Nonprofit Organizations and Foundations
Practice Leader: Lisa B. Petkun
Pepper Hamilton LLP represents many public charities, private foundations, trade associations and other tax exempt entities, such as universities and hospitals. Our corporate, tax, and trusts and estates lawyers work together to counsel these clients on the tax and business issues specific to these entities, as well as on legal issues that may affect any organization, for-profit or nonprofit.
We are experienced in entity structuring and governance, unrelated business taxable income, self-dealing and excess business holdings situations, intermediate sanctions, employee benefit structures, quasi-governmental and government-controlled entities (including 63-20 corporations), political action committees and non-charitable exempt organizations (such as cemeteries, social clubs and trade associations). We counsel tax exempt institutions about their charitable giving programs, including endowment funds, charitable gift annuities, outright and restricted gifts, charitable remainder trusts and charitable lead trusts.
We establish Section 501(c)(3) organizations for individuals and corporate entities. This work includes formation of the entity, submission of a ruling to the Internal Revenue Service to confirm the tax exempt status of the entity, registration of the entity under applicable state charitable solicitation statutes, application for state sales and property tax exemptions for the entity, and handling the filing of federal income tax returns (Forms 990 and 990 PF) for the entity.
We advise charitable organizations on how to qualify and continue as a public charity rather than as a private foundation, which often requires a detailed scrutiny of the organization’s sources of support and relationships with other charitable organizations that it may “support” under the tax laws. We provide advice about permitted lobbying activities and the applicability of the private foundation excise taxes.
We have obtained IRS private letter rulings for schools, civic organizations, business leagues, community charitable programs, and other federal and local community service organizations. We also have established scholarship programs for private foundations maintained by private corporations for their employees’ children. Our lawyers are integrally involved in the structure and formation of partnerships and limited liability companies used by exempt organizations as acquisition vehicles as well as investment partnerships formed with exempt partners.
Pepper counsels clients on the formation, funding and other planning issues associated with private foundations and public charities. We counsel prospective donors about their tax and personal planning goals associated with creating and making donations to charitable organizations, including a determination of the income, gift, estate and generation-skipping tax savings associated with such contributions. The firm integrates charitable gift programs into the donor’s overall estate planning and drafts all documents necessary to carry out such a plan, including, where appropriate, testamentary and inter vivos trusts, wills, deeds of gift and the like. We handle sophisticated income, estate and gift tax planning for closely held corporations, their executives and their owners. We advise corporate and individual fiduciaries in the administration of estates and trusts, nonprofit corporations and charitable institutions. We also counsel fiduciaries concerning investment management and advisory agreements, custodial agreements, brokerage matters, permitted investments for charities, relations with the Pennsylvania Attorney General as parens patriae of charities, the fiduciary duties of trustees and investment advisors, and the securities laws relating to charitable holdings of public companies. We also represent beneficiaries and fiduciaries in litigation of issues arising in the administration of trusts and estates, in will contests and in business transactions. Our practice also includes tax controversy work relating to real estate tax exemptions. Matters are handled at the ruling request, audit and appeals levels, as well as in the courts.Representative Engagements
A partial list of our nonprofit organization work includes:
- since 1956, acted as outside general counsel to a corporate fiduciary which is the trustee of several very large charitable trusts
- handled all aspects of the sale of a tax-exempt hospital, including creating and obtaining an expedited Section 501(c)(3) ruling for a new charitable organization that was an integral part of the sale structure
- formed a 501(c)(3) organization designed to educate youth on environmental issues, sponsored by a renowned grant-making organization; involved sensitive issues of integration with other environmentally concerned organizations
- formed a for-profit consortium of telecommunications technology companies engaged in the development and implementation of satellite communication technology; developed structure and governance arrangements (principally ingress, egress, and financing rights and obligations) for the consortium entity (an LLC); dealt with the complexities engendered by having more than one key participant
- represented a 501(c)(6) entity in its acquisition of a 501(c)(3) formed by an association of biotechnology companies to engage in educational and research activities
- served as general counsel to a charitable institution and advised the board of directors on contract issues, intellectual property issues and litigation matters. We also advised on various issues concerning charitable contributions, including the institution's capital fund campaign.
