Nonprofit Law/501 (c)(3) for equine assisted psychotherapy
I am a doctor, my wife and a friend have established a 501 (c)(3) for the purpose of organizing an equine assisted psychotherapy program for abused children. (I do not provide this type therapy personally and will not be involved as a healthcare professional.)
The foundation has already hosted training of and by professionals and now has certified people on staff.
We have owned horses for quite some time and already have facilities. I would think that our facilities and animals would be available to the foundation as a separate, taxable, fee for service venture.
The foundation will provide a means of providing therapy to those deemed to need these services and will interface with professionals in the area who will use the resources provided by the foundation.
They have begun accepting donations and doing fund raising and have a 5 member board of unrelated people to run the private foundation. (my wife and her friend are on the board)
It is not an inexpensive proposition to do this, and if successful it will be very time consuming.
I have personally just started paying attention to this and it is a little late in the game. I would like to be certain that the non-profit has been properly thought though.
My question initially is:
1. Can the foundation exist simply for the purpose of “raising money” to provide these services to the patients who need them? Rather than being the delivery system itself.
2. If so, what restrictions are there on the payout of these funds to the entities providing the care? This would be the participating psychotherapists, and our facility and personnel. These would be for profit entities.. for sure in the case of the therapists and I am thinking that a for profit status would be less complicated for the services provided by our horses and my wife and any employees.
My goal is to assign a useful status to the pleasure horses that we can no longer afford to keep simply for pleasure, but hate to give up.
Also to provide a useful service to a deserving group and achieve reasonable compensation (that would be taxable) for those involved. My wife and her friend are consumed by the desire to offer this help to these kids.
I am concerned about loosing control over our facility and running afoul of the IRS while trying to do a good deed.
I am also aware that this cannot be sustainable unless there is reasonable compensation for those who participate and provide services.
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 not private foundations and I am, therefore, assuming that your organization will be qualifying as a public charity (not as a private foundation). A quick summary of the differences between public charities and
private foundations can be found at:
1. A 501(c)(3) organization may raise funds by donations and give grants for the services to be provided to the abused children. Reg. 1.501(c)(3)–1(d)(2) expressly provides that relief of the poor, or distressed, or underprivileged is a charitable purpose. Relief can be provided in many ways.
2. You wrote, "I would think that our facilities and animals would be available to the foundation as a separate, taxable, fee for service venture." The IRS has published at
---Start of Excerpt--
Where an exempt organization engages in a transaction with an
insider and there is a purpose to benefit the insider rather than
the organization, inurement occurs even though the transaction
ultimately proves profitable for the exempt organization. The test
is not ultimate profit or loss but whether, at every stage of the
transaction, those controlling the organization guarded its
interests and dealt with related parties at arm's-length.
---End of Excerpt--
"an organization may represent that services will be provided at a
significant discount to the organization. When an organization
contracts with interested board members, the circumstances may
demonstrate that the organization does not have a purpose to
benefit the insiders. Sales or services by the board members'
businesses to an organization at a significant discount, at or
below cost, would help to justify the selection based on the
economic benefit to the organization....Transactions at fair market
value with board members may be allowed. But the determination to
do business with a board member or other interested party with
control must be made by an independent disinterested board. It is
not unusual for a board member to offer his own business services
to the organization. However, if the board member is not selected
by a disinterested board, then a transaction that would provide
services even at low market rates is problematic.
www.irs.gov/pub/irs-tege/eotopicb96.pdf on pages 22-23
As for the other entities contracted with, the public charity only needs to assure itself that it is getting the best deal for the organization.
[Typo -- it's "losing", not "loosing"]. You can maintain control over your own facility.
I would be willing to work on your matter further, but I would need to spend a substantial amount of time in drafting contracts and and that would be beyond the scope of my offer of free services. If you want to inquire about hiring me for such work, please contact me directly to the email address below.
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.