Ask the Editor - To the Point

Each week Don Kramer, editor of Nonprofit Issues, answers a question from a reader. Find his answers below. Can't find the answer you need? Submit a question

This Week's Question: Is this expulsion a selective prosecution?

Our tax-exempt nonprofit been sued.  The lawsuit is a public record and a 30-year member gave it to another person for information.  The member was expelled for transmitting the public document. This is the first member to ever have been expelled from the membership.  Is this selective prosecution by the Board? Answer

IMPORTANT:   The answers to these questions should not be deemed legal advice or be acted upon without prior consultation with appropriate professional advisors.

Previous Questions

Question MarkI have made a contribution to a 501(c)(3) nonprofit organization that qualifies me as a member to receive volunteer services they provide (taking members on shopping trips, doctor visits, etc.).  If I do not receive any services from the organization throughout the tax year, am I able to claim a charitable contribution deduction for my payment? Answer

Question MarkMay a 501(c)(3) nonprofit that receives state and federal funds impose a non-compete on its employees? Many have been employed for years and were not informed a non-compete was developed and instituted until they applied for jobs elsewhere. Answer

Question MarkSomeone offered me a large donation in exchange for a seat on my board. Can I legally accept?  Answer

Question MarkI am on the Board of a 501(c)(3) private school that has nine buildings on its campus.  Many are in need of modernization and the finances of the school do not allow that at the moment.  The Chair wishes to 'sell' the main administration building to a contractor/consultant for $1 and then let the contractor get the financing to upgrade the building.  The contractor will then 'lease' the building back to the school until the cost is paid.  I do not think it would be legal or ethical and would harm the nonprofit status of the school as donors would donate to a capital campaign to improve the building in question but the building would not be owned by the school.  Would donors still be able to take a tax deduction?  What are your thoughts on this scheme? Answer

Question MarkThe [XYZ] Foundation doesn't list donor names on their tax return available for public review. Is this illegal?  If so, what can the public do to have them disclose the donors? Answer

Question MarkOur 501(c)(3) museum founder wants to donate a collection of 500,000 artifacts to the museum. The artifacts range in value from just a few dollars to 10's of thousands. The overall estimated value of the collection may be as much as $1 million. Is there any way this can be done without a massive number of appraisals and accompanying cost? Answer

Question MarkI have just joined the board of directors for my homeowners’ association and have found that although we claim to be a nonprofit corporation in our bylaws, we do not have articles of incorporation in our records or on file with the Secretary of State as is required.  What are the legal ramifications of this? We've been operating this way for more than 10 years. Answer

Question MarkMay a nonprofit sports club deny membership to an individual?  Under what circumstances would this be allowed?  What risks does it involve? Answer

Question MarkOur town's historical society is considering using a huge proportion of a large new donation toward building a modern community center rather than a project that preserves history.  I understand that building a community center would be a charitable purpose, but are there risks to a 501(c)(3) organization acting outside its stated purpose?  Answer

Question MarkI am an unpaid volunteer editor of a nonprofit organization’s newsletter.  I am being harassed and retaliated against. Life has been made hell by the president and her friend the treasurer. They are out to get me.  Can I file a lawsuit or an Equal Employment Opportunity Commission complaint?  Do I have a voice? Answer

Question MarkThe founder of our 501(c)(3) nonprofit is active in the field of health and wellness and has licensed one of his wellness programs to us for use in under served populations.  We currently pay him an annual royalty based on a percentage of the program income.  The founder now wants the fee to be based on a percentage of ALL income of the organization, including all donations.  Many of the board are resistant to this.  The founder does about 65% of the fund raising. He also uses this same program in his for-profit enterprise and charges much higher prices. I am the executive director attempting to resolve this dilemma in a legal and fair way. The founder says he has consulted attorneys who say this is legal and OK to do. Is it? Answer

Question MarkMy daughter’s local 501(c)(3) swim academy has recently organized a “mandatory” "Taco Fund Raising Event."  They have asked each parent to sell $200 worth of tickets, or if they can’t sell the tickets, to pay from their pocket.  We are already paying for the swim lessons and donating supplies and service hours.  Can they ask for a mandatory donation like this? Answer  

Question MarkAs the new president of our nonprofit corporation, I discovered in going through old minutes of meetings of the board of directors some changes to our bylaws that were never included in copies used by the board. Some of these are now 5 years old. One, for example, provided that the president could not spend more than $500 without the approval of the board. How do we handle these items? Should our bylaws be updated to reflect all of the changes? Should the current board pass them again? How does this affect actions that have been taken that were in violation of some of the changes? Answer

