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 QUESTION: Can a non-profit 501c3 organization grant a large sum of money to an member.
A soccer association with member clubs some are 501c3 others are not and the parent or governing body is a 501c3
ANSWER: If the activities are for youth sporting, then such grants are allowed. From page 2 of
www.irs.gov/pub/irs-wd/0504031.pdf
"A section 501(c)(3) organization will not jeopardize its
exemption even though it distributes funds to organizations that
are not themselves charities. The exempt organization must
'ensure' use of the funds for permitted purposes by limiting
distributions to specific projects that further its own purposes.
The exempt organization also needs to retain control and
discretion as to the use of the funds and maintain records
establishing that the funds were used for section 501(c)(3)
purposes. (Citing to Rev. Rul. 68-489, 1968-2 C.B. 210)."
Harvey Mechanic
Attorney at Law
Harvey108@hotmail.com
---------- FOLLOW-UP ----------
QUESTION: Very last question on this topic.
A youth sports association that is 501c3 grants 50,000 to a member club in the association. The member club is going to use the grant money hire a director and pay that persons salary. The club is working towards getting their 501c3 but this position is not involved in that process.
ANSWER: The organization trying to obtain 501(c)(3) organization status would need to reveal the salary proposed for the director. Therefore, I do not understand why you wrote that "this position is not involved in that process".
Harvey Mechanic
Attorney at Law
Harvey108@hotmail.com
---------- FOLLOW-UP ----------
QUESTION: I wanted to know if the grant money could be used for a salary of an employee who would be hired after the club gets it's 501c3
Answer If the salary is no more than a reasonable amount it may be permitted. The IRS does not allow 501(c)(3) organizations to give someone
more compensation than is reasonable.
The IRS looks at many factors if it wants to allege that someone
is getting excess benefits. The first factor is how many hours
weekly the person is working for the 501(c)(3) organization and
then what the normal salary would be for someone who is qualified
for such a job in that area of the country.
At http://www.irs.gov/irm/part4/ch52s04.html#d0e660170
The IRS has:
---Start of Excerpt--
To determine if they are reasonable consider factors such as:
Duties performed
Amount and type of responsibility
Time devoted to duties
Special knowledge and experience
Individual ability
Previous training
Compensation paid in prior years
Prevailing economic conditions
Living conditions of the particular locality
The type of activities carried out by the organization and
its size.
---End of Excerpt--
Form 990 asks whether the organization followed an IRS-sanctioned
process for establishing a rebuttable presumption of reasonable
compensation of top management officers, officers and key
employees. The process includes a review and approval by
independent person, comparability date, and contemporaneous
substantiation of the deliberation and decision.
Harvey Mechanic
Attorney at Law
Harvey108@hotmail.com
