You are here:

Nonprofit Law/Transferring partial assets to a Metro Agency

Advertisement


Question
QUESTION: In 2012, a 501(c)3 dissolved and the assets were transferred to us a current 501(c)3.  A separate program was created and the funds were managed separately.  Now, Metro Parks (where the original 501 was housed, wants to manage the assets again and has asked us to transfer the funds back to Metro.

The questions we have are how do we do this correctly so that we are not penalized from the State/TN since we are not dissolving nor are merging? Is Metro Parks required to do anything specifically for these funds/account?  We have spoken to the Charitable Solicitations, Division of Business Services and the Attorney General with no clear answer.

What are we supposed to do?

ANSWER: A 501(c)(3) organization may donate funds to a governmental agency when the funds will be used for public purposes.  I am assuming your organization is a public charity, but even if it were a private foundation, it could grant funds to a governmental agency for public purposes. The nonprofit Foundation Center has published:
--- Start of Excerpt ---
Generally, the IRS treats public school districts as government instrumentalities. As such, they are exempt from federal income tax and eligible to receive tax-deductible contributions from individuals under Section 170(c)(1) of the IRC. Additionally, grants to such organizations, provided that they are for public or charitable purposes, are considered qualifying distributions for grantmaking private foundations.
--- End of Excerpt ---
http://goo.gl/mqGcMv

I don't understand why your organization set up a separate program for the funds you received in 2012 and managed those funds separately.  If there was some state order or court order that came with the funds that bound your organization I would need to see a copy of that order.  Otherwise, I see no difficulty with your organization granting funds to Metro Parks unless there is something in your articles of incorporation or bylaws that prohibit such funding by your 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.

---------- FOLLOW-UP ----------

QUESTION: No, it was not a State or Court Order.  We did so we could easily report back to Metro.  They still have the Disability Program as it was originally, they just dissolved the 501(c)3.  Can Metro governments accept private donations from citizens?  Maybe that's why they set up the 501 in the first place.

Answer
Yes. Metro governments may accept private donations from individuals. A  governmental unit, like a county government is able to receive deductible donations. See IRS Publication 526 "Charitable
Donations" www.irs.gov/pub/irs-pdf/p526.pdf on page 2 is the box chart which includes money or property deductible as charitable contributions to, "Federal, state, and local governments, if your contribution is solely for public purposes."  Sometimes, however, governmental entities want a 501(c)(3) organization established because they want to separate charity work duties away from the governmental entity or because they simply do not know that the governmental entity can accept donations without setting up a 501(c)(3) organization and have those donations deductible by the donors.

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.

Nonprofit Law

All Answers


Answers by Expert:


Ask Experts

Volunteer


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.


©2016 About.com. All rights reserved.