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Not for Profit Organizations

Allied Practice Areas > Not for Profit Organizations > Case Study

Case Study

Our client was organized as a not-for-profit corporation in the medical field under Illinois law in the 1990s.  The client thought it was a tax exempt organization.  However, over a period of 16 years, it had filed tax returns as a for-profit corporation.   It never had obtained tax exempt status under section 501(c)(3) even though it was eligible for such status.  The client faced bankruptcy owing to substantial penalties imposed by the Internal Revenue Service.  Here’s what Lakelaw did:
  • We worked with an accountant to prepare all necessary tax returns for prior years on form 990.
  • We worked with the not-for-profit branch of the Internal Revenue Service to obtain a waiver of all back taxes and penalties
  • We received a refund from the Internal Revenue Service of all back taxes and penalties paid prior to our having been employed.
  • We assisted the not-for-profit to obtain 501(c)(3) status as an educational and scientific organization.

    Bankruptcy - Lakelaw has represented a wide variety of not-for profit organizations at the end of their financial rope.  All too frequently, such not-for-profit organizations are funded by the State of Illinois or the State of Wisconsin.  Budgetary difficulties at the state level have made it impossible for such NPOs to carry on – they simply are not receiving funding. Bankruptcy is frequently the answer.  Lakelaw can help.  We assure that all regulatory and tax matters are handled and also assure that the Board of Directors is protected from personal liability.

    Dissolution - Sometimes, a bankruptcy is not necessary to wind-down the affairs of a not for profit.  In this case, dissolution is a better answer.  Assets which remain must be allocated to a proper place – frequently with court intervention under the doctrine of cy pres.

  • Tax Status Issues - Lakelaw has assisted not for profit organizations acquire tax exempt status under Internal Revenue Code section 501(c)(3) and 501(a)(9).

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