On Demand Audio Audio Only

Earned Income Tips and Traps for California Nonprofits (Audio Only) (Update)

Produced on January 14, 2019

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$ 59 Tax Law, Business, Corporate, & Securities Law, and Non-Profit In Stock
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Course Information

Time 61 minutes
Difficulty Intermediate

Course Description

Increasingly, charities are exploring and utilizing ways to raise revenues through vehicles other than traditional fundraising. Creating commercial subsidiaries, partnering with for-profits, crowdfunding, and broadening target markets for existing sales continue to rise in importance as part of the nonprofit sector’s earned income strategies. Nonprofits create taxable subsidiaries when the amount of their unrelated business activities threaten their tax-exempt status, but such determinations should be made with an understanding of the underlying laws. When charities enter into other types of relationships with taxable entities for the purpose of generating revenues, other requirements and issues are triggered that depend in part on the particular type of relationship (e.g., joint venture, commercial co-venture).

Charitable crowdfunding has been regulated relying on mostly laws that predate online technologies, but legislators and regulatory bodies are actively considering passing new laws and regulations. The laws regarding unrelated business income tax (UBIT), which have always been complex, changed substantially as a result of the Tax Cuts and Jobs Act. These laws are generally triggered by regularly carrying on a business unrelated to furthering a nonprofit’s tax-exempt purpose, which may be the result of serving a broader market to generate revenues rather than to serve targeted beneficiaries of a charity. Failing to understand and observe such laws can result in substantial penalties and even loss of exempt status.

This audio-only course, taught by Gene Takagi, a Principal of NEO Law Group, a firm focused on the practice of nonprofit and exempt organizations law, reviews the legal issues that should be considered when reviewing a nonprofit's planned or existing earned income ventures and offers practical guidance on best practices for both in-house and outside counsel.


Learning Objectives:

  1. Discuss how to assess an existing or planned profit-making venture for corporate and tax law compliance
  2. Distinguish between businesses that are considered related or unrelated to a charity’s tax-exempt purposes
  3. Review when UBIT gets triggered and the new rules for calculating UBIT
  4. Assess when a subsidiary or affiliated entity may be of use and what legal forms (including hybrid forms) such an entity may take

Credit Information

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Faculty

Gene Takagi

The Law Office of Gene Takagi

Gene Takagi is a San Francisco-based exempt organizations attorney and author and publisher of the Nonprofit Law Blog. Prior to opening his independent office in 2005, he practiced in the corporate group of the AmLaw 100 firm Sheppard, Mullin, Richter & Hampton LLP, during which time he was awarded Outstanding Barrister of the Year from the Bar Association of San Francisco and featured in Equal Justice magazine. In October 2007, Gene was featured on the front page of The Recorder, Northern California's leading legal newspaper, and law.com.  

Gene holds a law degree from UCLA and a graduate degree in nonprofit administration from the University of San Francisco. Prior to becoming an attorney, Gene held various management positions both in the for-profit and nonprofit sectors, and was responsible for annual budgets of up to $50 million and for the preparation of RFPs cumulatively worth over $500 million. He is a former director of the medical and behavior divisions of the San Francisco SPCA.

Areas of Practice:

Gene's primary practice focuses on the representation of nonprofit organizations in the areas of incorporation, fiscal sponsorship, tax-exemption, governance, organizational structuring, mergers and acquisitions, joint ventures, unrelated business activities, charitable solicitations, lobbying, charitable giving and dissolution.

Professional Qualifications and Activities:

Gene is a member of the State Bar of California, the American Bar Association, the Bar Association of San Francisco, and the Northern California Planned Giving Council. Gene currently serves on the boards of directors of Community Initiatives (formerly CIF of The San Francisco Foundation), a 501(c)(3) fiscal sponsor of projects that benefit the local community; and JCYC, a Bay Area-based children and youth organization serving 8,000 kids annually. He is a former board member of Net Impact, the Barristers Club of the Bar Association of San Francisco, and the Tavern Guild Foundation (dba The Community Thrift Store), and a former advisory board member of the Legal Services for Entrepreneurs program of the Lawyers' Committee for Civil Rights of the San Francisco Bay Area.

Gene is a frequent speaker on legal issues affecting nonprofits. He has given presentations for groups including the American Bar Association (2007 Annual Meeting), the Bar Association of San Francisco, the California Association of Nonprofits, CompassPoint, The Foundation Center, the CBO Center, Law.com, the New Progressive Coalition, Asian Americans/Pacific Islanders in Philanthropy (presented at the Silicon Valley Community Foundation), Lorman Education Services, and the Western Museums Association (2007 Annual Meeting).

Gene wrote an article on nonprofit corporate governance published by the American Law Institute/American Bar Association's The Practical Lawyer (June 2008). Gene and Barbara Rosen of Evans & Rosen LLP co-authored the article "Group Exemptions Demystified" in the January/February 2008 issue of Taxation of Exempts.

Pro Bono:

A member of the Bar Association of San Francisco's Pro Bono Committee, Gene is committed not only to providing pro bono services but also to promoting the importance of pro bono work. He is a former Chair of the Pro Bono Issues Committee of the Barristers' Club and three-time recipient of the Outstanding Volunteer in Public Service award by the Volunteer Legal Services Program of the Bar Association of San Francisco. While at his former firm, Gene participated in the formation of the Museum of the African Diaspora, and his work with the Newark Chamber of Commerce earned him a commendation from the Mayor. As part of his pro bono and community services, Gene has provided seminars for attorneys participating in the Legal Services for Entrepreneurs program of the Lawyers' Committee for Civil Rights and regularly speaks to nonprofit leaders and organizations. In 2007, Gene started a free four-session program on nonprofit legal issues to leaders and emerging leaders from minority backgrounds.

Education:

Juris Doctor, University of California, Los Angeles (UCLA)

Master of Nonprofit Administration, University of San Francisco

Bachelor of Science, University of British Columbia



Reviews

WW
Weston W.

This was a very helpful, informative recording. The written materials helped a great deal because it covers a great deal of ground in 60 minutes. It was easy to follow but being able to take breaks made it easier to digest.

BJ
barb j.

Excellent!

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