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Nonprofit Law/Non-profit tax laws

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QUESTION: Hello,
I work with a small non-profit, and I am working on starting my own.  They are both community based and work towards similar goals in different ways. Current NP has not been bringing in much, or doing much in the past few years, and I am trying to help get it going again. I have a friend who would like to donate money to hep me get my non-profit org up and running, but would like to be able to do it through the NP I currently work with. Hypothetically she would donate $5,000 to the existing NP, the NP would then donate 4,000-$4,500 to me, and keep between $1,000-$500.  This way, every one is happy, friend gets the tax write off, existing NP gains some funds, and then i am able to start my own.  I know there is a certain 10-20% the existing NP is required to donate of grant towards the community, does helping me start mine fall within that category? what would? What are the laws, tax or otherwise for such a situation?
Thank you

ANSWER: It appears that you and your friend do not understand how she can donate $5000 to your start-up and get the opportunity to take the full $5000 donation deduction this year.  I usually set up the new nonprofit for $250 and do that within a few days.  After that, she would donate the $5000 to the new nonprofit and she would receive the tax deduction.  See page 6 of the  IRS Publication 557 "Tax Exempt Status for Your
Organization" http://www.irs.gov/pub/irs-pdf/p557.pdf which has under the heading "Effective date of exemption" that the exemption determination is granted retroactively to the date of formation
which is normal for 501(c)(3) organizations that apply for exemption within the first 27 months of their formation.

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.

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

QUESTION: What if my business does not qualify as non-profit w/tax exempt status, but instead as a for profit subsidiary of the non profit I currently work with? Also how much would you charge for a consultation, I'm trying to deside the best form my business should take.
Thank you
Elizabeth

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 and not about their for-profit subsidiaries (or unrelated businesses).  My consultation rate for 501(c)(3) organizations and for set-ups of 501(c)(3) organizations is $175 per hour and $250 per hour for the for-profits (and for the unrelated businesses of nonprofits).  One hour will be sufficient. If you want to hire me, send me an email directly to my email address below and I will give you the payment options.

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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