Overview
Locke Lord has a long tradition of serving nonprofit entities, including universities, seminaries, hospitals, other health care and social service organizations, museums, religious entities, private foundations and trade associations. We represent a variety of organizations in the world of nonprofits, from the banks that provide financing and the foundations that provide financial support, to the insurance companies that structure unique programs for charities. Locke Lord also assists corporations and individuals in establishing charitable trusts and/or private foundations to facilitate charitable giving. We have considerable experience in securing and maintaining tax-exempt status for nonprofit organizations and deal extensively with the Internal Revenue Code's provisions regulating unrelated business taxable income and debt-financed income.
Publicly Supported Charities
We represent tax exempt religious, charitable and educational organizations on issues such as:
- Qualifying for and preserving exempt status
- Unrelated business income tax issues
- Intermediate sanctions rules
- Lobbying and political campaign activities
- Creation of taxable subsidiaries
- Tax and state regulatory issues associated with fundraising and links with corporate sponsors
- Corporate governance
- State charity and nonprofit corporation laws
- Compliance with charitable trust and solicitation laws
- Sarbanes-Oxley Act spillover into nonprofit world
- Employment issues
- Real estate transactions
- Executive compensation
- Retirement programs and health care
- Mergers and acquisitions, divestitures and other commercial transactions
- Counseling education, organizations on taxable activities and tax-exempt status
We have obtained many private letter rulings and determination letters for our exempt organization clients from both the IRS National Office and its district offices on a variety of subjects.
Foundations
We have served for many years as the principal legal advisor to one of the largest private foundations in the Midwest, with assets of close to $1 billion, and have organized and assisted many other small and medium-sized private foundations. We also represent Texas ’ oldest community foundation, as well as numerous corporate-sponsored foundations, including bank-sponsored foundations and scholarship foundations.
Health Care
Locke Lord attorneys offer a full range of legal services to nonprofit health care systems and hospitals, insurers, managed care companies, physicians and physician groups and other health care facilities and businesses. Our broad experience in both corporate health care and insurance regulation enables us to deal effectively with the continuously changing roles of payors and providers. We provide counsel on:
- Tax-exempt bond financing
- IRS compliance checks and audit initiatives
- IRC § 501(c)(3) tax issues
- Trustee liability and fiduciary obligations
- Nonprofit corporate structuring to comply with IRC § 501(a)
- Avoidance of penalties under the “private inurement” and “private benefit” doctrines
- Intermediate sanctions for excess benefit transactions
- Insurance “seasoning” requirements for newly-formed nonprofit organizations
- Unrelated business income tax
- Nonprofit corporate governance and compliance
- Internal and external investigations and defense of regulatory and criminal proceedings
Trade Associations
We represent trade associations and professional societies in the insurance, health care, construction, manufacturing and other business sectors. These clients are advised on a wide range of tax-related issues, including:
- Obtaining and maintaining tax exemption
- Unrelated business income tax
- Lobbying and the proxy tax planning for and forming taxable subsidiaries
- Antitrust
- Intellectual property
- Mergers, acquisitions, sales divestitures and other commercial transactions
- Information sharing programs
- Certification programs and standards
Finance
Lenders and nonprofit organizations that want to tap capital markets through tax-exempt bonds or taxable securities come to us for our creative and cost efficient solutions. Lenders can provide letters of credit that provide credit enhancement and lower costs to nonprofit borrowers. We have represented numerous universities, cultural institutions and social services agencies directly in bond issuances and helped them determine which bond issuer to use, which projects could be financed, and understand what the process entails. We have also represented nonprofit borrowers in swap transactions.
Director and Officer Liability
We frequently counsel our nonprofit clients on coverage and liability issues for directors, trustees and officers of nonprofits regarding their duties and liabilities under state and federal law. We also advise on issues related to indemnification under corporate bylaws and coverage under directors’ and officers’ insurance policies.
Religious Organizations
We have a great deal of experience in representing religious organizations, including educational institutions, social service organizations, radio networks, hospitals, religious orders, religious denominations and religious entities that band together to provide for liabilities on a common basis. Examples of entities we have been involved with to provide for liabilities on a common basis include risk pooling organizations for the protection of property, and retirement and health programs for employees and ministers of religious organizations. In that connection we have:
- Drafted qualified retirement plans sponsored by church organizations;
- Obtained private letter rulings from the IRS and advisory opinions from the Department of Labor confirming that church benefit programs were church plans within the meaning of Employee Retirement Income Security Act of 1974 (“ERISA”) and the Internal Revenue Code;
- Obtained refunds from the federal agency insuring defined benefit retirement plans, the Pension Benefit Guarantee Corporation, of insurance premiums mistakenly filed by church plans. The largest refund exceeded $1,000,000;
- Discussed with IRS and Treasury officials in Washington various regulatory changes affecting church benefit programs including the federal Church Plan Parity and Entanglement Prevention Act, the Clergy Housing Allowance Clarification Act of 2002 and other federal legislation and regulations;
- Represented self-insured church benefit plans before various state insurance departments that sought to regulate them the as unlicensed insurance companies or multiple employer welfare arrangements (MEWAs); and
- Prepared and submitted comments on various proposed federal regulations affecting health plans covering employees of two or more unrelated employers.
Litigation
We regularly represent nonprofit and tax-exempt clients in litigation involving regulatory enforcement issues, commercial disputes, fiduciary claims, charitable trust, charitable solicitations, Attorney General regulatory issues, corporate conversions, corporate governance and compliance, trustee liability and tax and tax exemption matters including challenges to tax exempt status. Representative projects include the following:
- Defense of nonprofit hospitals in a proceeding challenging unprecedented denial of state charitable property tax exemption
- Responding to Congressional and IRS inquiries respecting community benefit, charity care and executive compensation issues
- Defense of Attorney General claims to nonprofit health system’s proceeds of facility sales under charitable trust theories
- Defense of nonprofit board members in Attorney General proceedings to block merger of local hospitals
- Post-enforcement compliance review for and reporting for an academic medical center
- Defense of academic medical center in federal and state enforcement inquiries pertaining to billing practices
- Counseling nonprofit health system board on effective corporate compliance and ethics requirements as well as governance practices
- Representing a large family foundation in a proceeding to obtain refunds of “unreasonable compensation” paid to foundation managers
- Defense of a private university against various “encroachment” claims by adjacent residents
- Defense of a major museum in protecting its rights to contributed property