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Nonprofit Law/Pass Through Grants


I represent a 501c3 tax exempt NPO in PA. Typically, our gross annual receipts (operating budget) is less than $5000. However, two years ago the organization was asked to pass through several large state grants for stream restoration projects. No profit/salary/benefits was received by the NPO. Would these government grants be considered gross receipts under this test?

It depends whether your organization was legally obligated to pass through the grants.  If yes, then you would not include that as income.

As to pass-through funds, see the Google Book Version of "Not-For-
Profit Accounting Made Easy"  By Warren Ruppel.

Starting at the bottom of that page 81 for a few pages you can read
the recommended treatment of pass-throughs. Mr. Ruppel advises to
follow the recommendations of The Financial Accounting Standards
Board, Statement 136, entitled "Transfers of Assets to a Not-for-
Profit Organization or Charitable Trust that Raises or Holds
Contributions for Others".  A good description is also available

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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