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  1. Fiscal Sponsorship- An Alternative to Non-Profit Organization

    May 16, 2023 by lowens

    By Hadassah Gomez

    Hadassah Gomez, CDC Fellow Spring 2023

    Charitable organizations are often born out of passion, goodwill, a desire to advance a worthy cause and make a positive contribution to society. Unfortunately, these virtuous aspirations are often stifled by the tedious, expensive, lengthy, and complicated legal process of registering as a non-profit. Under the Internal Revenue Code 501(c)(3), (non-profit) status applies to organizations that are organized and operated exclusively for charitable and other specified purposes. A charitable cause or project stands to benefit from non-profit status through tax exemptions, grant eligibility and increased legitimacy which all control the ability to secure funding and efficiently manage the organization’s finances. Charities are a unique business entity, in that they are motivated by altruism as opposed to profits, and they depend on donations, grants and other forms of philanthropic funding, therefore, it is imperative that a charitable organization seeks optimum financial efficiency.  

    Unfortunately, the non-profit registration process is a legal bureaucracy, likely to deter even the most impassioned organizers of charitable causes. Between state and IRS filing fees, applications for non-profit status can cost upwards of $1000 and take up to six months to be approved. In addition to the application process being pricey and lengthy, it involves extensive and complex paperwork which may necessitate the enlisting of legal or other professional assistance thus adding even more to the expense and wait time.  

    In this case, what options do charitable ventures have? Must they succumb to the legal bureaucracy that is filing for non-profit status, or do they forego the invaluable benefits said status provides? 

    The answer to each of the aforementioned questions may be found in a Fiscal Sponsorship Arrangement.  

    According to the National Council for Non-Profits, a fiscal sponsorship arrangement offers a way for a cause to attract donors even when it is not yet recognized as tax-exempt under Internal Revenue Code Section 501(c)(3). In such an arrangement, a non-profit organization may agree to serve as a fiscal sponsor by providing fiduciary oversight, financial management, and other administrative services to support the activities of charitable entities engaged in work that furthers the fiscal sponsor’s mission. Essentially, an entity that is not officially registered as a non-profit, may still reap the benefits of the status by aligning with an appropriately registered entity. Under this arrangement, the fiscal sponsor assumes legal and financial responsibility for the unregistered sponsored organization. The sponsor may apply for grants and fundraise on the sponsored entity’s behalf. The sponsor may also handle administrative services such as bookkeeping and providing donor receipts for tax-deductible contributions made in the name of the sponsee. This arrangement not only benefits entities that find it impractical to file for non-profit status, it is equally convenient for entities that have filed or plan to file for non-profit status but need operational assistance in the interim.  

    Similarly, temporary charitable projects that are meant to be short-lived and only exist through the completion of a one-off project, event, or task may find filing for non-profit status impractical. In these cases, a fiscal sponsorship arrangement may be an appropriate solution.  

    At face value, a fiscal sponsorship arrangement appears to disproportionately benefit the sponsored organization, however, the fiscal sponsor also stands to benefit from said relationship. A fiscal sponsorship arrangement is typically between parties with similar or aligning missions, therefore, the fiscal sponsor is able to extend its reach and further its mission through the work of the sponsored organization. The sponsor may also be able to achieve some of their organizational goals, such as diversity efforts, through the work of the sponsored organization. Where the sponsored organization would have otherwise been a “competitor” of the fiscal sponsor, the arrangement effectively eliminates the competition through collaborative effort. The fiscal sponsor may also leverage the relationship with the sponsored organization for publicity and increased notability. Lastly, the fiscal sponsor may also financially benefit as it is common for a fiscal sponsor to ask administrative and other fees in exchange for the services provided under the arrangement.  

    Even though a fiscal sponsorship arrangement is an exceptional alternative to registering as a non-profit, there are some downsides that both parties to the arrangement should consider. For the sponsored organization, there is the risk of losing autonomy as the arrangement by nature cedes some degree of control to the sponsor. Furthermore, there is the risk that the sponsored organization may neglect its duties, misuse funds, or otherwise act inappropriately.  

    For the sponsor, some disadvantages include exposing itself to reputational risk. Even if the fiscal sponsor diligently vetted the sponsored entity prior to entering the arrangement, there is no guarantee that the missions of both parties will always align, and that any controversy associated with the sponsee would not affect the sponsor given their affiliation.  

    It is also important to note that a fiscal sponsorship arrangement may be governed by some sort of agreement. It is imperative that both parties contractualize the relationship to clearly define what is expected of each party. The agreement may also be comprehensive enough to include the extent of either party’s authority, the expectations for financial management, the procedure for terminating the agreement and the method of dispute resolution in the case of conflict.  

