Nonprofit Law/Classification



Hopefully you can advise me on this situation and it's not out of bounds.  Exempt entity recently had their 501c(3) status revoked for failure to file tax returns for 3 years.  The organizations sole intent is to earn and raise money and give an annual scholarship on a annual basis.  Their intent was to solicit donations from the public through donations and fundraiser.  Through out the years the only income earned was through investing the initial $250k they received from their founder. This leads to my question.  Given that they are receiving their income through investments, interest and dividends, etc, are they more of private foundation than a public charity?

From what you informed me, that organization, if it applied for reinstatement of 501(c)(3) organization status with the IRS, would be granted private foundation status.

The IRS has published, "If an organization has had its tax-exempt
status automatically revoked and wishes to have that status
reinstated, it must file an application for exemption and pay the
appropriate user fee even if it was not required to apply for
exempt status initially."

A quick summary of the differences between public charities and
private foundations can be found at:

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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