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Nonprofit Law/Transferring Donated Funds


We have a missionary in our ministry who will no longer be working with our organization. He raised his own support funds and still has a large amount in an account with us. The funds that he raised were donated by private donors specifically giving to support him and then processed through our 501c(3). How do we legally transfer these funds to him to utilize for his future missionary work? Do we need to transfer them to another 501c(3)?
Thank you very much for your time.

It appears that you may have not properly dealt with the matter.  In a 2002 internal memo, the IRS wrote, "The Service's longstanding position is that an EO [exempt organization] receives
a charitable contribution where it has full control and discretion as to the use of donated funds, but not where the donor earmarks the contribution for use by an individual or nonexempt organization (or makes the contribution pursuant to a commitment or understanding that the funds will be  so used).  Rev. Rul. 62-113, 1962-2 C.B. 10.  In the latter situation, the charity acts like an agent of the donor." on the top of pdf page 23.

Also see starting in the middle of page 18 as to missionary programs down to the end, on page 26.  The approved program starts on page

When the missionary made an arrangement that certain donated funds would be used for his expenses, that precluded the donations from being deductible as charitable contributions for federal income tax purposes.  Further, it jeopardizes your exempt status.  But your contract with him included the provision that the funds were "processed through your 501(c)(3)" and, therefore, those funds are your funds and he has no claim to them unless he has some contract with your organization specifying the use of the funds should he no longer be working with your organization. If your organization would like to transfer the funds to another 501(c)(3) organization, it may do so.

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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