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 Handling 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 and people 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 nonprofit 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 takes 10% and holds onto the remaining 90% of the funds until your nonprofit receives tax-exempt status from the IRS. At that time, it remits the 90% of the donated amount to the new organization that now has its 501c3. The 10% is not refundable, and if for any reason the organization does not receive tax-exempt status from the IRS, the 90% is remitted to the donor (assuming the donor has not yet taken a tax-deduction for the donation—if he or she has, then the 90% will be remitted to the 501c3 of his or her choice). The donor is responsible for any tax considerations and consequences of the donation.
We can do this for you provided you have a nonprofit corporation and you have a 501c3 application in process to the IRS. If not, we can take care of this for you with our normal process.