Nonprofit Law/Misrepresentation

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Question
A local organization formed using a DBA belonging to a well established 501(c)(3) corporation. On their web presence they claim to be a 501(c)(3) tax deductible nonprofit organization but are not on the list of eligible donees nor is there evidence they have even filed. They solicit donations by USPS mail only to a private residence apartment and list four "trustees" but no phone or EIN. This organization is not umbrellaed under the long standing nonprofit and the established nonprofit has no control over their actions.

I under that if they file within 15 months of formation that donations would be retroactive to date of formation if status as a 501(c)(3),is approved, but is announcing you have such status before the fact fraudulent and what penalties can ensue? Since they solicit via mail, could this be mail fraud?

Texas regulations require that an organization register with the Secretary of State to be allowed to operate as a tax deductible nonprofit and this group has not done so nor have they apparently registerd this DBA with the state or county. ( the original nonprofit has these DBA's) we understand they have opened an account with a different bank using the name and have an EIN not visible on the IRS eligible donees list.

The preceding is for background. The basic question is general to whether or not a charity may claim 501(c)(3) status before it is granted or is this deceptive or even criminal? And where can one locate the legal statutes that would apply to misrepresentation by a charity?

Answer
I have in my profile that this free forum is only for general questions about IRS federal exemption issues of 501(c)(3) organizations. Your issues are controlled by state law and states may differ somewhat with how they would treat such issues. Even though this forum is not for such state law issues, I will inform you that generally the Attorney General of the State has standing to seek a court order against an organization that is engaged in material misrepresentation as to its operations and often can seek fines be assessed.  In Texas the page for complaints and information is at https://www.texasattorneygeneral.gov/consumer/charities_complaints.shtml

In addition, if the established 501(c)(3) organization wants to sue that organization, they would have a cause of action if the public was confused by the actions of the new organization that effected the established organization. If that established 501(c)(3) organization wants to consult with me about that, they should send me an email directly to my email address below and I will quote you my fees for such a consultation.

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

Expertise

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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