‍This month is the 5th anniversary of MLC.  I was going to say the time flew by – and that’s kind of true – but it also feels like we’ve been doing this forever.

I had a moment of nostalgia reflecting back on our firm’s very first blog post where I explained what I thought I was trying to start when I left another great law firm to launch this.  The thing that jumped out to me most (other than my discomfort about the firm’s name which continues today…) is how it was… just me.  And it was just about… starting a law firm.

I barely have any memories of doing this by myself and, when I think about what we’ve been doing here, I hardly ever think of it in terms of “building a law firm”.  My amazing teammate, Michelle joined a couple of months after the post and, from my perspective, co-founded the firm that exists now and what I consider the true project here.  ‍

From when Michelle joined on and we started hiring, the mission of the firm expanded beyond just serving the progressive nonprofit sector aligned with our values and with a flexible approach to billing (though that’s all still present), to being to at least as focused on using our skills as legal professionals to create the freedom to establish a workers’ cooperative that values, empowers, and pays everyone (founders, attorneys, non-attorneys) as equal partners, and prioritizes a dignified, democratic workplace.

‍ I’m also realizing that I haven’t written as directly about our structure and project as I’ve thought (referenced it from time to time, but never as the main focus).  So now feels like a good time to reflect on what it is, the strengths and challenges of a cooperative structure, and what we’re always fighting for it to be.

‍Karl has talked before about our own affiliated 501(c)(4) organization, MLC Collective Fund and has also explained how some folks are using 501(c)(4) organizations as “superfoundations”.

‍ Because I really enjoy advising our clients about 501(c)(4) organizations (including about forming 501(c)(4)s, managing resources between 501(c)(4) and 501(c)(3) affiliates, and understanding the differences in the various restrictions on activities of 501(c)(4) and 501(c)(3) organizations), I’m happy for the chance to introduce myself to the MLC Blog with a post about 501(c)(4) organizations.

Specifically, I want to talk about two important exceptions to the rule that 501(c)(4) organizations don’t pay tax.

‍ ‍But first, let’s quickly refresh our collective understanding of what a 501(c)(4) organization is. Karl’s discussion here with his (imaginary) billionaire friends provides an overview of the income, gift, and estate tax considerations for donors to 501(c)(4) organizations. I’ll quickly summarize those points here (but if you haven’t read through that piece yet, I encourage you to go take a look).

In our first post, we explained why recreational organizations such as pickleball clubs are often better candidates for 501(c)(7) social club status than 501(c)(3) charity status. In our second post, we examined the limits on nonmember income. In our third post, we explored how opening club facilities to the public can create compliance concerns. 

Sponsorships bring all of those concepts together. 

A local restaurant wants to sponsor a tournament. A sporting goods company wants banner space at the courts. A business wants naming rights to a facility or event. The club wants the revenue. 

Can a 501(c)(7) social club accept sponsorships? 

Generally, yes. However, sponsorships should remain secondary to the club's primary purpose of providing recreation and fellowship for its members. When sponsorships, advertising, and corporate partnerships become a significant part of a club's operations, the organization risks looking less like a member-supported social club and more like a commercial business. 

A brief but exciting update re Defending Equity Initiative, the nonprofit affiliate we established last year (as described in depth in this series of posts on how to form and establish an exemption for a nonprofit) to defend progressive nonprofits fearing attacks from the administration. Our tax exemption application (see a copy of what we filed here, which others are welcome to use as a template for similar work) was very explicit about its plans to provide pro bono support to “organizations under immediate threat based on their activity supporting diversity, equity, and inclusion, immigrants, and progressive values.”

In spite of the persistent hum from some in our section that this language is the sort of thing nonprofits need to avoid and strip from their websites lest the IRS come yanking away their exemption, we received our determination letter from the IRS awarding the organization tax-exempt status as a 501(c)(3). See here.

Of course, the IRS approves the vast majority of the applications it receives — the issuance of a determination letter from the exempt organizations unit is hardly a white flag of surrender from the administration, as much as it would be nice to pretend. But it does underscore a few points we have been trying to make along the way..