Question MarkThe bylaws of a nonprofit corporation provide that the executive director will have a vote at meetings of the board of directors but will not be a member of the board.  Is that legal? And is it wise? Answer

Question MarkOur 501(c)(3) performing arts center provides each board member with 60 free show tickets a year, plus unlimited discounted tickets.  The 60 tickets have a value of about $3,600 and can be used for any performance, including sold out shows.  Should the organization be issuing 1099's with the value as income? Answer

Question MarkCan the founding board (5 people) form a nonprofit where we cannot be voted out - therefore functioning much like a sole member?  We also have 3 additional board members who were appointed but will go through elections.  We were just told we could not have this provision in our bylaws but we all 5 want this.  We have done all the work forming this group. Answer

Question MarkOur nonprofit organization has an attorney on its board who is affiliated with a sizable law firm in town.  Is it appropriate for that person's law firm to do legal work for us and be paid? Answer

Question MarkI loaned a nonprofit corporation a substantial amount of money over a five-year period while I was serving as a volunteer. I left the organization in 2013, and they still owe me most of the loan.  We have hard copies documenting the loan along with email trails.  I have repeatedly asked the Founder/CEO to pay me something on a monthly basis but she refuses to do so, stating the organization doesn't have the funds.  My understanding is that I have no legal recourse since it's a nonprofit, and the Founder can pretty much do whatever she wants. Do I have the right to see the organization's financial statements from 2010-2013?  What can I do? Answer

Question MarkHow does a nonprofit with multiple unincorporated branches control its branches? I am particularly interested in branch non-compliance with bylaw requirements, failure to elect branch officers and directors (no one is willing), failure to prepare financial reports, and poor money management at the branch level. The organization offers workshops for people who make handmade jewelry, so these failures don't cause harm to needy beneficiaries. They mostly inconvenience and annoy the heck out of the corporate headquarters. Answer

Question MarkIf a charitable hospital system owns a for-profit entity, can charitable funds be raised for naming opportunities within the for-profit’s building? Answer

Question MarkCan a nonprofit corporation be organized for the purpose of benefiting a single individual, and, if so, what are the tax consequences? I understand that donors could not claim a deduction for any gifts given to this type of nonprofit. But if all of the money coming into the nonprofit is donations/gifts, will the corporation have to pay income tax on those donations/gifts? Or, because they are gifts/donations being used for a charitable purpose, is the nonprofit excused from paying income tax on them? Answer

Question MarkThe Executive Director of our 501(c)(3) organization recently resigned to launch a for-profit management company and is taking key employees with her. Our board believes her team is the right team to continue to lead our organization. Can we hire her new company to manage the nonprofit, rather than try to hire replacements for the missing staff? Are there restrictions on the ways in which we can determine the contract value (can we just pass through income and expenses to the for-profit)? Answer

Question MarkA long time elderly supporter wishes to make a large donation to our 501(c)(3) organization with the stipulation that, upon her death, the organization will arrange and fund a funeral dinner in her honor. The amount left over from the donation is to be kept for our organization's use.  Should we accept that donation with this caveat or have her make arrangements with the funeral home to cover that portion of the funeral plans, with a separate donation to be made to us for our charitable purposes? Answer

Question MarkThe primary mission of our nonprofit membership organization is to end domestic violence.  We provide direct services to victims, but not legal representation. Several of our directors are family lawyers who occasionally represent offenders in domestic violence protection order cases and resulting criminal cases.  Some of our members feel this is contrary to, and therefore a violation of, our mission.  Some also feel it is a violation of the canons of ethics for the attorneys to represent offenders if they are committed to our mission.  Is there any merit in either argument, and, if so, do we need to exclude family and criminal lawyers from our Board? Answer

Question MarkI'm an officer in a nonprofit medical society that somehow received 503(c)(3) designation from the IRS, even though I recently discovered that we have not been properly registered as a nonprofit corporation with our state for at least 10 years.  I can get us registered but the question is if there will be consequences with the IRS for all the years we were not registered.  We obviously don't want to lose our 503(c)(3) status.  We have filed all of our E-postcards on time. Answer

Question MarkOur 501(c)(3) human services agency has decided to put together a non-partisan voter guide for the upcoming state Governor’s primary on some of the issues that impact the clients we serve.  We sent the same surveys out to all candidates of the major parties and informed the candidates that we would note nonresponse in our final publication.  If only one candidate (out of 6) responds, should we still print the guide?  What if two candidates respond? What is a good threshold? Answer

