Students Succeed in Obtaining Tax-Exempt Status for Community Daycare

January 3, 2018

In 2017, the School of Law’s Entrepreneurship and Community Development Clinic assisted the Immanuel Early Childhood Academy in Barnhart, Missouri, in obtaining tax-exempt 501(c)(3) status, effective in 2018.

The change allowed the academy to operate as a nonprofit daycare for working families in a community without many quality childcare options.

Led by SLU LAW associate professor Dana Malkus, clinic students Katie Martin (’17), 3L Andrew Bauman and 3L Rachel Haberman had the experience of advocating for their client while applying concepts learned in Business Associations, Contracts and Tax.

Moreover, it provided a means of practicing the skills related to those underlying concepts,” Malkus said. “The project allowed students to practice drafting, legal analysis, client counseling and case management skills, all of which are essential lawyering skills.”

Bauman explained that one of the challenges of the case was getting the daycare to be legally understood as a separate entity from the Lutheran church and a cornerstone of the Barnhart community. Barnhart, a census-designated place (CDP) in Jefferson County, Missouri, has a population of fewer than 6,000 people.

“Under 501(c)(3)... you have to have a really community-oriented purpose,” Bauman said. “There are only a certain amount of organizations that can actually achieve that ... [but] they definitely fit.”

The students had to document that the daycare served the Barnhart community in a clear and beneficial way, and had to demonstrate that it was so beneficial to the community it should not have to pay taxes to the IRS.

Their efforts succeeded, and the result is that the Immanuel Early Childhood Academy is able to keep costs more affordable while providing valuable and high quality early childhood education services to the families in its community.

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