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Nonprofit Law/Donations to 501c6

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QUESTION: I am a board member on a 501c3 that is hosting a festival to raise money to fund its activities. The festival, which is the 501c3's primary source of funding, is going to receive significant support (i.e., a huge boost in the its attendance) from the indirect involvement of a 501c6 organization.

We would like to "thank" the 501c6 for their indirect involvement by making a donation to their organization, but we do not want to put our 501c3 status at risk.

Can you give me some guidance as whether and to what extent we can make financial contributions to the 501c6?

ANSWER: A 501(c)(3) organization may not gift anything to any c6 entity or for-profit company or individual unless the gift is part of its charitable mission, for example the individual is a poor person and the organization relieves distress.

Now, if the c6 sets up a c3 fund, you could donate to that fund. See IRS Publication 557 "Tax Exempt Status for Your Organization" which is available at:
http://www.irs.gov/pub/irs-pdf/p557.pdf on page 74 (footnote 2)
"An organization exempt under a subsection of Code sec. 501 other
than 501(c)(3) may establish a charitable fund, contributions to
which are deductible. Such a fund must itself meet the requirements
of section 501(c)(3) and the related notice requirements
[application for exemption and annual information filings ] of
section 508(a)."

Harvey Mechanic, Attorney at Law -
Harvey108@hotmail.com

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.    



---------- FOLLOW-UP ----------

QUESTION: Assuming that the 501c3's charitable mission is broad enough to include a donation to the 501c6, would a donation to the 501c6 be allowed?

If so, would there be any other concerns or potential problems?

Answer
An unrestricted donation would not be allowed. Sometimes 501(c)(3) organization have grants to even for-profit organizations, but then those would be limited for use for charitable, educational or religious activities. For example, see http://goo.gl/XfAZX which is a New York Times story about a grant from the Bill and Melinda Gates Foundation, a
501(c)(3) organization, to ABC News.

Harvey Mechanic, Attorney at Law -
Harvey108@hotmail.com

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

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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 Harvey108@hotmail.com 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 "site:allexperts.com/q/nonprofit" without the quotes and then add your search terms before hitting enter.

Experience

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.

Education/Credentials

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

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


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