Question MarkWe are a small nonprofit that helps people with a certain disease.  One of our founding board members passed away from the disease in January.  We want to honor him in a special way and I'm wondering if you have examples of how other nonprofits have honored deceased board members. Answer

Question MarkOne of the founders of our small nonprofit organization asked to create a program for the benefit of members of the organization. We trusted her and have no written contract. We paid her to create the online web platform, paid part time staff, and marketed it to our members. Now it has become very successful. She has announced that she is going to take this and make it her own business. She will give us the name, online platform and the brand but she wants to maintain the videos, curriculum and other content she produced. Can she do this? Answer

Question MarkWe are a for-profit homeschool community (profit goes to pay reasonable salary to teachers and director) seeking to rent/borrow space from a local church. Churches seem nervous about lending or renting to us because we are not a nonprofit. Is this illegal or are they confused about just having to report rental income? Would it be legal for them to donate the use of their building once a week? Answer

Question MarkA donor to our nonprofit Hindu temple allowed us to use his investment property as housing for our priest. He refused to take the token rent we offered him and asked that it be counted as a donation.  When we give him a donation letter at the end of the year, should we add this rent amount to the cash amount that he donated? Or should we spell it out differently? Answer

Question MarkIs it ethical or a conflict of interest for a person to sit on two nonprofit organization boards of directors at the same time? And if there is no longer an executive director is it policy for board members to maintain the daily operations of a 501(c)(3)? Answer

Question MarkWhen the board of a 501(c)(3) nonprofit corporation violates the organization’s bylaws, amending the bylaws without a quorum being present, what recourse is there for the members?  The board announced that a quorum was present at the members meeting, knowing full well that it was not, and then let the results of the vote stand, even though there was not a quorum. The amendment reduced the quorum requirement from 10% of the members to whoever shows up.  What can be done to challenge this illegal act? Answer

Question MarkAfter being chairman of a nonprofit for 12 years, I resigned and left the board because of things going on that I didn't approve of.  In 2007, I co-signed and guaranteed a loan on the building for $132,000.  Approximately $63,000 is still owed on it.  I want my name off the loan.  What can I do? Answer

Question MarkThe treasurer of our 501(c)(3) organization refuses to turn over the checkbook to the other signers on the account to make a payment.  Two lawyers and a nonprofit management professional have told us that the payment is usual and required.  Despite this, the treasurer has decided that his personal opinion is more correct and he will not issue a check or turn over the checkbook.  What can we do? Answer

Question MarkI want to make a donation to a 501(c)(3) organization that has 11 separate chapters and want to earmark my $2,000 donation to a specific chapter to help that chapter grow. If I clearly earmark this money for the specific chapter, do they have to make sure that all the money goes to that chapter? Also, if I earmark it to a specific person in the chapter will it be deductible? Answer

Question MarkThe mission of our 501(c)(3) nonprofit is to provide educational and financial support to teenagers who are launching businesses.  We provide financial support with 0% interest loans.  Two questions: 1) Could these loans be deemed excess benefit transactions because they are provided to for-profit entities? 2) Can donors receive tax deductions for donations earmarked for this type of loans? Answer

Question MarkOur church has an employee who also works for another nonprofit organization. He frequently uses our church credit card to make purchases for this other nonprofit, which later reimburses the church.  Is this considered a legal practice? Answer

Question MarkSome members of the board of a nonprofit corporation seem to believe that program concepts conceived of and planned by a former executive director are "intellectual property" of the organization. Can a program idea be considered to be property? Can the former executive construct the same program at another charity without owing the previous employer a share of future revenues or "licensing" the rights to the program idea? Answer

Question MarkI'm on the board of a 501(c)(3) nonprofit corporation and all three directors have equal voting rights. The president has changed bank account information and locked me (the Vice President) out of all internal information. Is this legal? Answer

Question MarkI was the treasurer of a 501(c)(3) swim team that disbanded several years ago. I was just contacted by our credit union saying that the account funds are about to be turned over to the state due to inactivity, with approximately $3400 remaining. I thought the president was going to take care of closing the account and donating the funds to a charity, but apparently that has not been done.  The only names on the account are myself and a former swim team president (whose whereabouts are unknown and not the one I thought was closing the account). Who has rights to these funds? Answer

Question MarkOur very small senior club is sponsored by the local recreation council, but recently we have discussed separating to be a stand-alone club. They have told us that if we do we will not get our money back and will have to leave all of our supplies with them.  The council deducts over $600 dollars a year for head tax from our account, which is the major reason we want to leave. Can they legally take our money and supplies, and keep the name of our club? Answer

