Tax-Exempt Organizations

At Basswood, we empower charitable foundations and nonprofits with timely, efficient service. Our team offers expert guidance to protect tax-exempt status and optimize income while minimizing liabilities such as unrelated business income tax.

The nonprofit and philanthropic landscape is complex, requiring specialized knowledge. From inception to dissolution, our comprehensive legal support covers every phase of a nonprofit organization’s journey. Whether it is establishing federal tax-exempt status, structuring operations, or navigating dissolution procedures with the IRS, we streamline processes so organizations can focus on their core missions cost-effectively.

We go beyond traditional legal advising; we are strategic partners committed to the success of tax- exempt entities. From the outset, we help craft governance frameworks that align with regulatory requirements and industry best practices. Our guidance extends to board governance, conflict resolution, risk management, and compliance, ensuring ethical and efficient operations.

Our experience extends to complex financial transactions and investments. Whether it is structuring grants, program-related investments, or joint ventures, we tailor solutions to maximize impact while managing tax implications and regulatory constraints. We specialize in optimizing investment strategies to minimize unrelated business income tax and ensure compliance with private foundation regulations.

We recognize the distinct challenges facing tax-exempt organizations. Through our tailored legal solutions and strategic guidance, we empower nonprofits to thrive in their mission-driven pursuits while successfully navigating regulatory compliance and achieving financial sustainability.

Explore other Tax Services:

Frequently Asked Questions

Do I need to report and pay US tax on my foreign accounts, investments, or business interests if I live in the US?

Yes. U.S. citizens and U.S. tax residents (green‑card holders and individuals who meet the substantial presence test) must report worldwide income, regardless of where they live or where the assets are located.

You may also have additional foreign reporting requirements, such as the following:

FBAR (FinCEN 114) – if the total value of your combined foreign accounts exceeds $10,000 at any point in time of the reporting year
FATCA Form 8938 – if the total value of your foreign assets exceeds certain thresholds
Forms 5471, 8865, 8858 – for ownership in foreign companies (corporations, partnerships, disregarded entities)
Form 3520/3520‑A – for certain foreign trusts or gifts
Failure to file these forms can result in significant penalties, even if no tax is due.

What are my U.S. reporting obligations for foreign bank accounts, pensions, and companies—and what if I’ve never filed FBAR/FATCA forms?

Owning or having an interest in foreign assets often comes with additional U.S. reporting requirements. Common filings include:

FBAR for foreign financial accounts
FATCA Form 8938 for specified foreign assets
Form 3520/3520‑A for foreign pensions and trusts
Forms 5471, 8865, 8858, 8621 for foreign companies and funds

If you have not filed in prior years, there are established pathways to come back into compliance. The IRS Streamlined Procedures may allow you to correct the last 3–6 years of filings with reduced or no penalties, provided the noncompliance was non-willful.

We work with clients to assess their exposure, navigate available programs, and bring their filings into alignment with U.S. requirements.

I live abroad and pay tax locally—do I still have to file US tax returns and report my worldwide income every year?

Yes. Even when living overseas, U.S. citizens and U.S. permanent residents must file:

An annual U.S. tax return (Form 1040)
Foreign reporting forms such as FBAR and FATCA

Exemptions like Foreign Earned Income Exclusion (FEIE) or credits may offset liability, but filing remains mandatory to avoid penalties.

How do I avoid double taxation between the U.S. and my country of residence (FEIE, foreign tax credits, treaty relief)?

Avoiding double taxation involves coordinating U.S. and local tax rules so the same income is not taxed twice. Common tools include:

Foreign Earned Income Exclusion (FEIE) to exclude earned income
Foreign Tax Credit (FTC) to offset U.S. tax with foreign taxes paid
Tax treaties that offer relief for pensions, dividends, Social Security, and residency tie‑breaking rules
Totalization agreements to prevent double Social Security taxation

The right approach depends on your income profile, country of residence, and long-term plans. Thoughtful planning helps ensure these tools work together effectively.

How should we structure our foreign operations to manage global tax (branch vs. subsidiary vs. holding company)?

Your global structure shapes how your business is taxed, how risk is managed, and how efficiently you can grow across jurisdictions. Key considerations include:

U.S. tax treatment, including exposure to Global Intangible Low-Taxed Income (GILTI)/ Net CFC Tested Income (NCTI), Subpart F, and Foreign-Derived Intangible Income (FDII)
State and local tax obligations in each operating jurisdiction
Liability protection across entities
Administrative complexity and ongoing compliance requirements

Common structures include:

Foreign branch – simpler to set up, but may result in immediate U.S. taxation
Foreign subsidiary (CFC) – often more tax-efficient with thoughtful planning
Regional holding company – useful for coordinating multi-country operations and investment flows

We model scenarios to help you choose a structure that supports growth while managing tax and complexity.

Need guidance on a tax-exempt organization matter?

Whether you are forming a nonprofit, applying for tax-exempt status, managing compliance obligations, or addressing governance issues, Basswood Counsel can provide practical legal support for your organization.