Nonprofit and charitable organizations face a wide variety of legal and business issues, some of which are similar to those faced by proprietary organizations and many of which are unique. As they strive to accomplish their charitable purposes and generate revenues, grants and donations, many nonprofit and charitable organizations need assistance with the substantial legal and business issues they encounter. Lawyers at K&L Gates address the special needs and individual problems of their nonprofit and charitable clients in the United States of America and the United Kingdom.
U.S. Tax-Exempt and Nonprofit Organizations
K&L Gates has an active, wide-ranging tax-exempt organizations practice conducted by lawyers who devote most of their professional time to the representation of nonprofit organizations, as well as lawyers in other areas who are familiar with the distinctive operational and tax issues faced by these organizations.
The experience of our lawyers is enhanced by our participation as board members for a variety of charitable and nonprofit organizations. In addition, as a service to the nonprofit community, K&L Gates publishes the “Handbook for Directors of Nonprofit Corporations: A Primer on Directors’ Duties and Rights and Minimizing Risk.” Upon request, we send copies to charities for distribution to their trustees and directors. Copies may be requested from Lisa M. Malckany at .
K&L Gates tax-exempt lawyers have a particular strength in counseling private foundations. We have created numerous private foundations, and we counsel these foundations regarding compliance with the private foundation excise tax rules on self-dealing, qualifying distributions, excess business holdings and jeopardizing investments. In addition, we advise on all aspects of grantmaking, including grants to individuals, international grantmaking (including compliance with the USA Patriot Act and other guidance to prevent diversion of charitable assets to terrorism), expenditure responsibility and foreign public charity equivalence procedures.
Our Clients
Our nonprofit clients comprise a diverse group that includes private charitable foundations with elaborate regulatory environments, established public charities such as universities, cultural organizations and hospitals, other health care organizations, various national and international trade associations, and numerous smaller charities providing a range of particular human and economic development services and cultural opportunities. Many, but not all, of the nonprofit organizations we serve are exempt from federal and/or state taxation. Our tax-exempt clients include both public charities and charitable private foundations as well as organizations whose tax exemption does not depend on charitable purposes. Our clients range from small, local organizations with small annual budgets to large national and international organizations with annual budgets exceeding $100 million.
Areas of Practice
Nonprofit Governance
K&L Gates advises clients on all aspects of corporate governance and helps to develop best practices, including whistleblower and document retention policies, conflict of interests policies, audit committee charters and compensation for directors, officers and employees, as well as advising on the exercise of fiduciary duties. K&L Gates also assists nonprofit organizations in resolving governance disputes and facilitating harmonious board, management and member relations.
General Corporate Matters
K&L Gates lawyers provide legal counsel regarding various events and transactions affecting nonprofit corporations, such as mergers, affiliations and consolidations, corporate divisions and reorganizations, joint ventures with nonprofit and for-profit organizations, the establishment of for-profit or limited liability company subsidiaries, the establishment of social enterprises, conversion from nonprofit status to proprietary status or vice versa and formation of U.S. entities to support foreign charitable activities. We work with clients to negotiate and structure these transactions in a manner designed to achieve the goals of the parties. K&L Gates also assists with bylaw and charter amendments and restatements.
Tax Matters
We advise clients regarding the tax matters unique to tax-exempt organizations, such as obtaining and retaining tax-exempt status or public charity status, structuring relationships with for-profit organizations, structuring grants in the manner required by tax law, and avoiding self-dealing and other prohibited activities. We assist our clients in communicating with government and the public in manners that do not violate the prohibition on political activity and limitations on lobbying applicable to certain tax-exempt organizations. We also advise tax-exempt organizations regarding IRS and state audits, reinstatement of tax-exempt status, conservation easements, community and economic development projects, social enterprise ventures, public/private partnerships and private letter ruling requests to the IRS. In addition to the tax issues unique to exempt organizations, we also provide advice regarding other tax matters relevant to both tax-exempt and taxable organizations, including, for example, the determination of employee/independent contractor status, FICA, property tax exemption, tax withholding and state sales and use taxes.
Employee Compensation and Employee Relations
We advise our nonprofit clients regarding employee compensation and benefits matters. Our experience in qualified and nonqualified deferred compensation arrangements enables us to assist our clients in establishing or modifying employee benefit packages and in complying with the frequent tax law changes affecting such arrangements. We assist clients in evaluating executive performance and establishing and supporting appropriate compensation packages for key executives designed to comply with tax requirements applicable to compensation paid by tax-exempt organizations.