- served as general counsel to a pediatric hospital and provided a full range of legal advice. In the charitable giving area, we provided advice concerning numerous charitable gifts under wills and trusts in which the organization is the beneficiary, including a significant will contest.
- advised a charitable organization on all aspects of charitable giving as issues have arisen regarding programs established by the organization and particular concerns of donors. In addition, one of our lawyers chaired the Endowment Fund Committee of this organization.
- served as general counsel to an arts organization, advising on general corporate matters, creditors' issues, and labor and employment issues
- advised the national governing body of a U.S. Olympic sport about its organizational structure and other tax issues
- consulted with counsel to the board of an arts institute (on which one of our lawyers sits) and, in that capacity, reviewed and advised on deferred giving programs and structures, including pooled fund documentation and related tax issues
- advised a pension fund on whether certain types of investments in commodities would create unrelated business taxable income
- advised the board of directors and president of a private college on business counseling and contract issues and litigation matters. We also counseled the college about various inter vivos and testamentary gifts, including the creation of an endowment fund.
- advised a major charitable trust on tax, securities law, fiduciary and other issues concerning structure, governance and its relationship with the corporation of which the charity is a significant stockholder
- advised a major charitable trust on governance and related issues.
Pepper's tax-related engagements for college, university and other educational institution clients include:
- served as general counsel to a private university's nonprofit subsidiary that is focused on research and development of technology
- provided ongoing advice to a major university concerning the unrelated business taxable income ramifications of investments in various limited partnerships
- advised private colleges and universities on the structuring of major gifts and bequests; inter vivos and testamentary gifts, including the creation of an endowment fund; and reviewing offering documents for various potential endowment investments.
Our litigation for nonprofit institutions has included:
- a pledge made to a school contested by the beneficiaries of the pledger's estate
- potential fraud and abuse enforcement actions for a specialty medical center
- a student expulsion case involving threats of Title VI and breach of contract litigation
- design of alternative dispute resolution agreements between a nationally recognized college and its students
- internal adjudication of a student’s sexual harassment allegations against a faculty member
- removal of a tenured faculty member in a case involving sensitive issues relating to federal grant monies, due process hearings and potential adverse publicity
- labor and employment matters, such as union organizing campaigns, unfair labor practice charges, collective bargaining strategies, tenure issues, designing and defending affirmative action and RIF programs, employment contracts, Americans with Disabilities Act advice and counseling and international employment problems.
Pepper handles a range of employee benefits matters for tax-exempt organizations, including:
- retirement plan counseling, plan design and ongoing compliance issues for tax-sheltered annuity (403(b)) plans, including Department of Labor and IRS compliance requirements
- counseling on executive and deferred compensation issues unique to tax-exempt organizations, including unfunded arrangements and use of split-dollar and other life insurance policies
- tax advice on tuition and fellowship benefits, and employee fringe benefits
- counseling on compensation and benefit issues in university hospital and medical office affiliations
- successfully representing benefit plan trustees in plan administration and fiduciary litigation, including awards of attorneys' fees.
Our intellectual property work includes:
- designing technology transfer programs, including license and sponsored research transactions, and related equity features
- preparing, filing and prosecuting domestic and foreign patents in the biotechnology, chemical and pharmaceutical arts
- drafting and negotiating contractual agreements, including sponsored research agreements, material transfer agreements, license and collaborative research agreements, corporate partnering arrangements and related opportunities
- representing parties in litigation and alternative methods of dispute resolution, including inventorship and ownership issues, enforcement of patent rights, interference proceedings to determine priority of invention and foreign patent oppositions
- drafting computer hardware and software contracts and licensing agreements.
Pepper also has handled legislative matters, real estate acquisition, disposition and leasing, construction contracting and related litigation, and bond financing for colleges and universities.