Nonprofit Law/501(c)3

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Question
Hi Harvey

We are a 501(c)3 non profit agency.  We are about to embark on something new with the court system in town.  In court the committee will decide on what items an individual will need (i.e. dentist appointment, new clothes, etc.).  The funds that are used to pay for these items will come through fundraising through this committee's efforts.  The committee consists of one member from our agency the others are other professionals in the community.  They want to use our 501(c)3 to be the pass through of the funds.  Our agency would be holding the pot of money.  So for example John Doe it is approved by the committee that John needs to go to the dentist.  They make the appointment and get a cost estimate for the appointment.  They give me a voucher for the cost.  (Mind you the court is in relation to our business.)  We cut a check to the vendor for the cost.  Is this all doable under our 501(c)3 status?

Answer
First you need to understand that your 501(c)(3) organization is responsible for making sure that the beneficiaries are all what the IRS calls charitable beneficiaries.  You would then not have only a "pass through" procedure.  Your organization will make it clear to the court that it will take their recommendations under advisement.  Then it is doable under your 501(c)(3) organization status.  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."
www.irs.gov/pub/irs-utl/topicc02.pdf on the top of pdf page 23.

Sorry for the delay in the answer to your question. Allexperts.com has, for the last 10 days not been sending me the questions to answer.

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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