Nonprofit Law/Public Schools

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Question
As a teach in a public school we would like to apply for grants from area non-profit organizatios. We have been unable to supply them with a 501(c)3 document from the IRS that indicates that they are either a 509(a)1 or 509(a)2.  Are public schools non-profits under IRS rules or do they fall as public institutions?  But even so, can't we they apply for and receive grants? If we can, what else can we use to prove non-profit status to these grant-making organizations

Answer
A  governmental unit, like a county government is able to receive deductible donations. See IRS Publication 526 "Charitable Donations"
www.irs.gov/pub/irs-pdf/p526.pdf
on page 2 is the box chart which includes money or property deductible as charitable contributions to, "Federal, state, and local governments, if your contribution is solely for public purposes."  Therefore, you would only need to show that to potential donors, as the school district is such a governmental unit and I am assuming that the grants you receive will be benefiting a large number of the school population. You would need to have the donations go to the school district (and then the district could forward the donations to your particular public school).

Your district may have a policy.  For example the School District of Philadelphia has:
--- Start of Excerpt ---
It should be noted that the School District of Philadelphia is the only legally authorized entity permitted to accept donations (including physical items). Schools themselves are not individually incorporated and therefore are not allowed to accept donations. The SRC must approve all donations via either a separate resolution prepared by the school or through a blanket resolution that is periodically prepared by the Office of the Chief Financial Officer (CFO). School District employees are not authorized to accept donations. Any donation given directly to an employee that is not approved by the SRC becomes a personal IRS liability for that employee and is not considered a tax deductible donation for the grantor. (Please refer to item #1 in the procedures section below which details the acceptable method for receiving donations).
--- End of Excerpt ---
http://goo.gl/ofwzMI

---Start of Excerpt--
Organizations such as state colleges, fire departments, libraries, school districts, hospital districts, soil and water conservation districts, port authorities, and Indian related entities, are some examples of organizations that may be created by, controlled by, or
closely affiliated with governments. ...For the purposes of this article, these government affiliated organizations will be referred to as instrumentalities.
---End of Excerpt--
http://www.irs.gov/pub/irs-tege/eotopica97.pdf (page 1).

A governmental unit is not, though, a 501(c)(3) organization even though donations to it are deductible. Section 501 does not apply to state, county or municipal governmental unit except in certain circumstances. See IRS Publication 557 "Tax Exempt Status for Your Organization" www.irs.gov/pub/irs-pdf/p557.pdf on page 16, starting at the bottom of the second column under the heading "Instrumentalities" where we see, "A state or municipal instrumentality may qualify under section 501(c)(3) if it is organized as a separate entity from the governmental unit that created it and if it otherwise meets the organizational and operational tests of section 501(c)".

The nonprofit Foundation Center has published:
--- Start of Excerpt ---
While public schools may apply for recognition of tax-exempt status under section 501(c)(3) of the Internal Revenue Code (IRC), this step is not required in order for such organizations to qualify for private foundation grants. Generally, the IRS treats public school districts as government instrumentalities. As such, they are exempt from federal income tax and eligible to receive tax-deductible contributions from individuals under Section 170(c)(1) of the IRC.
Additionally, grants to such organizations, provided that they are for public or charitable purposes, are considered qualifying distributions for grantmaking private foundations.

Since organizations without 501(c)(3) status will not have an IRS
determination letter, grantmakers that do award grants to
government agencies or instrumentalities may instead request
written proof of an organization's status as a government entity.
Examples of supporting documentation may include a letter from an
authorized government official or a copy of the legislative act
creating a government body.

The IRS also can supply a "government affirmation letter" free of
charge, which will describe government entity exemption from
Federal income tax and cite applicable Internal Revenue Code
sections pertaining to deductible contributions and income
exclusion. Most organizations will accept the government
affirmation letter as the substantiation they need. Government
entities can request a government affirmation letter by contacting
the IRS
--- End of Excerpt ---
http://goo.gl/mqGcMv

Harvey Mechanic, Attorney at Law -
Harvey108hotmail.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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