    In conclusion, a fiscal sponsorship is a valuable technique to circumvent the non-profit registration process, while still being able to access the benefit of non-profit status. Altruism need not die at the hands of legal bureaucracy and fiscal sponsorship might just be a lifesaver for some charitable agendas. Acknowledging that the arrangement has inherent risk, parties may protect their respective interests through a well-executed Fiscal Sponsorship Agreement. Therefore, charitable entities in the start-up or pre-registered phase may benefit from considering Fiscal Sponsorship as a vehicle to access non-profit benefits without going through the hurdle of non-profit registration.  

  2. Brand Protection in the New Age of E-Commerce

    May 16, 2023 by lowens

    By Madison Boudreau 

    Madison Boudreau, CDC Fellow Spring 2023, pictured in the UMass Law Library

    The rise of and development of e-commerce over the last nearly thirty years has completely revolutionized consumerism and shifted the retail industry from what it once was. The inception of the “digital marketplace” in the United States can be dated back as far as 1982 upon the launch of the Boston Computer Exchange, an online platform for the purchase and sale of used computers. However, it was not until the development and growth of sites like Amazon and eBay in the nineties that  the online retail industry would truly begin to take shape. Despite the initial “burst” of the dot-com bubble in the early 2000s, the last two decades have shaped digital dominance worldwide—and retail is no exception. Between 2015 and 2019, the e-commerce share of total global retail sales experienced steady annual growth over the four-year period, rising from 7.4% to 13.6% during this time. 

    The COVID-19 pandemic sparked an increase in online retail engagement by necessity, which led the e-commerce share of total global retail sales to jump from 13.6% in 2019 to 18% in 2020. Between 2020 and 2022, Americans spent $1.7 trillion online, representing a 55% increase in digital spending compared to the two years preceding the pandemic. Further, in response to the personal and financial hardships that resulted during this period, there seemed to be a boom in e-commerce innovation. According to the U.S. Census Bureau’s Business Formation Statistics, there were more applications filed to form new businesses in 2021 (5.4 million) and 2022 (5.1 million) than any other year on record. The culmination of these circumstances has led to a fundamental shift in the consumerism paradigm as a whole. 

    In many respects, the e-commerce boom over the last three years in particular has streamlined small business ownership—particularly for retail businesses. In 2023, it is not uncommon for small retail businesses to operate exclusively online; many of whom operate exclusively as third-party sellers for websites like Amazon, Shopify, and Etsy. Further, the increased role of curated social media in consumer advertising provides an opportunity for these small retailers to build brand identity for little to no cost and with potential for exponential growth and limitless market reach. As a result, this new age of e-commerce has created the image that small business ownership has never been easier. While there may be some truth to this façade, it is equally true with the rise of modern digital retail comes its own unique set of risks and challenges—namely in the wheelhouse of intellectual property.

    Trademark registration has long been recognized as an invaluable tool for distinguishing brands from one another. The protection offered to trademarked symbols or words is intended to provide notice of claim to other businesses, a legal presumption of ownership, and the exclusive right to use the trademark. However, characteristics of the modern global online marketplace have revealed deficiencies in trademark law as it stands today. In short, the oversaturation of the market has made it difficult for small business owners to navigate the possible risks, rights, and remedies under the current trademark framework. 

    First, the determination of eligibility of a certain mark for trademark protectio

    n is a lengthy process that can take an average of 12-18 months for finalization and legal recognition. Further, the sheer size of the online marketplace has made it more difficult than ever for small business owners to stay afoot of marks in use by other brands. As a result, e-commerce retailers may unknowingly lack proper protection of their brand before the trademark registration process has been completed or may expose themselves to liability by using symbols or words already registered and protected.

    Additionally, the third-party sale of retail through websites like Amazon, eBay, and Etsy raises new questions surrounding the contributory liability of these online marketplaces for trademark infringement. This concept of “secondary liability” has been judicially created and has continued to evolve alongside this new age of e-commerce. In Tiffany Inc. v. eBay, Inc., the Second Circuit established that trademark owners have the burden of policing their trademarks in online marketplace websites, where online marketplace website owners provide an adequate process to remove potentially infringing listings once reported. More than a decade later, courts remain undecided on the proper framework for these cases. 

    While the impact of the post-pandemic digital age on business ownership and structure has provided increased accessibility for people to start and run their own enterprises, the new legal risks related to brand identity this landscape has fostered should not be understated. As the consumerism paradigm continues to shift throughout this time, it is of utmost importance to remain mindful of these new considerations to adequately advise small business owners for success in the new age of e-commerce.  

