Not-For-Profit and Tax Exempt Entities

Athens Tax and Estate Planning Attorneys

The creation of a not-for-profit organization or tax exempt entity is a very complex area of the law. Many people confuse the two, but a not-for-profit corporation for state law purposes is not necessarily tax exempt in the eyes of the IRS. In order to be recognized as a tax exempt entity by the IRS, a very detailed tax form known as a Form 1023 (or a Form 1024, for certain entities) must be filed with the IRS. If this form is not filed, the entity may still be a not-for-profit for Georgia purposes, but will be subject to income taxation and will not allow a donor to the entity to claim a tax deduction.

There are also many variations within the area of tax exempt entities. For instance, some entities may be tax exempt from an income tax standpoint, but donations to these entities will not be tax deductible by the donor. Examples of these types of entities are social clubs and homeowners' associations. These entities can be contrasted against charities created under Section 501(c)(3) of the Internal Revenue Code, which are both tax exempt from an income tax standpoint and eligible to receive tax deductible donations. Charities must be formed for the benefit of the public, and cannot benefit only a limited group of people. There is a further distinction among charities. A so-called “public charity” that has a broad range of public support is entitled to more favorable tax treatment than a so-called “private foundation,” which is subject to much greater scrutiny by the IRS and more stringent tax rules.

Creating a tax exempt entity is a complex matter and having experienced legal advice can be invaluable. At Blasingame, Burch, Garrard & Ashley, P.C., we are experienced in this area of the law and are happy to assist you in any manner that we can.

Need the assistance of a skilled Athens tax and estate planning attorney? Contact our firm today at (706) 354-4000 to find out how we can help.


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