In the first two posts in this series, we explained why recreational clubs like pickleball clubs are often a better fit for 501(c)(7) social club status than 501(c)(3), and we explored how nonmember income limits can affect a club’s exemption. A natural next question follows: how much can a 501(c)(7) club open its facilities or programs to the public without putting its tax-exempt status at risk?

The short answer is: some public use is allowed, but too much can cause real problems. The challenge is that the IRS does not draw a bright line. Instead, it looks at facts and circumstances, including how frequently the public uses the club, how the activity is structured, and whether the club’s primary purpose remains serving its members.

Heading into the holiday season, now is a good moment to highlight some of the posts on this blog from the past year. Our ambitions for this blog always exceed the time we have to fulfill them, but there are still are a number of posts we are proud of and resources that are hopefully useful for a long time (and a handful of diatribes that will hopefully one day seem like a relic of the moment).

If you haven’t already read these, we encourage you to check them out. And, there's is always more over on the Defending Equity Initiative Resources page.

Hopefully, 2026 brings some brighter news, and we wish all of our readers, clients, and friends a restful holiday season.

We have been saying for a while that the greatest harm to the nonprofit sector from this administration will not come from the threatened actions themselves but from the fear created by those threats.  The many ways that Boards, donors, and leadership will push for a retreat from the programs that are disfavored by the administration because they have heard about these threats, thanks to their amplification by articles and posts like this made in the spirit of keeping organizations informed.  Many of the threats to the nonprofit sector have been some combination of social media bile from the president and his collaborators, performative letters from Congresspersons or complaints to the IRS, or rumors of future regulatory action that have no prospect of being legally effective (e.g. “administration going to say environmental work is not charitable now” or “no more international grantmaking” – nonsense, but threats that consumed many hours of organization and legal time this year).  They have not been law or even formal regulations, just Executive Orders and a whole lot of junk masquerading as a real legal threat.

It is tempting to call the final Department of Education regulations – weaponizing a program intended to encourage those crushed by student debt (raises hand) to work for nonprofits instead of making all of their career decisions based on the hope of escape (raises hand again) – more of a real threat than the other stuff.  They are regulations after all and, prior to the current incarnation of the Supreme Court, those used to be really important. 

Maybe it will be something. 

But the premise of this post is that what nonprofits should do in response to these regulations is: nothing.   Don’t do anything.  Go about your mission and do not think about this again. (And if you’re annoyed with that response and think I’m underselling it – fine, go tell your employees to apply for loan forgiveness now and make sure they understand their rights under the program and are applying when they are ready, but you should have been telling them that anyway).

If you’re a nonprofit and listened to my advice, you should stop here and go about your day.  But if you want to know why that’s my advice and what this is all about, let me explain.

Eight months into the new administration, it feels like an appropriate moment to make some observations on the threats we have discussed previously, to give another plug for the Defending Equity Initiative, and comment on some developments.

First, a personal note:  there have been a number of times over the past several months where I’ve been tempted to write, but ran into the question of “Why?”  There are very few opinions I have that are not shared by anyone who might realistically read our firm’s blog.  The fascism, the abject cruelty and racism on display in the city I live in and many others, the despair for democracy and the rule of law-- as a lawyer for progressive charities and foundations living in Los Angeles, I’ve ‘bubbled’ myself thoroughly enough that I’ve got nothing to say on those topics that everyone reading doesn’t already feel acutely.

It's a lot easier for me to write when I can find some things to disagree with people I respect about.   And maybe I’ve reached that point.

On October 7, I had the opportunity to attend the public portion of the NAAG/NASCO Annual Charities Conference. This is the annual conference of the National Association of State Charity Officials, held this year in Columbus, Ohio. This gathering brings together state charity regulators, attorneys general offices, and nonprofit professionals to discuss oversight, compliance, and emerging trends in the charitable sector. It’s a rare opportunity to see nonprofit organizations through the eyes of the regulators who oversee them.

