form 1023-EZ, depending on the organization’s size and structure. The process can be complex, especially if deadlines were missed or required records are incomplete. Attempting to navigate this on your own can lead to further delays or rejections.
That is why working with an experienced nonprofit attorney is essential. At May Herr & Grosh, our lawyers for nonprofits in Lancaster have helped many organizations successfully regain their tax-exempt status. We can assess your situation, guide you through the reapplication process, and help you avoid future pitfalls thanks to expert help from the nonprofit lawyer in our firm.
Ready to Talk with a Nonprofit or Tax-Exempt Attorney?
Managing a nonprofit or tax-exempt organization requires constant attention to paperwork, regulations, and compliance deadlines. It is easy to feel overwhelmed—especially without legal guidance. Our team of experienced nonprofit attorneys understands the federal and Pennsylvania-specific laws that govern your organization.
Stop your search for a law firm for nonprofits and turn to the experts at May Herr & Grosh. Schedule a consultation today and let our trusted nonprofit legal services support your mission and protect your organization’s standing.
