Solo 501(c)(3) Forum

[Anonymous User]

I currently work for a PD office that contracts out a significant % of its appellate work. I'm attracted to the idea of being my own boss, choosing my own hours, etc, but I want to retain PSLF eligibility. Here's my idea: quit, form a one person 501(c)(3), and just take contract cases from this office. What are the flaws, if any, in this plan?

[$ell-o-tex]

Not sure if serious...

This plan might fail because the 50(c)(3) on the grounds that it may not have an exempt purpose and the earnings would impermissibly inure to the benefit of you.

https://www.irs.gov/charities-non-profi ... tion-501c3

https://www.irs.gov/charities-non-profi ... anizations

[Anonymous User]

One of the exempt purposes is "defending human and civil rights secured by law." That is the cornerstone of indigent criminal defense. For example: https://snocopda.org/about/

And the inurement requirement doesn't exclude paying a salary to the founder and sole employee of the nonprofit. Does it? I'm thinking I should talk to an actual attorney on this.

[First Offense]

This sounds a lot like asking for legal advice.

[unlicensedpotato]

Talk to an actual attorney.

[Anonymous User]

One of the exempt purposes is "defending human and civil rights secured by law." That is the cornerstone of indigent criminal defense. For example: https://snocopda.org/about/

And the inurement requirement doesn't exclude paying a salary to the founder and sole employee of the nonprofit. Does it? I'm thinking I should talk to an actual attorney on this.

Talk to an actual attorney, but this is correct. You can take a reasonable salary from your nonprofit. There are very specific requirements on what "reasonable" means. Not sure the extent to which "defending human and civil rights secured by law" covers indigent criminal defense - it seems like it could. Certainly there are plenty of legal aid organizations that operate as 501c3s, likely on a similar premise.

[Anonymous User]

Just doing research, the IRS is pretty amazing for agov agency. Very transparent and forthcoming with guidance on how to stay in compliance.

[RaceJudicata]

Forget the 501(c)(3) stuff. Do you have any idea what they pay the contract attorneys or if there enough of the contract work to, you know, feed your family and such? Also, who says they would give you all--or even a good portion--of their work? What do you do when the PD office leadership changes and they want to internalize the work or send it elsewhere?

Just a few of the problems I see off the top of my head..

[Anonymous User]

Forget the 501(c)(3) stuff. Do you have any idea what they pay the contract attorneys or if there enough of the contract work to, you know, feed your family and such? Also, who says they would give you all--or even a good portion--of their work? What do you do when the PD office leadership changes and they want to internalize the work or send it elsewhere?

Just a few of the problems I see off the top of my head..

2 steps ahead of you bud. I live in one of those big empty square states. Contractor pay is solid-- approaching $70/hr, and the COL out here is low. I know there's enough work and that they'd give me whatever I ask for because the person who doles out the cases is my boss and I drink with a few attys who take similar contract work. You're right that leadership could change and they could end contracting, but:

1) there is a severe shortage of JDs here
2) for our politicians, 'internalize the work' = big government = voted out of office
and
3) if it comes to that, it wouldn't be hard for me to get another job

My question is really just about the 501(c)(3) structure. I don't want to piss off the IRS but if this plan falls into the discouraged/suspect/unusual-but-not-unlawful category than I'd like to pursue it.

[jchiles]

How would the 501c3 status actually benefit you and not just be an extra hassle?

[Anonymous User]

How would the 501c3 status actually benefit you and not just be an extra hassle?

PSLF eligibility. If I did this for the next 7 years, I'd have close to $300k in student loans forgiven at that point with no tax liability on that forgiveness.

[Yukos]

Obviously talk to a nonprofit orgs lawyer, but I don't think your instinct is crazy. There are lots of nonprofit PD "corporations," and I assume they're 501(c)(3)s. You could fuck it up if you tie your salary to the nonprofit's revenue or something, but with a real lawyer to structure everything it might work out.