Much like Michael Scott declaring bankruptcy by just shouting it out loud (spoiler: that’s not how it works), your social club can declare its federal tax-exempt status just like that (kind of). This is not legal advice, so please don’t just yell “I declare tax exemption!” in your board meeting.

If you have been following along, we have been conducting a series of posts on how to launch a 501(c)(3) nonprofit in California. Now that the Defending Equity Initiative has filed its Articles of Incorporation and is officially formed in California, we need to complete the initial filings with various key regulators to properly set up our new nonprofit. As the Managing Paralegal here at Mill Law Center, part of my job is to make sure all of the initial filings and registrations get done. The same goes for the nonprofit we just formed.

As the Managing Paralegal here at MLC, part of my job is to make sure all of the initial filings and registrations get done  – the same goes for the nonprofit we just formed.

A few disclaimers:

• Like with all of our other blog posts – this post is not intended as legal advice – we recommend that you work with a law firm or other experts if you can to launch a nonprofit.  These are just samples of how we work through some of these forms that you might use as a reference.

• These are the filings required for a California nonprofit that is only operating and soliciting charitable donations in California.  If you’re incorporated in a different state or operating in other states you probably have different filings to worry about.  California gives you a good idea of the type of forms states want, but every state is a little bit different.

Continuing our series of launching a new nonprofit, and our own work to launch Defending Equity Initiative (“DEI”), this post will cover the basic process for preparing and submitting a Form 1023, and how we thought through some of the key questions. This is often the part of 501(c)(3) formation that new charities are either intimidated by or blow past without enough spot, sometimes leading to complications down the road. And, in general, I do encourage new nonprofits to get legal support as they go through it because, as you’ll see, some of these questions feel a bit complicated or reflect concepts that new charities should really be educated on before jumping into the fray.

But sometimes organizations need to do it themselves, and this is at least one example of how to do it and a discussion of things to think about it. That’s not to say just take the 1023 we filed (copy here) and imitate it mindlessly. In fact, please do NOT do that — every submission is different and you are submitting this form under penalty of perjury. There are many things we said ‘no’ to that you should say ‘yes’ to and vice versa. But we submit a lot of these, and this is the approach we did when doing our own self-help, so hopefully you find it helpful.

We will have more posts in the future breaking down the Form 1023 into more pieces, tackling some of the questions that did not come up for this application, and providing more self-help resources. For now, we wanted to get this out now to commemorate this exciting step for our new nonprofit, and get the clock ticking on the IRS to respond and issue tax-exempt status so this organization will have an enhanced ability to support the charities under attack in the current environment.

In the first post in this series, we explored why a pickleball club was denied 501(c)(3) status, and how 501(c)(7) is often a better fit for clubs organized around social and recreational activities. As we explained, 501(c)(7) social clubs are designed to serve the mutual interests of their members, not the general public. But qualifying for 501(c)(7) exemption is just the beginning, clubs must also carefully navigate IRS limits on how they generate income, particularly when it comes to revenue from nonmembers.

In this post, we’ll dig into the IRS rules on membership income and how they affect eligibility for 501(c)(7) status. We’ll explain the 35% and 15% income thresholds, what counts as nonmember income, and how things like event tickets or facility rentals can impact your tax-exempt status.

The new project launched by our team members, the Defending Equity Initiative, is now several weeks in and we have greatly appreciated the outreach from volunteers in response to our initial call for support. We will have more updates soon on that side in the coming weeks, and look forward to finding ways to take that great energy from our community of practitioners and find ways to help.

We did want to call out one addition to the website, which is a set of resources related to protecting immigrants, including sample guidelines to be prepared for an ICE raid, preparing to defend an I-9 audit, and ‘know your rights’ guides for immigrants. Huge thanks to our own team members, including our MLC Employment team who tackled the work from an employer perspective and with support from Watsonville Law Center, a great organization that is doing great work on the front lines of the crisis, There are lots of great organizations out there putting out similar information, and we try to link to a couple — if you know others, please reach out so we can expand the library of resources and links to connect our community with the organizations doing the most important work.

