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Nonprofit Law/501 C 3 Support Org.

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QUESTION: My 501 C 3 org. is deemed public funded by IRS.  I now have some businesses that want to start contributing to our humanitarian projects for funding.  I don't want to jeopardize that status.    What do I need to do to receive their donations?  Do I need to start a "funding organization" for these entities to contribute through that can then fund the projects through my existing 501 C 3 ?  If so, Can this org. be started under my existing 501 or do I need to apply for a sperate 501 C 3?
Thank you for your time.

ANSWER: Businesses may contribute to a 501(c)(3) organization and the public charity status will not, simply by that be lost.  But, if only a few of the businesses contribute, for example, 90% of the 501(c)(3) organization income, then the 501(c)(3) organization will lose public charity status.

See http://www.irs.gov/pub/irs-pdf/p557.pdf starting
in the middle column on page 34  "Qualifying as Public Supported".

In calculating the public support you would need to use the 2%
rule which the IRS discusses starting in the first column of page
33 of that Publication 557 under "Support from the general public".

If you still would be a public charity after the business contribute, then no problem and I will not then need to go into any more details here.  Otherwise, you would be in jeopardy of losing public charity status and, in that case, I would suggest that you consult with me in detail.

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: Thank you for the quick response.  My son has a company that would like to start helping feed children through one of my partner org. He would like to tie it in with a division he is starting for kids.  We would like to have a supporting org. called 2 Healthy Kids that he and others could donate to that would then fund projects through iMap.  IS this a possibility under my current 501 C 3 or do I need to start a new org and file for a new 501 C 3?

Answer
Well, you did not answer me about the public support issue -- whether that would be something that the present 501(c)(3) organization that you manage would need to worry about if your son's company donates what he wants to donate.  As I wrote earlier, there is no problem with him donating directly to the existing 501(c)(3) organization.  It appears, however, for some reason, you are not now wanting him to donate to the existing organization as you ask about another organization "2 Healthy Kids".  Another organization means that, unless your existing organization has a group exemption, the new organization would need to apply for 501(c)(3) organization status itself.

Now, if by "organization" in "We would like to have a supporting org." you actually may be not referring to a new organization, but a division of your existing 501(c)(3) organization (which is probably a nonprofit corporation).  Then there is no problem as long as there is no public support issue and as long as the new activities are those allowed for 501(c)(3) organizations.

If there is a new organization established, I strongly recommend that you consult with me in length because there may be substantial issues as to the new organization also being granted public charity status or even 501(c)(3) organization status.

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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