The nonprofit sector is a critical part of the US civic infrastructure, and nonprofit organizations play a vital role in delivering services, strengthening communities, and facilitating civic engagement. Unfortunately, nonprofits have taken serious financial hits.
Americans gave less of their incomes to charity in 2022 than they have in nearly three decades, which exemplifies the decades-long trend of scaled-back charitable giving.
Tax lawyers hold a tactile skill set that is invaluable to nonprofits relying on tax structures to support their mission and encourage donors to participate. They can help nonprofits apply for tax-exempt status and navigate the complicated rules to ensure continued qualification.
Providing tax consultations on a pro bono basis is one big thing tax attorneys can do to ease these organizations' burdens. They can also help with establishment and structuring by providing advice on bylaws, governance structures, and corporate formalities that align with tax-exempt regulations.
Tax attorneys also can help nonprofits understand the tax implications of different types of fundraising activities, such as events or grant applications. Nonprofits also have restrictions on engaging in political lobbying and advocacy activities.
Tax attorneys can help organizations understand the limits and reporting requirements for these activities while staying within the boundaries of tax law.
But where can they start? Picking an organization whose mission aligns with their values, interests, and beliefs is a good first step. The American Bar Associationhighlights a diverse list of nonprofits and programs including disaster relief, elderly, and service members to explore pro bono opportunities.
Another good option is to visit local nonprofits to see the work they're doing and open a dialogue on how tax experience can help.
I serve on the board of directors of the Gary Sinise Foundation, founded in 2011 by actor and humanitarian Gary Sinise. The foundation honors military personnel, veterans, first responders, their families, and those in need.
I joined the board after providing the foundation with more than 10 years of pro bono counsel. I also lend my time to the board of directors of Friends of Firefighters, which provides free, confidential, and independent mental health counseling for New York's Bravest, an organization that the Gary Sinise Foundation also supports.
According to Rule 6.1 of the American Bar Association Model Rules of Professional Conduct, "Every lawyer has a professional responsibility to provide legal services to those unable to pay. A lawyer should aspire to render at least 50 hours of pro bono public legal services per year." This call to service is deeply embedded in our association of lawyers.
To fulfill this duty, lawyers can provide legal services through nonprofits or directly to those who are indigent and otherwise couldn't afford legal counsel. While no state requires its lawyers to complete mandatory pro bono work, several states now require lawyers to track and report pro bono hours.
New York is the only state that requires law students to perform at least 50 hours of pro bono service as a condition for receiving a law license. This is a precedent that should be implemented in every state.
Regardless of whether a state requires tax professionals to complete mandatory pro bono work, those who provide pro bono services to nonprofits attest to the immense fulfillment and personal satisfaction experienced by doing this selfless work.
Tax professionals are uniquely positioned to support nonprofits. And opportunities to do so are boundless, as there are over 1.8 million nonprofits registered in the US, according to the National Center for Charitable Statistics.
Each of us leads busy lives with professional and personal demands, but the time dedicated to a nonprofit will provide a sense of pride and fulfillment that outweighs them. Many are fortunate enough to have expertise that can add so much to the lives of others.
Sinise's motto is, "While we can never do enough to show gratitude to our nation's defenders, we can always do a little more." It entreats each of us to do a little more to make the world a better place, and tax professionals should do our part.
The guidance a tax professional can provide through pro bono consulting and board volunteering will help nonprofits achieve fiscal stability and enable them to serve populations that are most in need.
This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.
Originally published by Bloomberg Tax.
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