[Anonymous User]

How would the 501c3 status actually benefit you and not just be an extra hassle?

PSLF eligibility. If I did this for the next 7 years, I'd have close to $300k in student loans forgiven at that point with no tax liability on that forgiveness.

You are mistaken to think that you wouldn't have any tax liability on the total amount forgiven.

[A. Nony Mouse]

How would the 501c3 status actually benefit you and not just be an extra hassle?

PSLF eligibility. If I did this for the next 7 years, I'd have close to $300k in student loans forgiven at that point with no tax liability on that forgiveness.

You are mistaken to think that you wouldn't have any tax liability on the total amount forgiven.

PSLF doesn't have a tax bomb, only PAYE/REPAYE/IBR do.

[LeDique]

And also, I think you would theoretically be allowed to operate a for profit law practice as well, while still retaining PSLF eligibility. I'm not sure of how this would be practically possible tho

[Anonymous User]

And also, I think you would theoretically be allowed to operate a for profit law practice as well, while still retaining PSLF eligibility. I'm not sure of how this would be practically possible tho

Really? I thought the current regs are pretty strict. Gov or 501c3 only. Even labor unions or UN work is disqualified.

[LeDique]

And also, I think you would theoretically be allowed to operate a for profit law practice as well, while still retaining PSLF eligibility. I'm not sure of how this would be practically possible tho

Really? I thought the current regs are pretty strict. Gov or 501c3 only. Even labor unions or UN work is disqualified.

It is for 501c3 status, but my memory from looking this up for the TLS PSLF Plan® was that the 501c3 job just had to be your "primary" occupation or some shit like that.

[Anonymous User]

And also, I think you would theoretically be allowed to operate a for profit law practice as well, while still retaining PSLF eligibility. I'm not sure of how this would be practically possible tho

Really? I thought the current regs are pretty strict. Gov or 501c3 only. Even labor unions or UN work is disqualified.

It is for 501c3 status, but my memory from looking this up for the TLS PSLF Plan® was that the 501c3 job just had to be your "primary" occupation or some shit like that.

OK. Looking at the guidance on ed.gov, it looks like you're right:

For the purposes of the Public Service Loan Forgiveness Program, a not-for-profit organization that is not tax-exempt under Section 501(c)(3) of the Internal Revenue Code is considered a qualifying employer if it provides at least one of the following public services:

Emergency management
Military service
Public safety
Law enforcement
Public interest law services
Early childhood education (including licensed or regulated child care, Head Start, and state funded pre-kindergarten)
Public service for individuals with disabilities
Public service for the elderly
Public health
Public education
Public library services
Other school-based services

Law enforcement includes organizations that are publicly funded and whose principal purposes include crime prevention, control or reduction of crime, or the enforcement of criminal law.

Public health includes organizations that employ nurses, nurse practitioners, nurses in a clinical setting, and full-time professionals engaged in health care practitioner occupations and health support occupations, as such terms are defined by the Bureau of Labor Statistics.

Public interest law refers to legal services provided by an organization that is funded in whole or in part by a local, state, federal, or tribal government.

That last sentence makes me think that being a solo whose work comes from cases assigned by the state PD would qualify for PSLF without the need to form a 501c3. It's a little annoying because the only people qualified to advise on this seem to be Dept of Ed employees.

[tyroneslothrop1]

What are you going to do with the excess cash, i.e., the amount you take in excess of your salary? "Invest" it back into the nonprofit; save it, for what purpose?

[Anonymous User]

What are you going to do with the excess cash, i.e., the amount you take in excess of your salary? "Invest" it back into the nonprofit; save it, for what purpose?

Sort of a nonissue b/c I've since been advised that 501(c)(3) is uneccessary as long as you can show that, as a solo practitioner, your case load (and $$$) is coming from a state contract. But if I had to go the 501(c)(3) route and took in more than my designated salary+expenses, I'd probably buy a hot tub to relieve my work-related carpal tunnel and a few casks of top shelf liquor for my one-man office xmas party.