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Nonprofit Law/501 c 3 funds to pay for county employee

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Question
QUESTION: Can a 501 c 3 organization whose purpose is to raise funds for a county government entity use its revenues to reimburse the county for a county employee's salary/wages/benefits?  The organization has restricted and unrestricted funds and I assume, if the reimbursement is allowed, only unrestricted funds can be used.  The reimbursement is likely about 40% of total annual donations to the organization.

ANSWER: A 501(c)(3) organization may grant funds in many situations, but one test in relation to grants relating to government instrumentalities is whether, if a private citizen gave the funds, would that payment by the individual be deductible as a charitable donation.  A governmental unit, like a county government is able to receive deductible donations. See IRS Publication 526 "Charitable Donations" which is available at www.irs.gov/pub/irs-pdf/p526.pdf and on page 2 there  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 (for example, a gift to reduce the public debt).  A gift to an individual employee of the county government is not clearly a gift for public purposes, but appears to benefit the individual employee.

Now, if there was a fact pattern that the county would not be hiring someone for a certain position, for example, for environmental control, a 501(c)(3) organization may consider that it is serving a public purpose and not a private purpose, if it negotiates with the county government to establish a certain position, but you have not given me such a fact pattern.  If you want to explain such or similar facts being applicable to your situation, let me know.  Otherwise, it appears that your organization would be involved in giving too much private benefit to that individual employee.  An detailed discussion by the IRS of the private benefit issue relating to 501(c)(3) organizations is found at http://www.irs.gov/pub/irs-tege/eotopich01.pdf

Especially note page 8 about a private school benefiting the insiders (if that county employee is an insider in relation to your 501(c)(3) 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. For me to consider your individual situation and how the law applies, I would need to gather more information.


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QUESTION: The county employee is event planner and volunteer manager.  Several  events held annually; much of the work done by volunteers.  Some event funds raised go to entity, some go to 501 c 3.  Employee has other duties, but amount unclear since employee reports to county, not 501 c 3. 100% of salary/wage/benefits is reimbursed to county by 501 c 3.  Unknown whether county created position and asked 501 c 3 to fund or if 501 c 3 proposed and agreed to fund position.

Answer
I have in my profile that this free forum is only for general questions about IRS federal exemption issues of 501(c)(3) organizations. Your question is very specific and I would need more information in order to give you a good legal opinion.  If you want to hire me, send me an email directly to my email address below and I will quote you my fees for a legal opinion letter.

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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