Question MarkWhat are the most typical reasons why a 501(c)(3) charity can lose its tax-exemption? Answer

Question MarkThe board of my 501(c)(3) organization never presents minutes or votes on said minutes. Is this legal?  The Chair cancels meetings at the last minute if he can't make it but never cancels if other members can't make it. They also have executive sessions without stating their purpose. When I mention the legality of such things they threaten me. What can I do as an employee to save this organization from these rouges? Answer

Question MarkMay a charitable organization sell its real estate at a reduced price in return for a charitable donation to the organization?  For example, can the organization sell a $500,000 property to an individual for a $1 purchase price and a $499,999 charitable donation? Answer

Question MarkIs it illegal or unethical for a board member of a nonprofit to bid on an auction item at the annual fundraiser?  Answer

Question MarkWe have two boards, a foundation board and an operating board for our 501(c)(3) organization. Each has its own by-laws and tax number. The foundation board is starting to exert more influence on the operation of the charity in the areas of budgeting and personnel, to the point of threatening to withhold further funds.  Is this allowable?  Answer

Question MarkShould we include our conflicts and whistleblower policies in our bylaws? Answer

Question MarkOur 501(c)(3) booster club board decided to institute a new volunteer policy this year. All parents automatically become members of the club if their child is in the sport (gymnastics). There are required volunteer hours and failure to meet the hours equals a fine of $25/half hour. Parents can buy out of the volunteer hours by paying $500 up front. Does this policy violate the club's 501(c)(3) status? Does the penalty money received by the club constitute taxable income for the club? Answer

Question MarkWe are a 501(c)(6) trade association that is considering holding an annual charity golf tournament to support various children’s charities.  We will raise the funds by offering sponsorships and by the entry fees without using any professional fundraiser.  Are we OK in doing this or would you advise us to stay away from it? Answer

Question MarkI came to a failing nonprofit agency as Executive Director.  The organization is now doing very well and expanding its scope and mission.  I want to minimize any vulnerability from a rogue Board member who is unhappy in their job and suddenly wants to be the new ED.  Converting to a membership corporation is not likely.  What other bylaws could be introduced to maximize job security for the ED? Answer

Question MarkHow can an individual make a financial contribution to another individual who is suffering with terminal illness and obtain a charitable contribution deduction? Answer

Question MarkIf our 501(c)(3) charity were to participate in a group fundraiser with other 501(c)(3) organizations for a service that all of us provide together in partnership, how would we handle the donation receipts? Is it sufficient to have only our own tax information on the donor receipt, even though the proceeds will ultimately benefit not only us but also the other nonprofit partners? Or would we need to include each nonprofit’s info? Answer

Question MarkDoes a charity have to register under state charitable solicitation registration laws to solicit a corporation or a private foundation if it is not soliciting the general public? Answer

Question MarkThere is a ranch in our state that recently held a second fundraiser for a charitable organization.  Although the owner advertised that the proceeds would go to the charity, the owner has kept the proceeds. His excuse is always "he didn't make anything."  I have contacted the charity several times via email (can't find a phone number) without any reply. What can I do?  Is there somewhere else I can report him? Answer

Question MarkIs a gift given to a 501(c)(3) charitable organization and earmarked for its lobbying activity deductible by the donor as a charitable contribution? Answer

Question MarkMy wife is the president/treasurer of the board of our governmentally subsidized low-income housing coop. Recently she confessed to me that she spent $25,000 from the building reserve funds. Will she face legal charges if and when the governmental agency finds out through its annual audits that the funds are missing? Answer

Question MarkWhen our 501(c)(3) organization raises funds and tells the public that we are going to donate to a specific cause, how long do we have to submit the funds to that charity?  I am concerned by the length of time it takes when we are told that the Board has not decided how much more to contribute to that cause.  I feel at least the amount raised should be turned over after the fundraiser within a reasonable time period. Answer

Question MarkIs a charity required to send an acknowledgment to the matching gift company for sending a matching gift check? Answer

Question MarkOur nonprofit provides services to individuals with developmental disabilities. We have 200 employees and about 20 independent contractors. How do we assure that the ICs follow licensure requirements, procedures, etc.?  Our HR department strenuously objects when we mention "training" for ICs - but how can we assure the correct responses to issues when we cannot train these people who are providing therapies to our clients? Answer