Our labor and employment lawyers represent employers faced with union representation campaigns, defend companies charged with unfair labor practices, negotiate collective bargaining agreements and arbitrate cases arising under those agreements. We advise regarding various employment law issues, including discrimination cases involving race, sex, age, national origin, sexual orientation, and religious discrimination, as well as those dealing with sexual harassment, wage and hour regulations, ERISA and alleged unjust dismissal.
We represent employers in court as well as in administrative proceedings before the NLRB, OSHA, EEOC and various state agencies. We also work with clients to establish a working environment that minimizes the risk of employment-related claims. To that end, we help our clients develop appropriate personnel policies, make appropriate disclosures to employees and negotiate appropriate contracts.
Real Property Matters
K&L Gates has been involved in the changing law of real property taxation and real estate transactions. We advise clients regarding strategies for achieving and maintaining real property tax exemption and defend them against attacks on their exemptions. We also handle real estate transactions involving bargain sales and conservation easements and the more routine matters that arise from leasing, buying, selling and managing real property. Our experience with tax-exempt organizations enables us to identify concerns unique to these organizations, such as meeting gift substantiation requirements, avoiding unrelated business income, protecting federal and state tax-exempt status and maximizing the likelihood of qualifying for exemptions from real property taxation.
Finance
We work to obtain appropriate financing for our nonprofit clients’ endeavors. We coordinate tax-exempt bond financings, secured and unsecured loans from financial institutions, private offerings of securities and membership interests and registered offerings of securities. We serve as borrower’s counsel and underwriter’s counsel in connection with numerous hospital, university and other eleemosynary financings. Our lawyers serve as bond counsel for state and local governments, as well as counsel to underwriters, trustees and credit providers. As bond counsel, we handle a variety of transactions, such as general obligation bonds, utility revenue bonds, assessment bonds, short-term obligations, lines of credit, lease financings, tax increment financing, 501(c)(3) financing, housing, industrial development and other types of private activity bonds. In connection with this work, we advise on tax and other matters as well as derivatives, guaranteed investment contracts, forward supply contracts and other specialized investments. We restructure financing arrangements when necessary to reduce cost, increase capital available or modify financing arrangements to permit the client to undertake desired activities. We also advise regarding governmental contracting and the issues presented by such arrangements, including performance and financial accounting and audits.
Planned Giving and Charitable Solicitation
The planned giving area of our practice is important to many of the charitable organizations we represent. We are called upon to structure gifts from philanthropic individuals in the form best suited for both the charity and the individual. K&L Gates creates, implements and administers a range of charitable gift forms, including conservation easements, charitable annuities, remainder and lead trusts, gifts of remainder interests in residences and other gift techniques. We monitor and protect our charitable clients’ beneficial interests in the administration and termination of estates and/or trusts, and we advise our nonprofit clients (particularly those in the health care field) on matters relating to guardianship, living wills and organ donation.
Nonprofit organizations that seek to raise funds from the public must comply with state laws requiring registration and/or disclosure by organizations seeking to solicit donations. K&L Gates assists nonprofit organizations in complying with these laws in various jurisdictions. We determine when and where registration is required, determine what disclosures are required, and establish appropriate contractual relationships between the nonprofit organization and its professional fund-raising counsel and professional solicitors. We also establish endowment policies and determine whether circumstances merit the establishment of a separate foundation. Where appropriate, we assist our nonprofit clients in dealing with the Office of the Attorney General as it exercises its parens patriae authority over charities.
Public Affairs and Lobbying
In addition to formal representation of our clients before federal, state and local courts and administrative agencies, the firm maintains an extensive practice providing assistance to tax-exempt organizations with a wide array of federal, state and local policy needs. In conformance with the laws governing exempt organization lobbying, we work with exempt organizations to affect public policy in Congress and the administration. Our appropriations team interacts with the highest level of decision-makers in both the House and Senate on a daily basis on behalf of K&L Gates clients. In addition, the firm works with a wide variety of administrative agencies to educate political appointees and career officials on policy issues relevant to our tax-exempt organization clients. We also gather intelligence, and monitor and analyze forthcoming policy events and trends.
