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Nonprofit Law/Reverse Triagular Merger and NFPs


Mr. Mechanic,

I have a few questions regarding "control" of a NFP by another NFP.  

Our 501(c)(3) (Company A) is in the process of assuming control (become its sole member and elect its board of directors) of another 501(c)(3) (Company B) which for grant purposes must keep its EIN. The plan is to create an acquisition sub (Company C) which will merge with Company B with B surviving (to keep its EIN) and through the plan of merger changing B's bylaws to have A as the sole member etc.

Question 1- What is the classification of B now, it is a separate legal entity but is it a subsidiary of A?
Question 2- If it is not a subsidiary, must we still consolidate financial reports as a variable interest entity?
Question 3- Is there such a thing as a NFP subsidiary of another NFP, or are they always "spin offs".

Thank you for your consideration.  I enjoy your forum.

I have in my profile that this free forum is only for general questions relating to IRS federal exemption issues of 501(c)(3) organizations that are public charities (not treated as private foundations).

The general rule is that a public charity may control another public charity.

1. B is a separate legal entity but is considered a subsidiary of A
2. N/A
3. The IRS does use the word "Subsidiary" in reference to the situation.  See, for example, the bottom of page 3 of

Harvey Mechanic, Attorney at Law -

P.S. This response is intended to be a general statement of law, should not be relied upon as legal advice and does not create an attorney/client relationship.  

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Harvey Mechanic


I am an attorney and I volunteer time to answer general questions about U.S. Federal income tax issues of nonprofit 501(c)(3) public charities only. Those questions could be about 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 possible 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. If you do not make your question public then I will not be spending much of my donated time on answers that would not benefit the public. If you have other questions, please contact me at I will reply from my email. In any case, do not reveal confidential information to me until after I have contracted with you to provide personal legal services. My responses on this forum are intended to be general statements of law, should not be relied upon as legal advice, and do not create an attorney/client relationship. For me to consider your individual situation and how the law applies, I would need to gather extensive information about the situation. To search my previous answers you can do a Google search by "" without the quotes and then add your search terms before hitting enter.


I have been practicing law and especially the law of nonprofit organizations since 1990 when I was admitted to the New York Bar and I have maintained my status with the Bar since that time.


B.S. Columbia University in New York City, 1970

J.D. (Law Degree) Brooklyn Law School, 1990 -- Cum Laude.

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