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Maintaining tax-exempt status is vital for most nonprofits, not just for the obvious financial benefits, but for building public trust, attracting donors, and qualifying for grant funding. Unfortunately, many nonprofits unknowingly put their tax-exempt status at risk by making legal mistakes that could easily be avoided with proper counsel.

At the Law Office of Cameron Hawkins, we help Atlanta nonprofits identify and correct compliance issues before they lead to IRS penalties or reputational damage.

Private Benefit and Private Inurement

Tax-exempt organizations must operate primarily to serve the public interest, not private individuals. If a nonprofit’s activities disproportionately benefit insiders, such as founders, board members, officers, or their families, the IRS may determine that the organization is engaging in ‘private inurement’ and revoke its exemption.

Examples of activities that could trigger revocation of tax-exempt status include:

• Paying excessive compensation to directors or officers
• Awarding contracts to board members' businesses without competitive bidding
• Using nonprofit assets for personal benefit

General counsel can help nonprofits set up proper conflict of interest policies, review compensation structures, and ensure transactions with insiders are appropriately documented and defensible.

Political Campaign Activity

While 501(c)(3) organizations can engage in limited lobbying, they are absolutely prohibited from participating in political campaign activity. Endorsing candidates, making political donations, or even appearing to support a political figure in an official capacity can endanger tax-exempt status.

General counsel can provide guidance on how to engage in legally permissible advocacy without crossing into prohibited political activity. They can also review public communications and event sponsorships to ensure they stay within IRS guidelines.

Failure to File Form 990

Every year, most tax-exempt organizations must file Form 990 or an appropriate variant (such as 990-EZ or 990-N). Failure to file for three consecutive years results in automatic revocation of tax-exempt status. Although this might seem obvious, failing to file is a mistake many smaller nonprofits or new leaders discover too late. In addition to avoiding revocation, filing an accurate and timely Form 990 is important because:

• It provides public transparency to donors, watchdog organizations, and regulators
• It demonstrates organizational stewardship and governance practices
• It can impact eligibility for grants and public funding

General counsel can work alongside accountants and leadership teams to ensure reporting obligations are met and disclosures are properly reviewed before submission.

Generating Excessive Unrelated Business Income

Nonprofits may engage in some business activities unrelated to their core mission, but too much unrelated business income (UBI) can threaten an organization's tax-exempt status. If the nonprofit looks more like a for-profit business than a charitable entity, it risks IRS scrutiny. General counsel can help nonprofits find a safe balance by:

• Reviewing new revenue streams for potential UBI concerns
• Structuring programs to align more closely with the nonprofit's mission
• Determining when it’s necessary to pay unrelated business income tax (UBIT) without putting the broader exemption at risk

Poor Documentation of Charitable Activities

The IRS expects nonprofits to be able to demonstrate that their activities are charitable and aligned with their stated mission. Poor recordkeeping, such as failing to document program accomplishments, expenditures, or board oversight, can raise red flags during audits or reviews. Nonprofits should always be prepared to show:

• How programs serve the public interest
• How donated funds are spent
• How leadership decisions support the charitable mission

General counsel can assist with board training, policy development, and risk assessments that help nonprofits maintain documentation practices capable of withstanding regulatory scrutiny.

Noncompliance with Georgia Charitable Solicitation Laws

While IRS compliance is critical, nonprofits must also follow state laws regarding charitable solicitations. In Georgia, nonprofits that solicit donations generally must register with the Secretary of State’s office and file annual renewals. Failure to comply can lead to fines, loss of fundraising privileges, and damage to public credibility.

A comprehensive nonprofit legal risk assessment includes a review of Georgia-specific obligations in addition to federal requirements. Outside general counsel can help nonprofits manage compliance calendars and avoid lapses that can jeopardize operations.

Why Outside General Counsel Makes Sense for Nonprofits

Most nonprofits do not need a full-time attorney on staff to stay compliant. Legal risks typically arise during specific organizational changes, financial reviews, or external audits. Hiring outside general counsel gives nonprofits:

• Affordable, scalable access to legal insight
• Objective risk assessments from attorneys familiar with nonprofit liability and compliance
• Preventive advice that helps avoid costly mistakes before they trigger IRS or state action



The Law Office of Cameron Hawkins partners with Atlanta nonprofits to provide ongoing general counsel services, targeted legal reviews, and crisis response support. Our work is focused on protecting nonprofit status, preserving donor trust, and supporting mission-driven growth.

Protect Your Atlanta Nonprofit’s Future

If your nonprofit hasn’t reviewed its compliance practices recently, or if you’re expanding programs, fundraising efforts, or leadership structures, it may be time to schedule a legal risk assessment. A proactive approach can help protect your tax-exempt status and your mission.

Call the Law Office of Cameron Hawkins at (678) 921-4225 to schedule a consultation and find out how we can help your nonprofit stay protected.