Nonprofit Organizations

Nonprofit Organizations Attorneys | North Carolina

Running a nonprofit in North Carolina means managing tax-exempt status, governing a board, employing staff, entering contracts, and often acquiring real estate, all while keeping a narrow margin of error with the IRS and state regulators. Ward and Smith has served North Carolina’s nonprofit sector for more than a century, providing the same full-service legal depth that for-profit companies expect from outside counsel: tax, employment, real estate, litigation, and government relations, coordinated from a single firm that already knows your organization.

The firm’s attorneys have served as board members and legal advisors to nonprofits across the state. That experience means we engage with the governance and operational challenges that nonprofit leaders face in real life, not just the legal framework around them.

What We Handle

Formation and ongoing compliance:

• Formation under the NC Nonprofit Corporation Act, including articles of incorporation and bylaws
• Federal tax-exempt status applications and maintenance for Internal Revenue Code Section (IRC) 501(c)(3), 501(c)(4), 501(c)(6), and related organizations
• Unrelated business income tax (UBIT) planning and compliance under IRC Section 511
• Governance counseling, board fiduciary duty, and conflicts of interest policies
• Executive compensation review and IRS intermediate sanctions compliance under IRC 4958
• Lobbying and political activity compliance for public charities, trade associations, and social welfare organizations
• Endowment management, gift acceptance policies, and donor restrictions
• Nonprofit mergers, affiliations, and dissolutions
• Employment law compliance including wage and hour, discrimination, and FMLA for nonprofits
• Real estate acquisition, leasing, and financing for nonprofit facilities
• Contract drafting and review for service agreements, grants, and program partnerships
• Litigation defense for disputes involving nonprofit governance, contracts, and employment

Clients We Serve

• Public charities and private foundations
• Trade and professional associations
• Educational institutions and charter schools
• Healthcare nonprofits and federally qualified health centers
• Religious organizations
• Arts and cultural institutions
• Political organizations
• Community development organizations and affordable housing nonprofits

A Full-Firm Resource for Nonprofits

Nonprofits carry the same legal complexity as any organization of comparable size, without the legal budgets that typically come with it. Ward and Smith’s full-service model means a nonprofit client has access to attorneys in Tax, Labor and Employment, Real Estate, Litigation, and Government Relations through a single relationship. When a governance dispute becomes litigation, or when a facilities acquisition requires environmental review alongside real estate work, the right attorney is already part of your team.

That integration matters most in moments of organizational stress: a regulatory inquiry, a board dispute, an employment complaint. Ward and Smith attorneys have been in those rooms with nonprofit clients, which shapes how we approach the work.

Why Ward and Smith

Ward and Smith’s depth in North Carolina business and tax law, combined with attorneys who have direct experience serving on nonprofit boards and advising NC government agencies, makes us a practical partner for organizations that need legal counsel grounded in how nonprofits actually operate. We are not a specialty boutique. When your organization’s legal needs expand beyond tax-exempt status, the right attorney is already at the table.

Frequently Asked Questions

What is the difference between a 501(c)(3) public charity and a private foundation?

Both are tax-exempt under IRC 501(c)(3), but the IRS treats them very differently. Public charities receive broad public support and face fewer restrictions on operations and investments. Private foundations are typically funded by a single donor, family, or corporation and are subject to strict rules on self-dealing under IRC 4941, minimum distribution requirements under IRC 4942, excess business holdings under IRC 4943, and jeopardizing investments under IRC 4944. Private foundations also pay a small excise tax on net investment income. Many organizations that start as private foundations eventually convert to donor-advised funds or public charity status to reduce administrative burden and compliance risk.

How much lobbying can a 501(c)(3) organization do?

Public charities may engage in lobbying as long as it does not constitute a substantial part of their activities. The IRS applies either a vague substantial part test or, for organizations that elect it under IRC 501(h), the more predictable expenditure test. Under the IRC 501(h) election, a charity may spend up to 20 percent of its first $500,000 of exempt-purpose expenditures on lobbying, with a separate cap on direct lobbying. Political campaign activity supporting or opposing candidates is entirely prohibited for IRC 501(c)(3) organizations. Rules differ significantly for IRC 501(c)(4) social welfare organizations and IRC 501(c)(6) trade associations, which have more latitude for advocacy. Ward and Smith advises nonprofits on structuring advocacy activities to stay within applicable limits.