Our approach to public affairs and lobbying assignments involves not only direct advocacy on behalf of our clients, but also stresses maximizing our clients’ internal “grass roots” resources, identifying creative solutions to legislative and regulatory controversies, and creating and coordinating coalitions among similarly situated groups and organizations. In carrying out these assignments, many of our lawyers benefit from years of public service with various units of federal, state and local government.
Administrative and Regulatory Matters
With the growth in size and complexity of state and federal governments, our nonprofit clients frequently face challenges from governmental regulators relating to their day-to-day operations. Whether it is regulation of care plans in a nursing home or regulation of the political activity of a trade association, K&L Gates assists its nonprofit clients with compliance efforts. Moreover, led by our Washington and Harrisburg offices where necessary, K&L Gates lawyers meet with regulators and bring legal actions when needed to assure fair treatment of our nonprofit clients.
Many of our clients are dependent on governmental reimbursement or funding for a significant portion of their annual budgets. K&L Gates is experienced in assisting these clients to comply with the often complex procedures necessary to receive governmental monies, bringing legal actions where necessary to assure that a client receives funding promised by a governmental agency.
E-Commerce and Technology
Our nonprofit practice is fully integrated with the firmwide e-commerce and technology practices in order to match the potential of e-commerce with the unique regulatory constraints of nonprofit organizations. On behalf of our nonprofit clients, we structure sophisticated interactive websites offering the sale of goods and services, matching volunteer opportunities with volunteers and coordinating the compliance of solicitation efforts with applicable solicitation regulations and exempt organization tax law. We perform website audits and advise on regulatory compliance issues involving websites and the electronic exchange of information, including advice regarding the impact of the Health Insurance Portability and Accountability Act (HIPAA). We help many of our clients with legal issues arising from the outsourcing of e-commerce and technology services to third-party vendors. In addition, K&L Gates lawyers structure alliances, partnerships and other strategic relationships between technology providers and nonprofit organizations.
K&L Gates’ nonprofit practice is only part of the services we offer to clients. The experience of all of our lawyers is available to our clients to address a variety of legal matters. For example, our nonprofit clients have availed themselves of K&L Gates lawyers in the environmental area as a result of third-party claims, the discovery of contamination or underground storage tanks on their property or the need for environmental permits. We also prosecute and defend complex lawsuits such as antitrust claims, allegations of breach of fiduciary duty and similar matters. Many of our nonprofit clients benefit from the services and counsel of K&L Gates’ intellectual property lawyers in connection with a variety of patent, copyright and trademark issues. We obtain U.S. and foreign patents, register copyrights, negotiate and draft multiparty agreements for the creation, transfer and licensing of intellectual property rights, and counsel clients so they enforce and maintain their own intellectual property rights and avoid infringing the rights of third parties.
U.K. Nonprofit and Charitable Organizations
In the UK our practice group gives practical legal advice to charities, those wishing to establish charities and those dealing with charities, on all aspects of charity law and associated legal issues.
The practice provides strategic legal advice on establishing charities and subsidiary trading structures and advises charities going through major changes, such as reorganizations, mergers and acquisitions, both nationally and internationally. We liaise with the Charity Commission on behalf of charities on specific issues, such as registering with the Charity Commission, charitable status and constitutional structure and on more general regulatory and compliance matters. We also deal with the issues that specifically arise in relation to Royal Charter bodies.
We draw on experience from across the firm to offer charities and other nonprofit organisations advice on all aspects of their work. Our range of experience includes advice in relation to other areas of experience such as tax, intellectual property, employment, e-commerce, environment, property and construction. We provide advice to charities on the commercial aspects of their activities such as public and private partnering, commercial and property deals, sponsorship, outsourcing and joint ventures of all kinds. We also advise on contentious matters that affect charities and not-for-profits, resolving trusts, tax and charitable disputes and other kinds of litigation as a regular part of our practice.
Charities have to achieve their objectives in the most economical way and as effectively as possible. They generally have slim management resources and need to husband their finances strictly. Increasingly, they also need to be aware of commercial issues. All the areas of their operation are now subject to increasingly complex regulations. Our aim is to empower our clients to meet their objectives speedily, efficiently and cost-effectively.
Our lawyers are always conscious of the objectives and particular requirements of our charity clients. Many of our staff and partners help charities through their personal activities, and several are themselves charity trustees. We therefore have a thorough understanding of charity issues and can see them from both sides.