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Nonprofit Law/Transferring funds to India

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Question
Hello,

We recently started a non-profit organization in California to conduct fund raising activities to help underprivileged children in India. We don't have a non-profit organization in India, however we have volunteers who are ready to receive the funds and perform the necessary charity work (purchase and distribute food, school supplies,etc to the needy). If we do an online transfer to their bank accounts (individuals) from the bank associated with our foundation here in the US, would we face any issues from IRS ?  this is our first time forming a non-profit and not clear on what are considered as the acceptable expenses / grants.

Thank you so much for your help
KIND HEARTS FOUNDATION TEAM

Answer
See the IRS publication at http://www.irs.gov/pub/irs-wd/0504031.pdf for details about international grants to and international activities of U.S. exempt organizations, and, especially page 2:
--- Start of excerpt ---
... a section 501(c)(3) organization will not jeopardize its exemption even though it distributes funds to individuals, provided the distribution is on a charitable basis in furtherance of the organizationís purpose. Again, there is no distinction regarding the geographic location of individual distributees. In order to substantiate that individual distributions are appropriate, the organization needs to maintain records and case histories showing the name and address of each recipient, the amount distributed to
each, the purpose for which the aid was given, the manner in which the recipient was selected and the relationship, if any, between the recipient and members, officers, or trustees of the organization. Rev. Rul. 56-304, 1956-2 C.B. 306.
--- End of excerpt ---

Therefore, you would need to have records all the way through to the delivery of the food and school supplies and other items to the needy persons in India.

The IRS explains further:
--- Start of excerpt ---
However, organizations of this character which make such distributions should maintain adequate records and case histories to show the name and address of each recipient of aid; the amount distributed to each; the purpose for which the aid was given; the manner in which the recipient was selected and the relationship, if any, between the recipient and (1) members, officers, or trustees of the organization, (2) a grantor or substantial contributor to the organization or a member of the family of either, and (3) a corporation controlled by a grantor or substantial contributor, in order that any or all  distributions made to individuals can be substantiated upon request by the Internal Revenue Service.
---End of Excerpt---
http://www.irs.gov/pub/irs-tege/rr56_304.pdf (cited with approval in IRS instructions for Form 1023 Application for Exemption on pdf page 23 middle column) at: http://www.irs.gov/pub/irs-pdf/i1023.pdf)

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. For me to consider your individual situation and how the law applies, I would need to gather more information.

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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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