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Nonprofit Law/Percetage of donations.

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Question
When running a non profit corp. of what percentage of your proceeds must actually be donated?

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 that are not private foundations. Therefore, I am assuming you are referring to such a 501(c)(3) organization.

The word "proceeds" is vague as it may mean either gross receipts or surpluses.  It is defined as "the profits or returns from a sale, investment, etc." http://dictionary.reference.com/browse/proceeds+?s=t

In any case, many 501(c)(3) organization do not donate any funds to other entities or individuals, but use all of the funds for their own charitable, educational or religious activities.  There is no "donation" requirement for public charities.

The IRS does not have any specific percentage that can be used for expenses. However, the IRS wants to see that the organization does charitable work "commensurate" with its size and income. An article posted on the site of The Chronicle of Philanthropy on May 13, 2008
discusses briefly the "commensurate test" at:
http://bit.ly/1FUn6J

If you are referring to a private foundation, it must donate (distribute) 5% of its corpus annually for approved purposes. http://goo.gl/pxsLh8

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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