  3. What is a Fiscal Sponsorship Agreement and Do You Need One?

    May 16, 2023 by lowens

    By Austin Gutierrez

    Austin Gutierrez, Community Development Clinic Fellow Spring 2023, pictured in the UMass Law Library

    Fiscal Sponsorship Agreement’s (FSAs) are an effective way of starting new nonprofits, social movements, and providing public services. (i).  These FSAs are fairly common within the realm of nonprofits. In general, a fiscal sponsorship means that a nonprofit organization, the “fiscal sponsor”, agrees to provide administrative services and oversight to, and assume limited legal and financial responsibility for, the activities of groups or individuals engaged in work that furthers the fiscal sponsor’s mission. (ii).

    Typically, when seeking out a fiscal sponsor, the situation is where someone with a new charitable venture or program idea has a relationship with an existing 501(c)(3) organization/public charity, and that organization facilitates the raising of grants and donations for the project. (iii). 

    There are numerous ways to create an FSA but the majority of the FSA’s fall into three different categories: Model A, Model B, and Model C. Model A and Model B generally entail the fiscal sponsor having total ownership/control over the project being sponsored. (iv). The people who want to create the idea go to the sponsor and under a Model A agreement, those who had the idea are typically the employees of the now fiscal sponsor. Model B is similar, but those with the idea will be overseeing the project as independent contractors instead of as employees like in Model A. (v). Between both these models, the project is ran as if the fiscal sponsor is operating the project.

    There is a grantor-grantee relationship that is referred to as Model C. Here, the fiscal sponsor has a more limited role. (vi). They are just receiving funds for the project and making grants to the sponsored organization/project. So instead of having total control of the program, the fiscal sponsor has a more “hands-off” approach. 

    In all of these versions of a FSA, it is important to recognize that the fiscal sponsor ultimately has control of where the funds go for the sponsored project/organization. (vii). This is typically referred to as a variance power. This is where the fiscal sponsor has discretion and control of what happens with the money. 

    Organizations would consider fiscal sponsorship when they cannot do the project on their own. The variance power is the “trade-off”. (viii).  

    The benefit of aligning with a fiscal sponsor is typically because these new projects/organizations don’t usually have 501(c)(3) status. That means, without a fiscal sponsor, the project/organization does not have that immediate access to grant funding from private foundations, government grants, nor tax deductible donations. (ix). This is the benefit the fiscal sponsor provides along with the capacity benefit. Capacity referring to the staffing, administrative expertise, typically know-how of the work environment, and experience the new project generally does not have. (x). 

    The “trade-off” is that the new project/organization is giving up control, a fee of 3-5% on the low end or 15% on the high end. (xi). Without the variance power, the fiscal sponsor is nothing more than, as the IRS states, a “conduit”. (xii). They are just receiving money and passing it along without exercising any control in-between. This would cause consequences for the fiscal sponsor and jeopardize the deductibility of the contributions offered. Parties must know and understand this trade-off. 

    Generally, fiscal sponsors are not made to continue “forever”. So, when a project is successful and works well, that sponsored organization/team will typically go off and form their own organization independent of the fiscal sponsor. Use the knowledge that they’ve gained from the experience of the sponsorship and hopefully go on their own after. 

    Fiscal Sponsorships also work well for the fiscal sponsor when the project does not go as well as they would have hoped. Typically, this can be seen as a test run for the fiscal sponsor and it is easy to “give up” on because they can just shut down the project if it is unsuccessful. (xiii).   One concern, if you are looking to get sponsored, is to vet or at least assure that the possible fiscal sponsor is actually able to provide administrative support. (xiv). There have been situations where fiscal sponsors take on too many projects and leave those seeking to get funded on the backburner. 

    When fiscal sponsorship comes to an end, many fiscal sponsors believe they have a lot more rights than they actually do. Due to the fiscal sponsor’s variance power, the fiscal sponsor has the final say on where the money goes at the end of the relationship. (xv). Typically, the project/organization does not get a say on where the raised money ends up, this is at the discretion of the fiscal sponsor. (xvi). To avoid these awkward situations, one can hopefully establish some planning in the initial agreement when the termination occurs, be that final expenses or other termination matters. But generally, the fiscal sponsor should have the final say in what happens to the funds come the termination of the agreement. 

    On a final note, some FSAs provide a provision that establishes after a certain amount of time, the parties will regroup and reassess the agreement as the project has evolved. (xvii). This allows both parties the option to re-negotiate the agreement and see if they want to “renew” the agreement or part their separate ways. This provision encourages cooperation between the two parties and builds an expectation that the parties will plan their next steps and if it is appropriate to continue. 



