Protecting Your 501(c)(3) Tax Exemption: A Practical Survival Guide
Tax-exempt organizations are facing more scrutiny than ever. Federal and state regulators have signaled an intent to more aggressively investigate nonprofits, and compliance missteps that once drew a warning can now trigger audits, penalties—or even revocation of tax-exempt status.
To help your organization prepare, Miller Canfield’s tax attorneys have developed a Practical Survival Guide for Protecting Your 501(c)(3) Status. The guide explains how the IRS revocation process works, outlines your legal rights, and provides concrete steps to reduce risk and maintain compliance.
Here are a few key reminders:
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Review your organizing documents. Make sure your articles of incorporation and bylaws clearly limit your purpose to activities that qualify under Section 501(c)(3).
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Avoid private benefits. Transactions involving insiders must be fair, reasonable, and fully documented. Even the appearance of excess benefit can raise red flags.
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Stay current with filings. Missing three consecutive years of Form 990 filings results in automatic revocation of exemption.
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Monitor unrelated business income. Too much activity unrelated to your exempt purpose may jeopardize your status.
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Keep your lobbying and political activity in check. Nonprofits must ensure lobbying remains insubstantial and avoid any participation in campaigns for public office.
A one-page Tax-Exemption Compliance Checklist is also available for quick reference.
To access the full Tax-Exemption Survival Guide or to discuss how these issues may affect your organization, please contact your Miller Canfield attorney or a member of the Miller Canfield tax team.
