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Nonprofit Law/nonprofit giving to for-profit


Can a nonprofit organization, set up to collect funds to preserve a historic building, give those funds to the owners of the building if the owners are a for-profit entity (individuals, LLC, etc.)?

Many thanks for your time.

I have in my profile that this free forum is only for relevant IRS federal exemption issues of 501(c)(3) organizations. I am assuming that you are asking, therefore, about such an organization.  I am also assuming that the building owners and the shareholders of the building entity are not insiders of the 501(c)(3) organization.

The answer to your question is "generally no" as the owners would get too much private benefit.
An extensive discussion by the IRS of the private benefit issue relating to 501(c)(3) organizations is found at:

For example, on page 3 we see:
---Start of Excerpt--
A good example is Rev. Rul. 70-186, 1970-1 C.B. 128, in which an
organization was formed to preserve and enhance a lake as a public recreational facility
by treating the water. The lake is large, bordering on several municipalities. The public
uses it extensively for recreation. Along its shores are public beaches, launching ramps,
and other public facilities. The organization is financed by contributions from lake front
property owners, members of the adjacent community, and municipalities bordering the
lake. The revenue ruling concluded the benefits from the organizationís activities flow
principally to the general public through well maintained and improved public
recreational facilities. Any private benefits derived by the lake front property owners do
not lessen the public benefits flowing from the organizationís operations. In fact, it
would be impossible for the organization to accomplish its purposes without providing
benefits to the lake front property owners.
---End of Excerpt--

So, if the building owner was maintaining or improving the property for the public to be able to enter and enjoy the interior and it was opened to the public for regular business hours, grant by a 501(c)(3) organization may be allowed, but probably not if the owner is just maintaining or improving the building for his own benefit, with only incidental benefit going to the public.

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


DO NOT GIVE ME INFORMATION THAT YOU WANT KEPT CONFIDENTIAL. 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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