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Nonprofit Law/Form 1023 - "Successor"

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Question
Part XII, Line 1 asks if you are a "successor" to another organization.  I have gone back and forth on this question, as well as study the IRS definition of "successor".  I answered NO to this question.  Do you agree with my interpretation?

We are a booster club for a high school band that has been operating for years.  However, the new board this year just discovered that they never filed for nonprofit status, or kept very good records.  We started the process this year to become nonprofit.  So my answer to Part XII, Line 1 on form 1023 is NO...  We are a "new" organization due to our recent incorporation, new EIN, and new name.  The booster club in the past never formally organized, no by-laws, etc.  If you agree, how do I characterize the $10,000 we received from the old booster club bank account?

Thank you for your very valuable site!

Answer
The instructions to Form 1023 are at http://www.irs.gov/pub/irs-pdf/i1023.pdf and see page 22 on the right column as to Successor organizations:
--- Start of Excerpt ---
Schedule G. Successors to Other Organizations
General Information:
You should complete this schedule as a successor organization if any of the following situations pertain to you.
You have taken or will take over the activities that were previously conducted by another.
You have taken or will take over 25 percent or more of the fair market value of the net assets of another organization.
...
The other organization is the predecessor organization. You should complete this schedule regardless of whether the predecessor (other organization) was exempt or not exempt from federal income tax.
--- End of Excerpt ---

I am assuming that previously your booster organization had its own EIN (Employer Identification Number - or Taxpayer Id number) and a bank account in that number.  That means it is an entity, under the IRS definitions.  In fact, The IRS Exempt Organization's section (EO) confirmed that individuals establishing a 501(c)(3) organization receive
exemption only if they formed  one of three types of entities, "8 ORG Organization Code - This code indicates whether the organization is a trust, a corporation, or an unincorporated association.
http://goo.gl/K4X06

Previously the group was, if it had the EIN and bank account as I have assumed, an unincorporated association and therefore, under the definitions on page 22 of the IRS instructions to Form 1023 Application for Exemption, you would need to answer "yes" in Part VI (not Part XII), Line 1 and complete Schedule G.  You are required to do so on the basis of one of two of the above:

1. You have taken or will take over the activities that were previously conducted by another, or
2.  You have taken or will take over 25 percent or more of the fair market value of the net assets of another organization ( I am assuming $10,000 was at least 25% of the net assets of the old booster organization.

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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