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Nonprofit Law/Converting from 501(c)(5) to 501(c)(3)


We are a working farm and a privately owned fairgrounds that was originally ruled to be a 501(c)(5). As a part of our new sustainable funding program we are incorporating the writing of grants. Recently, major funders have tightened their requirements on receiving organizations and now most require that the receiver be a 501(c)(3). The use of surrogate organizations for the purpose of authoring and administering the funds is being discouraged. My question is this.......How does one convert from a c5 to a c3? We have weighed the issue of maintaining the c5 and forming a separate layer of organization (c3)but don't think their is justification to have another layer of governance within our organization.

See IRS Publication 557 "Tax Exempt Status for Your Organization"
which is available at:

on page 69 (footnote 2)that applies (from the page before for 501(c)(5) organizations, "An organization exempt under a subsection of Code sec. 501 other than 501(c)(3) may establish a charitable fund, contributions to which are deductible. Such a fund must itself meet the requirements of section 501(c)(3) and the related notice requirements [application for exemption and annual information filings]"

I don't know if that would be precluded because there is some separation needed between the accounts, although there does not need to be another "layer of governance".

If you would not want to set up such a fund, then I would strongly recommend that you first would want to discuss with me whether the IRS would grant 501(c)(3) organization status to your full anticipated operations.  I have in my profile in my forum at the free service that I offer is only for general questions directly related to IRS exempt purpose issues of 501(c)(3) organizations.  Such a discussion would be beyond that and I would need to spend a substantial amount of time.  If you want to hire me, send me an email directly to my email address below and I will quote you my fees for such consultations.

In any case, if you decide to convert, you would first amend your state articles of incorporation and bylaws and then file with the IRS Form 1023 application for exemption for the 501(c)(3) organization status.

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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