Hunton Law

Legal Counsel for Nonprofits, Foundations & Social Enterprises

Legal Counsel for Nonprofits, Foundations & Social Enterprises

Benefit Corporations Supporting Charitable Causes

A recently released Internal Revenue Service Information Letter has practical implications for social enterprises formed as benefit corporations that wish to support charitable organizations and causes in connection with the benefit corporation’s public benefit purpose. 

In the Information Letter, the IRS stated that payments made by a benefit corporation to an Internal Revenue Code Section 501(c)(3) nonprofit charitable organization for the purpose of “institutional or goodwill advertising to keep the benefit corporation’s name before the public” will be treated as valid business expenses under IRC Section 162(a).  Section 1.162- 20(a)(2) of the Income Tax Regulations provides, in part, that expenditures for institutional or goodwill advertising which keeps the taxpayer’s name before the public are generally deductible as ordinary and necessary business expenses provided the expenditures are related to the patronage the taxpayer might reasonably expect in the future.  So long as the benefit corporation satisfies the above standard, the benefit corporation’s payments to charities will be treated as fully deductible business expenses rather than partially deductible charitable contributions (limited to 10% of the corporation’s taxable income under IRC Section 170).   

Since 2010, when the first benefit corporation state statutes were enacted, benefit corporations have been subject to the same federal tax laws as regular business corporations.  With the issuance of the recent IRS letter above, we are now seeing the emergence of certain tax benefits offered to benefit corporations, signaling that regulatory agencies view benefit corporations as generating sufficient public benefit to justify some level of tax preference.  We will have to wait and see whether further tax benefits will be extended to benefit corporations in the coming years.

Announcing “Rewards and Risks of Fiscal Sponsorship” Panel on April 26th

“Rewards and Risks of Fiscal Sponsorship”

Wednesday, April 26, 2017, 8:00am-9:30am

DZH Phillips, 135 Main Street, First Floor Lobby, San Francisco, CA 94105

Join us for a panel program on fiscal sponsorship.  We will discuss financial implications, insurance liabilities, and legal obligations when considering fiscal sponsorship opportunities.

Panelists include: Janet Holland, Partner, CPA, DZH Phillips; Karen Frost, Chief Financial Officer, Larkin Street Youth Services; and Zoe Hunton.  Moderated by Cole Kinney, Nonprofit Practice Leader, G2 Insurance Services.

Please register for this complimentary program via EventBrite.

Watch the Recording of the March 21st Impact Investing Panel

In case you missed it, the video recording of “The Many Ways Impact Investing Affects Nonprofits” is available for on-demand viewing on the Foundation Center's YouTube channel.  During this 90 minute panel, Zoe Hunton, Stephanie Cohn Rupp, and Ruth Shaber discussed characteristics of impact investments, legal issues relating to impact investing, and ways that nonprofits participate in impact investing and benefit from impact investments.  If you have any questions, please do not hesitate to contact Zoe at zoe@hunton-law.com.  

Announcing Impact Investing Panel on March 21st

“The Many Ways Impact Investing Affects Nonprofits”

Tuesday, March 21, 2017, 3:00-4:30pm PT

Foundation Center West, 312 Sutter Street, San Francisco, CA 94108

Join Foundation Center West for a panel event on impact investing – how nonprofits participate in impact investing, why the increase in impact investing matters to nonprofit organizations, legal issues relating to impact investing, and developments in the impact space. 

Panelists include: Stephanie Cohn Rupp, Managing Director, Impact Investing, Threshold Group; Ruth Shaber, MD, President, Tara Health Foundation; and Zoe Hunton. 

Register here.