    (i) Guidelines for Pre-Approved Grant Relationship Fiscal Sponsorship, Nat. Net. Fis. Spon. at 1,  

    (ii) Id

    (iii) Benjamin Takis, Q&A #71 – What’s the difference between model A and Model C fiscal sponsorship?, Se4., Aug. 4, 2021, 

    (iv) Michael Gellman & Benjamin Takis, Video: Fiscal Sponsorship Basics for Nonprofits, Se4., Dec. 17, 2021, 

    (v) Id

  4. CDC Hosts Mayor Mitchell of New Bedford for Community Development Lecture

    April 18, 2023 by lowens

    The Community Development Clinic was honored to host Mayor Jon Mitchell this month at the Community Development Lecture at UMass Law. The lecture was followed by a reception.

    Throughout his term in office, Mayor Mitchell has sought to re-establish New Bedford as one of the leading cities in the Northeast. He has moved aggressively to reform the city’s schools, improve public safety, modernize the port, and to elevate the quality of life in every neighborhood. Under Mayor Mitchell’s leadership the City has achieved both the highest bond rating and highest high school graduate rate in its history, lowered crime by nearly forty percent, secured hundreds of millions of dollars in investment, and positioned itself to become the leader in the emerging offshore wind industry. Mayor Mitchell graduated from Harvard College and the George Washington Law School.  Before running for Mayor in New Bedford, Mayor Mitchell was also an Assistant United States Attorney in Boston, having previously served as a federal prosecutor in Washington, D.C. in the Attorney General’s Honor Program. 

    Hosting Mayor Mitchell for a lecture on community development and law was an excellent way to learn more about important  issues related to legal and social justice local to UMass law students. A knowledgeable and experienced speaker, Mayor Mitchell provided valuable insights and perspectives on topics such as how law and policy affect communities, strategies for promoting community development, and approaches to addressing social and economic inequalities. For UMass Law students involved in law and social justice, this event broadened understanding of local legal and social justice issues.

    During the lecture, Mayor Mitchell spoke at length about New Bedford’s emerging leadership role as a producer of offshore wind energy, along with the complex legal and political frameworks that accompanies such developments.  The development of offshore wind energy requires navigating complex legal frameworks at both the national and international levels, as well as addressing environmental concerns, energy policy, and economic considerations. Laws and regulations related to the permitting, construction, and operation of offshore wind projects must be carefully crafted to ensure that they balance the needs of various stakeholders, including developers, governments, and communities. Moreover, the development of offshore wind energy has the potential to create jobs and stimulate economic growth in the areas where the projects are located. The legal frameworks around offshore wind energy are constantly evolving, as governments and stakeholders work to find the best ways to promote the growth of this important renewable energy source while also protecting the environment and addressing social and economic issues. UMass Law looks forward to further partnerships with the area’s entrepreneurs and social change makers as this sector grows.

  5. Ground Leases: Private Contracts for the Public Good

    April 18, 2023 by lowens

    By Nicole Egan

    Nicole Egan, CDC Fellow Fall 2022

    Property values have doubled in the past twenty years (i), and recently, mortgages hit their highest rate in a decade (ii). These rising costs have led to substantial declines in home ownership statistics because potential buyers are priced out of the market. (iii) Unfortunately, despite being portrayed as a modern trend, housing affordability crises are nothing new. Throughout history, land ownership has always been a source of wealth reserved for a lucky and disproportionate few (half of the land in England, for instance, is still owned by less than 1% of the country’s total population) (iv). To be fair, inequalities in land ownership do make sense. Land is humanity’s most valuable resource: providing food, water, shelter, and enjoyment for people who are unable to simply make more of it.

    However, as lucrative as land ownership may be, merely having the right to use it can be equally as desirable. Large corporate retailers, for example, frequently agree to build and operate businesses on land they do not own. The advantages of doing so are clear—instead of purchasing expensive property, a land Tenant simply pays rent while Landlord-Landowners profit on otherwise unused land. Upon expiration of the contract, the right to possess the property returns to the landowner, leaving the Tenant free to pursue their next business venture without being tied to the land. But agreements like this are not confined to commercial transactions—anyone fortunate enough to hold vacant property can temporarily assign their rights by entering into a Ground Lease.

