Need Immediate 501c3?

Do You Need an Immediate 501c3?

We’ve had a lot of calls over the years where people need a 501c3 immediately, if not sooner. They needed it yesterday, and they just can’t wait and go through the normal 501c3 process. Nor do they have good cause (from the IRS’s point of view) for Expedited Filing with the IRS.
 
Usually, what triggers this immediate need is that someone wants to make a large donation to the person’s organization that doesn’t yet exist or doesn’t yet have tax-exempt status. Sometimes the donor wants to see the actual letter of determination from the IRS and isn’t satisfied that an application is in progress. And so the donation is going to be lost.
 
What to do? One thing you CAN’T do legally is take over someone else’s dormant or inactive 501c3. The IRS will not permit this, plain and simple. The IRS granted tax-exempt status to that dormant or inactive nonprofit based on certain facts and circumstances submitted to the IRS in its application for 501c3 status. Coming along later and taking over that 501c3 with a different set of facts is simply not permitted.
 

We have a solution for such a situation. We have a tax-exempt 501c3 that can receive the donation. It isn’t worthwhile to receive donations smaller than $50,000, but sometimes the donations are much larger. Sometimes an individual or grant-making organization is motivated to give the recipient a large donation but is constrained by rules that state that grants can only be given to a 501c3, not one in process with the IRS. This can be especially true near the end of the year as donors want to make a tax-deductible contribution and receive the tax benefit in that year. Once our 501c3 receives the donation in secured funds from the donor, it remits 90% of the donated amount to the new organization that does not yet have its 501c3. The donation should not exceed 20% of the donor’s Adjusted Gross Income.

 

We can do this for you PROVIDED:

(1) that you have a nonprofit corporation and you have an application in process with us to the IRS. If you do not yet have this, we can perform our normal expedited service for incorporation and get the IRS application on its way within about a week in most states;

(2) that you must always use your best efforts to obtain 501c3 tax-exempt status or be liable for any negative tax consequences from the IRS to us and to the donor;

(3) that if you are not a client of ours, your donor must sign a waiver that holds us harmless in the event that the organization does not obtain 501c3 tax-exempt status and the donor suffers any negative tax consequences. This puts some onus of supervision on the donor, as we are not in a position to supervise your best efforts to obtain 501c3 tax-exempt status and supervise the funds after they leave our 501c3 nonprofit. The donor very often is close to the organization and can assure himself that the donee does not use the funds for a non-tax-exempt purpose.

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