What are the risks of unrelated business income for a nonprofit?

Unrelated Business Taxable Income (UBTI) arises when a nonprofit regularly conducts a trade or business not substantially related to its exempt purposes, as defined under IRC 512. Common examples include certain advertising revenue in publications, rental income where significant services are provided, and debt-financed income. UBTI is taxed at corporate rates and reported on IRS Form 990-T. Under the Tax Cuts and Jobs Act of 2017, each unrelated business activity is now treated separately for loss netting purposes, increasing the tax exposure for organizations with multiple activities. Substantial unrelated business activity can also raise questions about whether the organization remains primarily operated for its exempt purpose. Ward and Smith advises nonprofits on structuring revenue-generating activities to minimize UBTI exposure.

What fiduciary duties do nonprofit board members owe under North Carolina law?

Under the NC Nonprofit Corporation Act, N.C.G.S. Chapter 55A, nonprofit board members owe three fiduciary duties: the duty of care (informed, attentive decision-making consistent with what a reasonable person would exercise in similar circumstances); the duty of loyalty (placing the organization’s interests ahead of personal interests); and the duty of obedience (adherence to the organization’s mission and governing documents). Conflicts of interest must be disclosed and managed through a written policy. Executive compensation deemed excessive by the IRS can trigger intermediate sanctions under IRC 4958, including excise taxes on both the recipient and the board members who approved it. Ward and Smith advises boards on governance practices that protect both the organization and its directors from personal liability.

Can a nonprofit in North Carolina own real estate?

Yes. Nonprofits may own real estate for use in exempt activities. Property used directly for exempt purposes may qualify for property tax exemption in North Carolina under N.C.G.S. Section 105-278.7. Financing options include conventional lending, tax-exempt bond financing for qualified IRC 501(c)(3) organizations, New Markets Tax Credits for projects in eligible census tracts, and USDA Community Facilities loans for rural organizations. Real estate acquired with restricted grant funds may also be subject to donor restrictions that limit future disposition. Ward and Smith handles real estate acquisition, financing, and compliance work for nonprofits from initial due diligence through closing.

What is required to dissolve a nonprofit organization in North Carolina?

Dissolution of a North Carolina nonprofit requires a board resolution (and in many cases member approval), followed by filing articles of dissolution with the NC Secretary of State under N.C.G.S. Chapter 55A, Article 14. The organization must notify creditors, wind up business affairs, and distribute remaining assets consistent with its governing documents and the cy pres doctrine: remaining assets of a dissolved public charity must go to another tax-exempt organization with a similar mission, not to directors or members. The IRS must also be notified via a final Form 990. Failure to follow proper dissolution procedures can leave board members personally exposed to creditor claims.

What employment law obligations are unique to nonprofit organizations?

Nonprofits are subject to most of the same federal and state employment laws as for-profit employers, including the Fair Labor Standards Act, Title VII, the Americans with Disabilities Act, and the Family and Medical Leave Act. However, several provisions apply differently: very small nonprofits may fall below FLSA or Title VII coverage thresholds; religious organizations may have broader exemptions from antidiscrimination requirements; and volunteers, though not employees, can create liability under certain circumstances. Nonprofits that receive federal funding through grants also face additional compliance requirements tied to that funding. Ward and Smith advises nonprofits on both standard employment compliance and the specific issues their sector creates.

How does a nonprofit apply for IRC 501(c)(3) status and how long does it take?

Most organizations seeking IRC 501(c)(3) status apply using IRS Form 1023 (the standard application) or Form 1023-EZ (a streamlined version for organizations with projected annual gross receipts of $50,000 or less and assets of $250,000 or less). The IRS target processing time for Form 1023 is generally three to six months for complete applications, though complex applications or those with unusual purposes can take longer. The application requires detailed descriptions of planned activities, financial projections, governance documents, and compensation information. Errors or incomplete submissions frequently generate IRS questions that delay approval. Ward and Smith prepares IRC 501(c)(3) applications and advises on the organizational structure and governance documents that support a clean approval.