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Have questions? We’ve got answers. Take a look at our frequently asked questions for more information.
Background and Key Principles
The California Lawyers Foundation (CLF) is a tax-exempt organization under Internal Revenue Code (“IRC”) Section 501(c)(3). The California Lawyers Association (CLA) is recognized as a tax-exempt trade/professional association under IRC Section 501(c)(6)
As the charitable arm of the CLA, the CLF may conduct charitable programs, projects and activities (including continuing legal education (CLE)) that further the Foundation’s and the Association’s common mission of promoting excellence, diversity, and inclusion in the legal profession and fairness in the administration of justice and the rule of law.
To protect the 501(c)(3)tax-exempt status of the CLF, respect its separate corporate existence, not run afoul of IRS, California Franchise Tax Board and California Attorney General charitable trust rules and guidance, and comply with the rules set forth by the California Fair Political Practices Commission (FPPC), the following general principles must be observed:
- Decisions with respect to the CLF must be made by the CLF’s board and officers. The traditional corporate formalities must be observed with respect to the CLF to ensure that it acts independently and that the risk of “piercing the corporate veil” does not arise.
- All activities of the CLF must be charitable in nature and consistent with the charitable purposes of the CLF as set forth in its governing documents (i.e., Articles of Incorporation and Bylaws) and its application for recognition of exemption under IRC Section 501(c)(3) (IRS Form 1023). Any payments made by the CLF must have a direct nexus to the CLF’s charitable work. In making decisions about the activities of the CLF, its board and officers must consider the IRS principles prohibiting private inurement or private benefit—essentially, payments or other benefits to individuals unrelated to the CLF’s charitable work or unreasonable in amount based on the services provided to the Foundation by the individual.
- To ensure that there is proper documentation of decisions regarding activities, the CLF will develop a form for the purpose of assessing activities and documenting their relationship to the CLF and its work.
Will the foundation co-sponsor other activities or project beyond educational programs if no funding is requested?
As noted above, provided the CLF deems it in the interest and within its charitable mission to do so, co-sponsorship without a financial contribution from the CLF is possible. The same Co-Sponsorship Request Form is required.
What will a donor receive after making a contribution?
All donors will receive a confirmation letter from the CLF thanking the donor for their contribution and stating the designation if the donation was made for a designated purpose (i.e. a specific diversity fellowship program). The letter will also note that no goods or services have been received in return for the contribution and that they should retain the letter for their tax purposes.
Related to fellowships or scholarships, are there any tax liabilities for a recipient?
It should be noted that there is a potential tax liability for recipients. Scholarships (and fellowships) are generally tax-free provided certain conditions are satisfied. For example, it is generally acceptable to use scholarship or fellowship funding to cover school related expenses rather than room and board. The fellowship or scholarship funding is not intended to be used for general purposes or to act in place of a salary. If an applicant is selected to receive a scholarship or fellowship, there may be circumstances where they will need to pay taxes. The Foundation will provide an information sheet that accompanies the check to any recipient to alert them of the potential tax liability.
Will contributions to the foundation be tax-deductible to the donor?
As noted in the “Background and key principles” section above, the CLF is a 501(c)(3) tax-exempt organization. Generally, contributions will be tax-deductible by the donor, but this dependent on the donor’s individual tax situation.
A potential donor has asked if the CLF can accept non-cash gifts. For example, can the CLF accept stock or artwork?
At this time, the CLF will only accept gifts of cash, cash equivalents (e.g., credit card payments) and marketable securities.
Who, specifically, at the CLF will make decisions regarding its activities?
Ultimately, the CLF Board of Directors is responsible for its activities and for safeguarding its tax-exempt status. The Board, however, has delegated to the CEO or their designee certain activities that can be approved without action of the Board.
Will contributions to the foundation be tax-deductible to the donor?
The CLF will consider such requests on a case-by-case basis using the basic principles described above.
For I.R.S. purposes, the term “charitable” encompasses “educational” and for ease of reference, is used throughout.