    A Ground Lease is defined as a “long-term (usually 99-year) lease of land only. Such a lease typically involves commercial property, and any improvements built by the lessee usually revert to the lessor ” (v) In other words, in a Ground Lease, individuals or entities retain title to their land while another party has the right to enter, possess, and use it for any agreed-upon purpose (vi). In general, there are two types of Ground Leases (vii). In a subordinated Ground Lease, the Tenant’s bank usually receives a security interest in the property when it is used as collateral in a loan (viii). This poses a risk to Landlords because their land may be subject to repossession in the event of a default by the Tenant. On the other hand, in an unsubordinated Ground Lease, Landlords maintain superior rights for all claims against their land—so even if a Tenant defaults on a construction loan, the Landlord still maintains ownership of their property in an unsubordinated Ground Lease (ix).

    Of course, as with any contract, there are certain risks that must be anticipated before signing. One common issue is that Ground Leases are often entered into during the early stages of ambitious construction projects—frequently before a Tenant has received all required zoning and building approvals (x). Thus, there may be no guarantee that a new business will actually ever open its doors in the event a Tenant is unable to obtain all of the permits necessary to begin construction. Moreover, even if a commercial Tenant is able to build and subsequently run a profitable organization, there’s always a risk that the business may not be sustainable.

    Nonetheless, issues like this can be prepared for by drafting periodic reappraisal options into the lease for the Landlord’s benefit (xi). This provision allows for landowners to request periodic reassessments of their property’s value in order to renegotiate rent payment amounts or other applicable lease terms to protect their investment over time (xii). Additional considerations like insurance liability and coverage, duration, and defined business purposes should also be drafted into the agreement to clarify ambiguities and avoid disagreements down the line. But in essence, Ground Leases allow landlords to avoid typical lessor risks and obligations while securing rental income for a set duration.

    Accordingly, Ground Leases should be used to provide affordable housing opportunities. An unsubordinated Ground Lease could potentially provide public housing facilities, owned and operated by Non-Profit companies that cannot afford to purchase land outright in pursuit of their cause. In that example, the landowner benefits by receiving rent payments while also providing an urgent public need for housing, all the while knowing that their land will likely increase in value over time anyway. As long as the Non-Profit Ground Lease Tenant has the experience and qualifications necessary to turn their dreams into a reality, all the landowner needs to do is patiently wait to collect on their investment.

    In sum, Ground Leases are tools by which individuals or entities who cannot afford to purchase real estate via traditional financing methods can still possess and use land, just like a titleholder would. Unlike in typical rental agreements, Ground Leases allow tenants to build and use land for any agreed-upon purpose. Additionally, Landowners may lease their property for profit while waiting for its value to increase over time. Therefore, Ground Leases could help rebalance inequalities in the housing market—and all landowners need to do is sign.


    i Nick Routley, Charting 20 Years of Home Price Changes in Every U.S. City, VISUALIST CAPITALIST, Oct. 22, 2020,

    ii Thomas Yeung, Housing Crisis 2022: 3 Graphs That Show How Wild Home Prices Have Become, INVESTORPLACE, Oct. 13, 2022,

    iii 2022 State of the Nation’s Housing Report, HABITAT FOR HUMANITY,

    iv Rob Evans, Half of England is Owned by Less Than 1% of the Population, THE GUARDIAN, Apr. 17, 2019,

    v LEASE, Black’s Law Dictionary (11th ed. 2019) (emphasis added).

    vi See Jonathan Stein, Tax Considerations for Ground Leases, GOULSTON & STORRS, Feb. 22, 2022, (stating that ground leases usually last from 25-99 years and are preferred by property owners who are underutilizing their land).

    vii See Jeri Frank, What Are Land or Ground Leases and How Do They Work? STRATAFOLIO, Jun. 17, 2020, (describing the benefits of unsubordinated and subordinated ground leases).

    viii Id.

    ix Id.

    x See Jerome D. Whalen, Six Things You Should Know About Ground Leases, 33 No. 3 Prac. Real. Est. L. 19 (2017).

    xi Id.

    xii Id.

  6. Advancing the Client’s Interests In Contract: Delicacy & Nudity Riders

    April 18, 2023 by lowens

    By Raisa Choudhury

    Raisa Choudhury, CDC Fellow Fall 2022

    In the mid-2000s, True Crime had the idea to put together an episodic television series titled “Femme Fatales.” They offered the lead role in an episode titled “Jailbreak,” to Anne Greene after she auditioned for the role. Green accepted and signed an employment agreement, along with a personal release and a nudity rider. A year after she completed her obligations to the show, Greene filed a lawsuit against True Crime claiming that they sexually harassed her, caused her intentional inflictions of emotional distress, and were negligent in fully disclosing the facts surrounding her role. In a surprising turn of events, True Crime filed a cross-complaint alleging Greene breached the express terms of the nudity rider by refusing “to appear and perform in nude scenes and/or simulated lovemaking scenes,” thereby causing them to incur additional expenses and delay in shooting.

