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Nonprofit Law/Non-profit 501(c)(3) Organizations using SUB organizational names without the certification or statusfrom the government.


What are the laws regarding a named organization that does not have 501(c)(3)Non-Profit status working/created under another named organization that does have the governmental status of a Non-profit 501(c)(3)?  One is being used as the "umbrella organization" of the that legal?

 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." on the top of pdf page 23.

That Revenue Ruling is available at:

That is the main issue when there are arrangements like you present.  Other than that, as long as the 501(c)(3) organization makes sure the funds and operation of the nonexempt organization are also in compliance with activities allowed for 501(c)(3) organizations there is no problem with having an arrangement, which is usually done by a contract.

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

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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