On Demand

Tax-Exempt Organizations: Avoiding Legal Traps and Navigating Corporate Sponsorships

1h 3m

Created on March 25, 2019




The laws governing nonprofit organizations contain a host of anomalies and traps that may wreak havoc with unwary, poorly advised, or simply unlucky organizations. This course will provide an overview of potential pitfalls, and offer tips for minimizing legal risk in three areas.

In the first half of this course, Pamela A. Mann, partner and chair of the Tax-Exempt Organizations (TEO) Group at Carter Ledyard & Milburn LLP, will focus on governance issues that occur when organizations face internal power struggles exposing fault lines and ambiguities in an organization's bylaws, procedural decisions, and corporate relationships. She will also discuss common misconceptions and dangers that arise when organizations must cope with threatened or actual investigations by state attorneys general and how best to navigate some of the tricky situations such investigations present.

In the second half of the program, Ahsaki E. Benion, counsel in Carter Ledyard's TEO Group, will focus on the legal pitfalls that arise when nonprofits enter into relationships with for-profit corporate sponsors. Corporate sponsorship offers benefits for both the tax-exempt organization and the corporate sponsor-including brand awareness, increased public support, and customer loyalty. Unfortunately, organizations and sponsors alike often fail to realize that sponsorship payments may be deemed taxable as unrelated business income unless specifically excludable. In addition, certain sponsorship relationships-commonly known as cause-related marketing-may trigger legal obligations for both parties under state commercial co-venture laws.

Learning Objectives:

  1. Examine how certain governance issues can leave corporate actions open to challenge in the event of internal power struggles
  2. Explain how state Attorneys General use their broad authority to investigate and prosecute nonprofit organizations, and identify practices that may invite unwanted scrutiny
  3. Identify the issues nonprofits and for-profits that engage in corporate sponsorship relationships must consider in order to minimize legal risk

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