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Nonprofit Law/How quickly must a 501(c)(3) group spend its money for charitable purposes


Hello:  A small charitiable group collects money in 2014 to spend on civic or charitable purposes.  How long can the group continue to hold the money without spending it?  If the group allocates it to spend for charitable purposes, by bylaw or segregation, does this change the result?  Thanks.

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. I am assuming from what you wrote to me that the organization is not a private foundation (but is a public charity).

There is no restriction for one or two years of accumulation of
funds.  However, if you do it for many years, then the IRS would
want to see a purpose for the accumulation.

A 501(c)(3) organization that is not a private foundation may
accumulate funds for one or two years or so, as long as it
maintains substantial exempt activities, commensurate with its
financial resources. Exempt activities are those that are related
to the organization's purposes, not just activities to gain
funds. In other words they must be either religious, charitable
or educational activities. If it wants to accumulate funds longer
than a year or two, it must have a reason why it needs to save
up, i.e. for the purchase of a building. The test is that
accumulations of earnings and profits are necessary for the
reasonably anticipated needs of the organization.  page  12 (that document is a IRS National
Office Technical Advice Memorandum which cites to Presbyterian
and Reformed Publishing Co. v. Commissioner, 743 F.2d 148 (3rd
Cir. 1984), a U.S. Court of Appeals decision.

You would also want to check on Illinois regulations, but I doubt that there is any substantial difference. See

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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