AboutHarvey Mechanic Expertise Federal tax issues of nonprofit 501(c)(3) public charities only. Establishing and maintaining legal requirements for such non-profit organizations in the United States, including Internal Revenue service filings and requirements. I will not be working on this free forum to answer question about Nonprofit's Unrelated Business or how to fill out forms. This forum is only for legal questions about a specific nonprofit asked by members or those otherwise directly effected by the specific nonprofit organization.
Experience I have been practicing law and especially the law of nonprofit organizations since 1990 when I was admitted to the New York Bar.
Expert: Harvey Mechanic Date: 5/8/2008 Subject: Municipal fund transfer
Question My not-for-profit is considering partnering with local county government to
establish a public nature center. They own the land and building; we would
run the facility (nature programs, gift shop, etc.) and conduct routine
maintenance. As a way to ensure oversight, the county is insisting on a cash
flow mechanism in which all funds generated on-site would go into a county
account (which would be dedicated to use at the nature center). We would
have to submit requests to be reimbursed for our costs in running or
maintaining the facility. We're okay with the concept as it applies to program
fees, facility rentals, etc., but not with regard to monies raised by our on-site
fundraisers. Do you agree that such an arrangement would violate our not-
for-profit or tax-exempt status? Our sense is that it wouldn't be allowable
for us to take private donations and then turn them over to a municipal
government to be returned at their discretion.
I look forward to your response. Thanks for your time.
Answer This forum is only for federal tax questions regarding 501(c)(3) public charities as I have explained in my profile. It is not a violation of IRS regulations for funds to be donated to a municipality with the municipality being under a contract to pass-through all of those funds to a 501(c)(3) organization that is a public charity.
As to charitable deductions:
See IRS Publication 526 "Charitable Donations"
www.irs.gov/pub/irs-pdf/p526.pdf in the middle column of page 2 listed as deductible donations to:
---start of excerpt ---
• Federal, state, and local
governments, if your contribution is
solely for public purposes (for
example, a gift to reduce the public
debt)
--end of excerpt ---
The donations would be for public purposes. However, you would need to get an agreement from the county that they would provide donation receipts to the donors and you would need to advise the donors that the checks will be made out to the county and would be deductible.
You would then not be engaged in any activities that would jeopardize your 501(c)(3) organization status.
Harvey Mechanic
Attorney At Law
Harvey108@hotmail.com
