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Nonprofit Law/New York certificate of incorporation app./non-profit

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Question
I have an application of incorporation/non-profit for the state of New York.

How does charitable or non-charitable status effect my intention to produce products for sale,
to raise money for the foundation's programs?

Where do I find the language from the Internal Revenue Service that should be listed in the Ninth section of the application

I am a Designer/Artist/Musician. The foundation will promote International Art,Design and Culture.
My work(Art,Furniture and Textile Design,Sculpture,etc.) would be sold to produce revenue for
the foundation,along with grants and crowd funding.

Answer
Section 502 of the Internal Revenue Code reads, in relevant part,
"An organization operated for the primary purpose of carrying on a
trade or business for profit shall not be exempt from taxation
under section 501 on the ground that all of its profits are payable
to one or more organizations exempt from taxation under section
501."
http://codes.lp.findlaw.com/uscode/26/A/1/F/I/502

Your main revenue activity is sales of your work and, therefore, your organization would not qualify to be a 501(c)(3) organization under IRS regulations.

Further, if you receive any compensation for your work in the creation of the works, that would normally preclude exemption as a 501(c)(3) organization under the principle called, private inurement. See "The Crux of Charity: Inurement, Private Benefit, and Excess Benefit Transactions" which is a 59 page pdf 2004 draft paper available at:
http://www1.law.nyu.edu/ncpl/pdfs/2004/Conf2004_Dale_DRAFT.pdf

I have in my profile that this free forum is only for general questions about IRS federal exemption issues of 501(c)(3) organizations. I have given you the above information, but, as it appears that your organization would not qualify as a 501(c)(3) organization I would not be going further, for example, by suggesting what you would put in section "Ninth" of your application.  I have in my profile in my forum at http://bit.ly/NonprofitLaw the free service that I offer is only for questions directly related to IRS exempt purpose issues of 501(c)(3) organizations.

If you want to hire me, send me an email directly to my email address below and I will quote you my fees.

Harvey Mechanic
Attorney at Law
Member of New York Bar
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

Expertise

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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