Tax-Exempt Organizations

Managing the Increased Governmental Scrutiny of Tax-Exempts

The last several years have seen both the Internal Revenue Service (IRS) and Congress intensify their scrutiny of the operations of tax-exempt organizations. Governance has emerged as one of the most controversial issues, with Congress, in particular, expressing a keen interest in insider misconduct and misuse of tax-exempt assets. The reasonableness of executive compensation and executive perks, political campaign activities, and lobbying have topped the IRS's list of hot issues, as has revenue from unrelated business interests.

To help them operate within the current regulatory climate, Miller & Chevalier's clients receive the combined benefit of a renowned tax practice that regularly represents tax-exempt organizations, Washington-based lawyers recognized as having a deep understanding of the workings of the federal government, and authorities in the array of other legal matters that engage tax-exempt organizations. Miller & Chevalier was founded as the first federal tax practice in the United States. For decades, we have been providing sophisticated and discerning tax-exempt organizations with comprehensive services in the areas of tax-planning, compliance, IRS controversy-resolution, and litigation, as well as related non-tax services, such as employee benefits and international operational planning and compliance.

Our clients are a diverse array of organizations in all stages of their life cycle, and include both domestic and foreign organizations with U.S. operations:

  • Public charities, including universities, colleges, and other educational organizations, churches and religious organizations, hospitals and medical facilities, and charitable mission-based organizations;
  • Supporting organizations;
  • Private foundations, including company-sponsored foundations and large foundations (typically with assets of over $100 million) endowed by a single family or historical gift;
  • Charitable trusts;
  • Social welfare organizations; and
  • Domestic and international trade associations.

We serve our clients according to their operational and business needs. For some, we are general outside tax counsel and handle all day-to-day tax-related issues. Clients with broad in-house capacity sometimes prefer to consult with us on discrete complex issues arising from transactions, operational changes or activities, their dealings with for-profit entities, or relevant changes in federal law.

Planning, Consulting, and Compliance

Miller & Chevalier handles all organizational and operational facets of obtaining and maintaining tax-exempt status. We help our clients realize their tax objectives for their organization while assisting them in complying with the requirements for tax-exempt status as they conduct their day-to-day activities. As tax-exempt organizations increasingly explore new sources of revenue, we help our clients address their potential liability for the Unrelated Business Income Tax (UBIT) and help evaluate and structure suitable business options.

Our lawyers have extensive experience with the variety of substantive federal tax issues that tax-exempt organizations encounter. In addition to UBIT issues, these include:

  • Transactions and activities that may jeopardize tax-exempt status;
  • Political campaign activities and lobbying;
  • Private foundation excise taxes on self-dealing, net investment income, undistributed income, excess business holdings, jeopardizing investments, and taxable investments;
  • Section 4958 taxes on excess benefit transactions (the "intermediate sanctions" rules);
  • Executive compensation, employment tax liabilities, and other employee benefits issues;
  • Corporate governance and corporate and trust fiduciary standards;
  • Structuring royalty agreements and leases;
  • Establishing and operating for-profit subsidiaries;
  • Joint ventures and the tax consequences of other transactions between tax-exempt and taxable entities;
  • Reorganizations and restructurings of tax-exempt organizations and their affiliates;
  • Conversion from nonprofit to for-profit status; and
  • The impact and content of pending legislation affecting tax-exempt organizations.

As domestic organizations become more global in structure and purpose, Miller & Chevalier helps them manage the complex issues raised by cross-border operations. The collective capabilities of our International and Tax-Exempt Organizations practices make Miller & Chevalier the natural choice for tax-exempt organizations that are engaged in or considering international activities. Among other services, we advise our clients on permissible and impermissible foreign activities and on compliance with international trade and regulatory regimes, including import/export regulations, the Foreign Corrupt Practices Act (FCPA), and rules governing inbound and outbound foreign investments.

Advocacy, Audits, and Administrative Solutions

Miller & Chevalier lawyers have a reputation in government for integrity and professionalism. It is a distinction that we value and that we are committed to preserving. Our in-depth knowledge of this environment is reinforced by the experience of the many lawyers in our firm who have served in government positions.