    So, what is a nudity rider and what is it comprised of? A nudity rider is a separate document from the employment contract that sets out the levels of nudity the receiving party is expected to undergo and the actions that they will be expected to perform. The intention behind a nudity rider is to protect both parties by setting clear boundaries on what will be done and providing future evidence that any videography or photography was obtained consensually. Nudity riders have specific descriptions of the amount of skin shown during the agreed-upon session and they require the receiving party to consent to the stipulations. Depending on the situation, a nudity rider may also stipulate how the photos and videos that are taken from the session can be used.

    Essentially, the aim of writing a nudity rider is to prevent any misunderstandings or future legal disputes. For example, in Greene’s case, her lawsuit was deemed frivolous by the courts because she signed the nudity rider, and the rider disclosed in detail the amount of skin that would be shown on video. This clearly shows the importance of nudity riders and their role in protecting drafters from vulnerability to claims of sexual harassment.

    So, the question then becomes, why is a separate document necessary to draft a nudity clause? Is it not easier to simply have a nudity clause in the main employment contract? To answer these questions, it is important to note what the purpose of contracts is. A contract is an agreement between parties, creating mutual obligations that are enforceable by law. Once signed, this contractual agreement forms a promise that certain rights and obligations will be fulfilled by each party. In essence, a promise and a meeting of the minds are at the heart of every contract. A well-drafted contract provides certainty, clarity, and protection if problems arise in the future. While the details described in nudity clauses can be added to main employment contracts, the sensitivity and delicacy surrounding a person being filmed or photographed in a vulnerable position make it improper to do so.

    Contracts form promises between two willing parties, and it would be a disservice to both parties if the gravity of a person being filmed in nude or semi-nude positions is not expressed. By having a detailed description of what the receiving party is expected to do in a nudity rider, a correct amount of importance and consideration is placed on it before the receiving party signs off on the contract.

  7. Can an LLC be classified as a non-profit and receive tax-free benefits?

    April 18, 2023 by lowens

    By Mike Masci

    Mike Masci, CDC Fellow Fall 2022

    Yes, but proceed with caution! Because Limited Liability Companies (LLCs) are a relatively new entity type, with all 50 states having adopted LLC statutes by 1996i, the Internal Revenue Service (IRS) has recently issued guidance regarding how an LLC can receive non-profit status under Section 501(c)(3) of the Internal Revenue Code.ii In this notice, the IRS outlined the requirements that the LLC must satisfy to qualify as tax-exempt for IRS purposes.

    IRS Requirements

    First, the entity must be organized and operated exclusively for exempt purposes and its assets are dedicated to an exempt purpose and do not support private interests.iii In addition, the LLC must have both of its articles of organization and operating agreement include the following provisions:

    · Require each member of the LLC to be an organization described in Section 501(c)(3)

    · Express charitable purposes and charitable dissolution provisions

    · Express Chapter 42 compliance with provisions of Section 508(8)(e)(1) if the LLC is a private foundation

    · Contingency plans in the vent that one or more members cease to be a Section 501(c)(3) organizationiv

    The IRS has noted that some state LLC laws may restrict the types of provisions that can be included in the articles of incorporation. In this case, the requirements set forth above will meet if the (1) operating agreement contains the required provisions and (2) articles of incorporation do not contain contradictory provisions.v In addition, the LLC must represent that all provisions in its articles of organization and operating agreement are consistent with applicable state LLC law and are legally enforceable. vi

    Finally, the organization files Form 1023 with the IRS along with the required provisions of the articles of organization and operating agreement, and then IRS will supply the entity with a determination letter stating they have received non-profit status.vii

    General Considerations

    Section 501(c)(3) of the Internal Revenue Code has been used since 1969 for entities to organize as non-profit companiesviii but this was before the IRS recognized LLCs as an entity type in 1997ix. Since the Internal Revenue Code was written before the IRS recognized LLCs as their own entity structure, there are potential issues and considerations one must consider before choosing to become a non-profit LLC. In addition, the guidance regarding LLC tax-exempt status has not been fully fleshed out due to LLCs being a creation of state law and tax-exempt status being a federal law. The IRS has mentioned some potential issues that may arise, but there is currently no clear resolution:

    · Most states’ LLC statutes specify that an LLC may be formed for any lawful purpose. In a few states, however, the LLC statute appears to require that an LLC be a profit-seeking enterprise.