Compared to the horrors we are seeing daily here in Los Angeles, with community members living in fear of abduction by masked ICE agents, functioning more than ever like a secret police that will now receive $170 billion to expand their abominable operations, these sorts of resources admittedly feel small and futile. With time and persistence, hopefully it can help add up to something meaningful. Our hearts go out to everyone trying to survive these times.

In the spirit of the protests today, we think it is a great day to launch Defending Equity Initiative, a new freestanding nonprofit organization that will be a pro bono legal services provider for 501(c)(3) organizations unfairly targeted for their DEI programs, support of immigrants, or other progressive work. You can read more on its website about the kind of work it will take on and the organizations it will support. You can also see a couple of examples of the kind of resources we want to host there.

We’ll let that website and organization speak for itself, but here are some things you can do if you support the mission:

1. If you know an organization that is facing a live threat (an IRS audit, a lawsuit or other legal challenge), encourage them to apply for support. We can’t guarantee availability and can only offer pro bono legal services at this time to organizations facing active threats, but we want to hear what people are facing and will do what we can to provide or connect them to appropriate support.

2. If you have expertise that could be useful to an organization conducting diversity, equity, and inclusion programs or other race-conscious programming, that supports immigrants, or is otherwise progress and subject to targeting, please fill in our volunteer form. You’re not committed to anything by submitting, but we want to know who is out there and who we might be able to reach out if there are organizations in need of your expertise.

3. If you want to donate resources or handouts that make sense or have other ideas of you might be able to support DEI’s work, please email the organization.

Maybe after our 501(c)(3) application is submitted and received (more on that to come on this blog soon as part of this series) we may start asking for money so we can hire experts in addition to relying on volunteers, but for right now we are just looking for time and expertise from people as appalled as we are by the state of affairs, and the chilling effect radiating through the nonprofit sector, and who want to find some way to help.

As we launch Defending Equity Initiative, our new nonprofit for supporting progressive organizations that may be targeted by the current administration, it’s tempting to hit the accelerator and race through the formation process.  But we also want to use this series to model how to set up a nonprofit, and it’s all too common to see people over some important steps in establishing a foundation for a nonprofit corporation that will hopefully last a long time.

So, we’re going to try to be patient and use this post to cover everything after the Articles of Incorporation; namely, the Bylaws, the appointment of directors and officers, a Conflict of Interest Policy, and a framework for the nonprofit’s functioning moving forward. As a reminder and a disclaimer, these documents are provided as useful samples, not as legal advice, and every nonprofit corporation is a bit different — so, get legal support if you can when setting up your nonprofit and always read anything carefully that you sign and make sure it makes sense.

Once this is done, we can (finally) get to the work at hand, and with a solid legal foundation.

Check out this recent appearance by Patrick Hogan, attorney at Mill Law Center, on Change’s Give Smart video podcast.

The podcast cover multi-state charitable registration, California’s charitable crowdfunding law, and how to manage the challenge of staying on top of it all.

For nonprofit organizations, maintaining tax-exempt status isn’t just important—it’s their lifeline. Losing tax exemption can jeopardize their very existence, cutting off access to critical donor support, imposing new tax burdens, and undermining their ability to carry out their mission. The most common cause? Failing to file IRS Form 990 for three consecutive years leads to automatic revocation of tax-exempt status.

Continuing our series on nonprofit formation… we know why we are starting a nonprofit; we thought through whether we needed a new nonprofit, we decided how to structure the relationship to our for-profit entity; now... we form it.

This post will tackle the Articles of Incorporation, specifically for a California nonprofit public benefit corporation, using our new entity for organizations targeted for their DEI work as an example.  A document that is usually no longer than a page or so, many people do not realize that they are making a number of important choices when they file their Articles of Incorporation.  Choices that are not always easily unwound.

Let's walk through those together.