This reputation and our national standing as a top tax practice inform our working relationships with the IRS, the U.S. Department of the Treasury, and the management and staff of other government agencies and permit us to represent our clients' positions effectively and efficiently. Our clients rely on us to represent them on significant regulatory issues, including obtaining private letter rulings and negotiating closing agreements with the IRS, and to assist them in obtaining regulatory and legislative changes. Our Washington, D.C. focus gives our clients immediate access to news of regulatory and legislative trends and developments; in fact, we often alert clients to developments well in advance of their formal publication or announcement.

Handling audits and resolving controversies administratively are a significant aspect of Miller & Chevalier's core practice. We have a long and successful record helping our clients plan for audits and manage the range of audit issues, and we have obtained positive results for our clients at every stage of the IRS administrative process. These matters often involve proposed revocation of tax-exempt status; UBIT issues; private foundation excise tax issues; Section 4958 excess benefit (i.e., "intermediate sanctions") excise tax issues; and political campaign activity and lobbying issues. We also assist issuers, underwriters, and conduit borrowers in resolving controversies involving tax-exempt bonds with the IRS. We regularly negotiate closing agreements and other settlements with the IRS that enable our clients to maintain their tax-exempt status and to resolve related tax and penalty issues without litigation and on terms favorable to our clients.

Litigation

Tax-exempt organizations with substantial dollar amounts in controversy choose Miller & Chevalier for our approach to litigation, our litigation experience, and our record of achievement in court. Although we explore all relevant options to help our clients avoid the costs and public scrutiny of litigation, if litigation is necessary, our clients know that we are forceful advocates who will defend them vigorously and persuasively.

Miller & Chevalier offers clients the benefits of a team whose litigators have both extensive litigation skills and deep technical tax knowledge. Our tax-exempt practice features lawyers with tax litigation experience in the United States Tax Court, the United States Court of Federal Claims, the Federal District Courts, and the Federal Appellate Courts. This capacity is of substantial benefit to our clients and significantly distinguishes our practice.

In addition to tax matters, we also have extensive experience in controversies involving state trust law or corporate fiduciary issues.

Internal Compliance Reviews and Internal Investigations

In response to the current emphasis by the IRS and Congress on self-correction in the tax area, many tax-exempt organizations have retained Miller & Chevalier to conduct an internal compliance review to identify and address problem areas before the organization receives notice of an IRS or Congressional inquiry. Given our range of substantive, controversy, and litigation experience, we are uniquely qualified to conduct internal compliance reviews or internal investigations into the activities and practices of tax-exempt organizations, identify potential areas of noncompliance with the federal tax laws, and recommend steps an organization can take to address noncompliance proactively. Addressing areas of non-compliance proactively is the best defense to an IRS attempt to revoke an organization's tax-exempt status.

Government Experience
  • Commissioner, Internal Revenue Service
  • Assistant Commissioner (Technical), Internal Revenue Service
Corporate Experience
Rankings and Recognition
  • Chambers USA: Tax Team of the Year, 2016
  • Chambers USA: Tax: Controversy (National), 2007 - 2016
  • Chambers USA: Tax (District of Columbia), 2003 - 2016
  • Legal 500: Tax: Non-Contentious (US), 2013 - 2016
  • Legal 500: Tax: International Tax (US), 2013 - 2016
  • Legal 500: Tax: Contentious (US), 2007 - 2016
  • U.S. News -- Best Lawyers® "Best Law Firms": Tax Law (National), 2010 - 2016
  • U.S. News -- Best Lawyers® "Best Law Firms": Tax Law (District of Columbia), 2010 - 2016
  • International Tax Review "Americas Tax Awards": Americas Tax Policy Firm of the Year, 2012 - 2013, 2015 - 2016
  • International Tax Review "Americas Tax Awards": Washington, DC Tax Firm of the Year, 2013
  • International Tax Review "Americas Tax Awards": Washington, DC Transfer Pricing Firm of the Year, 2012
  • International Tax Review: World Tax (Washington, DC), 2012, 2014 - 2017
  • International Tax Review: World Transfer Pricing (National), 2014 - 2017
Clerkships