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Nonprofit Law/Equipment ownership

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QUESTION: A local church allowed a food program to set up a non profit under its 501(c)3 status.  The non profit has separate checking accounts and a board.  A trailer to transport goods was purchased by the non profit with a grant to the non profit from a foundation.  Additional funds were donated to the non profit as well.  Tags, inspections and insurance are paid for by the non profit.  The title is in the name of the church.  The Board has voted to sell the trailer but have been told the church owns the trailer.  Does the church own the trailer when it was purchased with a grant and donations specifically given to the non profit?

ANSWER: You wrote that "The non profit has separate checking accounts". I am assuming, from what you wrote, that the checking accounts are in the same EIN (Employer Identification Number - or Taxpayer Id number) of the church, because you wrote earlier, "A local church allowed a food program to set up a non profit under its 501(c)3 status."  The way "under" is done is by having all funds go into accounts with the same EIN as the 501(c)(3) organization. If I am not correct in my assumption, please let me know. But, in any case, I would need to read the master agreement that was ostensibly signed by the church and the group that was running the food program before I could give you my opinion as to the legal and equitable title holder of the trailer.

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 church and the non profit are under the same EIN.  There is no written agreement.   The non profit began as an ecumenical group, was changed to a non voting group by a member of the church, and recently was reorganized to an ecumenical voting board per the request of the church.

ANSWER: Well, without a written agreement, the food groups evidence in court as to its equitable ownership is going to be based upon oral agreements.  Was there any oral agreement as to the use of the trailer between the church and any individual(s)? If so, give me an approximate transcription of that oral agreement and then I will reply further.

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: The trailer was expressly purchased for use by the non profit to pick up food from the food bank and other agencies providing food.  To my knowledge the trailer was not used for church purposes.  Currently it sits outside the food pantry and is being used to store cardboard.

The application for the grant was filled out by the non profit and stated the trailer would be used to pick up and delivery food for the non profit.

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 matter is controlled by state law and states may differ somewhat with how they would treat such issues. Even though this forum is not for such state law issues, I will give you a lead.  You refer to a "non profit" but how is it organized?  Is it a nonprofit corporation in Texas?  If not, what?

If it is a nonprofit corporation (or even a charitable trust or a Texas unincorporated nonprofit association), it may enforce an oral contract that it has with the church.

It appears that the "non profit" should contact me, or someone else who is knowledgeable in the area, to draft an agreement next time they want to work with a 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.  

Nonprofit Law

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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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