    · Are there any other provisions of the LLC law in one or more states that may affect the ability of an LLC to qualify under section 501(c)(3)?

    · Most state LLC laws include default provisions granting the members of LLC certain economic rights that would be inconsistent with IRC Section 501(c)(3) if the members are “private shareholders or individuals” within the meaning of IRC Section 1.501(a) – 1(c).x

    MA Considerations

    Massachusetts will classify an LLC for tax purposes the same way they are for federal income tax purposes.xi This means that after the entity has received its IRS determination letter, a copy must be filed with the Corporate Division of Massachusetts Department of Revenue and once the letter has been filed, there will be no subsequent Massachusetts income tax.xii

    Although the non-profit LLC will receive no Federal or Massachusetts income tax, it is still important to consider other tax implications. In 2009 the Massachusetts Supreme Judicial courts heard the case of CFM Buckley/North, LLC v. Board of Assessors of Greenfield, where it held that LLCs do not qualify for the charitable exemption from local real and personal property taxes.xiii This is because to qualify as a “charitable organization” for the purposes of receiving an exemption from real and personal property taxes, the organization must be “incorporated”.xiv Pursuant to M.G.L. c. 156c, section 2(2), LLCs are defined specifically as “unincorporated organizations formed under c. 156c and having 1 or more members.”xv This in turn means that any non-profit LLCs in Massachusetts will be responsible for all of their real and personal property taxes, which can amount to a significant tax liability.


    Although the IRS and Massachusetts Department of Revenue allow for LLCs to be exempt from income taxes, one must proceed with caution because the real and property tax liability can become substantial. In addition, there is a lack of case law involving non-profit LLCs, so it can be difficult to determine how a court will rule.


    i Larry E. Ribstein, LLCs: Is the Future Here? A History and Prognosis, 13 A.B.A 10, 10-13 (2003).

    ii In 2021, the IRS issued Notice 2021-56 to explain the requirements an LLC must meet to qualify for an exemption from income taxes.

    iii I.R.C. § 501(c)(3). iv I.R.S. Notice 2021-56.

    v Id.

    vi Id.

    vii Form 1023: Limited Liability Companies Eligible for Exemption, I.R.S. (Oct. 05, 2022),

    viii A Brief History of Nonprofit Organizations (And What We Can Learn), NONPROFIT HUB, (last visited Nov. 29, 2022).

    ix Sandra Feldman, Understanding LLC Law: Its Past and its present, WOLTERS KLUWER (Sep. 30, 2021),

    x I.R.S. Notice 2021-56.

    xi Limited Liability Companies and Limited Liability Partnerships, MASS. DEP. OF REV. (Oct. 21, 2022, 5:00 PM),

    xii Stephen Fishman, How to Form a Massachusetts Nonprofit Corporation, NOLO,,your%20nonprofit’s%20IRS%20exemption%20letter (last visited Nov. 29, 2022).

    xiii CFM Buckley/N., LLC v. Bd. of Assessors of Greenfield, 902 N.E.2d 381, 387 (2009).

    xiv Id. at 383-384.

    xv Id. at 384.

  8. How does a client-centered approach look in real-time?

    April 18, 2023 by lowens

    By Andrew Ashkar

    Andrew Ashkar, CDC Fellow Fall 2022

    When a client engages you to start a business, they may have a clear vision of the result they want to achieve, but they may need your expertise on the mechanics of making it happen. Other times, the client may be focused solely on the mechanics and require guidance on the mission. Regardless of where the client is at, taking a client-centered approach is crucial to the success of the transaction because starting a business is an art, not a science, and the client’s vision is their masterpiece. You want the client to feel empowered, in control, and that their needs have been met. But what happens when the client seems satisfied until the end of the process when they suddenly get cold feet or raise a new issue?

    In such cases, thinking quickly and adapting to the situation with the facts at hand is a quality that’s embedded in the legal profession. However, giving the client space to breathe and time to reflect on important decisions is equally important. This approach enables the client to feel more confident when they ultimately make that decision. Even if you’ve laid out all the possibilities with the facts presented by the client, taken a specific course of action, and are right at the finish line, if the client raises concerns that were not previously discussed, the attorney needs to take a step back and refrain from inundating the client with more options or scenarios.

    A client-centered approach not only fosters trust, which is essential when working with someone to create something meaningful, but it also lets the client know that they are in charge, and their vision will manifest on their schedule when they’re ready. This is particularly important when the attorney is organizing an entity that the client may operate for their lifetime. The entity is the client’s brainchild, and they should feel secure and confident in what they’re bringing into the world. A client-centered approach requires the attorney to create a working relationship with the client and move with them down the path they choose.

