AboutHarvey Mechanic Expertise US 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 questions about Nonprofit's unrelated or for-profit businesses or how to fill out forms. This forum is only for general questions about federal tax law, not as the law applies to your specific situation.
To search my previous answers you can do a Google search: site:allexperts.com/q/nonprofit [with your other search terms appended].
Experience I have been practicing law and especially the law of nonprofit organizations since 1990 when I was admitted to the New York Bar.
Education/Credentials B.S. Columbia University in New York City, 1970
J.D. (Law Degree) Brooklyn Law School, 1990 -- Cum Laude
Question Thank you for all of these answers! What a resource. My organization, which places professional arts educators in school programs, has been offered a grant from a dance company that is dissolving. They would like to disburse their assets to us with the intent that we receive some of the funds for operations and a substantially larger amount to be disbursed to a specific group of similar artists who regularly work for us. Can a c3 simply send a check to these artists from this fund? My thought is that we would need to be hiring them for work that fulfilled our mission rather than simply cutting the check.
Answer The IRS has written in a memo on page 2 of
www.irs.gov/pub/irs-wd/0504031.pdf
---Start of Excerpt--
Similarly, a section 501(c)(3) organization will not jeopardize
its exemption even though it distributes funds to individuals,
provided the distribution is on a charitable basis in furtherance
of the organization's purpose. .., In order to substantiate that
individual distributions are appropriate, the organization needs
to maintain records and case histories showing the name and
address of each recipient, the amount distributed to each, the
purpose for which the aid was given, the manner in which the
recipient was selected and the relationship, if any, between the
recipient and members, officers, or trustees of the organization.
Rev. Rul. 56-304, 1956-2 C.B. 306.
---End of Excerpt--
An example is an organization that sends scholarship grants directly to individuals properly selected.
You are welcome.
Harvey Mechanic
Attorney at Law
Harvey108@hotmail.com
P.S. You may want to recommend that the dissolving organization check its state's law and many state have procedures that need to be followed when a nonprofit distributes all, or substantially all, of it assets. Even though this forum is not for such state law issues, if you give me their state I may be able to direct them.
