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Calculating Public Support Percentage

Section 509(a) sets the rules for qualification as public charities; the rules are significantly different for 509(a)(1) and 509(a)(2)

Charities, especially newly created ones, are frequently confused about their classification under Sections 501(c)(3) and 509(a) of the Tax Code. It's not surprising. The rules are some of the most technical and confusing of all the tax rules affecting charities. This Ready Reference Page includes a chart showing the items of income included and excluded in the calculation of the public support fraction under sections 509(a)(1) and 509(a)(2) and does the calculation of the percentage under each section from a comprehensive example of sources of income.   

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The Lawyer on the Board: Playing a Dual Role

Both parties should understand the ethical limitations on the attorney’s conduct when wearing two hats in board deliberations.

None of these situations is insurmountable so long as both the lawyer and the other members of the board understand the issues. The key is acknowledging the issues before they arise, so that nobody will be surprised and neither the lawyer nor the organization will be put at risk.

A lawyer serving on the board of a nonprofit should have a serious discussion with the other members of the board about their mutual expectations for service. The lawyer may face ethical issues which could come as a surprise to everyone if not faced in advance. The lawyer and the organization should consider whether the benefits outweigh the risks of dual service.

Outflanking Foundations’ Public Charity Defense

Private foundations may make grants to groups which are not public charities if they exercise "expenditure responsibility" in approving, monitoring grants

Although most private foundations are uncomfortable making expenditure responsibility grants, they clearly have the power to do so and in the right circumstances may be convinced that it is appropriate.

Even if they do not make the grant directly, it may be possible to convince them to use a conduit through a public charity like a community foundation.

It is an important power that ought not be overlooked.  This Ready Reference Page spells out the procedures for private foundations (and donor advised funds) to make grants to oganizations that are not public charities.

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Directors Often Fear Risks of Personal Liability

Board members face potential liability for their own actions in causing injury to others, or in breaching a fiduciary duty to the organization.

Although board members can cut the risk of personal liability by conforming their conduct to the appropriate standards, they cannot control whether or not they will be sued. Therefore, they should be sure that the organization maintains proper insurance to protect them against foreseeable hazards, including general liability coverage, professional liability coverage where appropriate, and directors and officers liability insurance.

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