    For the attorney, this may be just one transaction, but for the client, it’s a campaign. A client-centered approach puts the client at the center of the thinking, considers the entire client journey, gives the client what they’re looking for, requires clear communication, and does not operate under assumptions.

    Attorneys may feel they have the best solution or strategy for the client, but putting the client at the center of the thinking allows them to express their vision fully, and the attorney’s job in a client-centered approach is to align the client’s brain and heart. However, an overambitious client may need to be cautioned when their heart overrides their thought-process. Nonetheless, the client must feel that they are at the center of the thinking and not coerced into making certain decisions.

    A client-centered approach must begin with the end in mind. It’s not a matter of executing the transaction and being done with it. The attorney is required to consider the entire client journey and lay out all foreseeable scenarios that may impact the transaction. Additionally, if a client is engaging an attorney, they likely have an idea of what they’re looking for. It may be their vision or mission, but either way, the client will be vocal about what they want from the beginning. It’s the attorney’s job to listen closely and not read between the lines, adding their own values to the client’s mission.

    Clear communication requires the attorney to be attentive to the client’s confusion or lack of understanding of a legal concept. This requires emotional intelligence and the ability to read body language. The client may be confused even if they don’t explicitly state it, but it may be evident from their facial expressions. Taking a step back and ensuring the client is on the same page is necessary for a client-centered approach to be effective.

    Finally, a client-centered approach cannot operate at its full capacity if the attorney is making assumptions. Assumptions can take many forms and ultimately stem from a gap in understanding that is filled with non-explicit assertions. If the client does not communicate a detail or methodology to the attorney, the attorney must not assume it. Assumptions have rarely produced satisfactory results in human life and are even less likely to create satisfaction in a legal transaction.

  9. Advances in Contract Law: Protecting Hollywood’s Naughty Little Sisters

    April 14, 2023 by lowens

    By Stefanie Grimando

    Stefanie Grimando, CDC Fellow Fall 2022

    If you’re involved in directing or shooting media, you’ll likely encounter nudity in some fashion. Most photographers or filmmakers will eventually have to implement a nudity rider to accompany consent agreements.

    Models and actors have to consent to what they’ll do during their performance, and great detail goes into how much—if any—nudity they will allow to be filmed or photographed. A consent agreement is a legal contract governing a relationship where one party gives informed consent to participate in an activity. In terms of Hollywood sex scenes, how do directors and actors come to an agreement? Nudity rider incoming! This contract addition could be as simple as not allowing nudity whatsoever or may allow shots of particular body parts or a body double. The nudity rider spells out just how much skin an actor will show, before filming or even auditioning occurs. Success is telling—major celebrities have more freedom to decline work that they don’t agree to do, whereas relatively unknown actors may not have the same liberties if they want to secure as much work as they can. Where Hollywood starlets are protected by SAG-AFTRA, which states “the appearance of a performer in a nude or sex scene or the doubling of a performer in such a scene shall be conditioned upon his or her prior written consent,” adult film stars are often left unprotected by some higher power. If Anne Hathaway can decline to film a racy birth scene, can Sasha Grey decline anal sex if it’s not specifically outlined in her contract? Why should Ms. Grey feel obligated to hire an attorney or agent when a union could specialize in her line of work? 

    The Screen Actors Guild represents upwards of 160,000 actors, journalists, dancers, singers, and other media professionals. With SAG formed in the 1930s and pornography having been officially invented in the early 1800s, why is it that when I search “porn” on SAG-AFTRA’s FAQ page, it yields no results? Are adult film actors not worthy of union protection such as those of the likes of Bill Cosby or George Takei? Maybe Hollywood doesn’t want to admit that actors performing on the other side of Mulholland Drive deserve the same protections as its A-List celebrities. So the adult film industry needs to take matters into its own hands. Historically, Hollywood has neglected to associate its movie stars with its adult film actors. Advocates for adult film actors’ rights argue that SAG should create a branch specifically catered to adult film actors. The mainstream entertainment industry ought to recognize adult media stars as performers worthy of legitimate protections, of empowerment. Where Sharon Stone’s Hollywood success could be attributed to her Basic Instinct nudity, perhaps adult film actors should be given more credit. Where all entertainers strive to earn a living, perhaps it is time SAG caters to adult film actors, offering them union protection. Destigmatize sexual expression. Protect the rights and freedoms of adult industry performers. Next stop: the decriminalization of sex work, stereotypes be damned.

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