Question MarkHow often should our 501(c)(3) nonprofit corporation review our bylaws to ascertain compliance with the Tax Code? Answer

Question MarkI was president of a cheer parents booster club.  The club treasurer and I were designated signers on the checking account. Recently, the treasurer admitted signing my name, without my knowledge or intent, because she needed a check to pay a bill.  The by-laws require signatures of two officers; there are no exceptions. Since there was no intent to deceive for monetary gain, the police will not prosecute. Is there any type of recourse I can take just to make a point about principle?  I have suggested that they ask for her resignation and I have resigned because of this underhanded situation. Answer

Question MarkOur 501(c)(3) organization is formed for “community betterment” purposes.  We want to start making Community Grants to "do good" types, be they individuals, the scouts, or the XYZ Senior Center.  One candidate is the retired carpenter who builds "public benches" for the town commercial area.  He donates his time and skills but would like the material costs to be covered.  May we make grants to individuals, or must we make our grants only to other 501(c)(3) charities? Answer

Question MarkWe have a nonprofit children’s youth program that holds a mandatory fundraiser every year.  This year we tried a raffle. About one-third of our participants did not return the tickets and/or monies raised. Can we hold them responsible for the monies not returned? I feel we should at least be able to hold them responsible for returning unsold tickets so that we know they did not just pocket the money and tell the people that their ticket wasn't picked. Answer

Question MarkMay the executive director/founder of a 501(c)(3) corporation sell the organization to a for-profit company without the board voting? And if so, can there also be a profit from this sale? Answer

Question MarkAssuming that it would be very cumbersome to amend a nonprofit corporation's bylaws to add customary indemnification for officers and directors, would it be acceptable to have the corporation enter into individual indemnification agreements, as is often done with business corporations?  Answer

Question MarkOur 501(c)(3) organization wants to expand into other areas to help people, but our bylaws are written very narrowly in what we can do and also leave room for different interpretations. The board has already approved going ahead to help other people outside of our bylaws purpose. Do we need to make the necessary changes to our bylaws before pursuing our new endeavor? Answer

Question MarkWe are a small nonprofit that needs some repairs (roof and furnaces) to our building. We have an endowment fund Certificate of Deposit that is 23 years old. Is there any way to use that money for the repairs? Or does that money just have to sit in the bank until the organization is non-existing and then what? We get $11 a year from the $11,000 CD. Answer

Question MarkOur Coalition of Neighborhood Councils (CNC) has been around for almost 12 years, but for the past few years it has been mismanaged. In closing down the building we were renting, we seem to have incurred some unforeseen debt (between $500 and $10,000 with only $500 in our account) and the current board believes the only solution is dissolution.   Several directors are worried that our debt to the IRS and others could hurt us in the future if we continue as CNC.  An attorney said it could cost up to $10,000 to dissolve, and some directors are looking for less expensive services.  I believe that we can resolve the indebtedness and continue to provide a scaled-down program to serve the community without dissolving the CNC, but others are afraid of being sued and want to dissolve.  What do you suggest?  Answer

Question MarkOne of the alumni of our 501(c)(3) leadership development organization is running for public office and has asked for our support.  Two directors have recommended that we share the alumni contact info with the aspiring politician.  I'm concerned that we could quickly and easily get in trouble and could be seen as partisan. How can we be supportive of our alumni and avoid legal and perceptual complications? Answer

Question MarkMay our youth-serving organization ban a young person from participating in the program based on the child's behavior?  May it also be based on his father's constant inappropriate behavior at the program activities? Answer

Question MarkI am president of a 501(c)(3) that has a true endowment to provide scholarships to a specific university. The initial $50,000 contribution in 1993 has grown to over $106,000. We would like to expand the giving beyond the restrictions given by the original donor and give to students at other universities as well. Can our Board do this as long as we don't touch the principal? Answer

Question MarkOur local Historical Society puts on a play every year. The acting is horrible. Despite this, the director and actors are paid. As a 501(c)(3) aren't they required to post the jobs and interview the Director and Assistant Director? The Assistant Director has no training and his only experience is acting in these disasters. I not only have a college degree in drama but also a resume as director and drama teacher. Shouldn't the jobs be posted and the board hire the one with the training and resume? Answer

Question MarkFollowing the hijacking of a previous attempt to establish a nonprofit corporation, I am now drafting Bylaws that are intended to prevent a recurrence of that experience.  My wife wants an organization that stipulates “no members.”  My concept is to draft Bylaws that recognize a “Founding Director,” my wife, vested with sole authority to make overall operational decisions, appoint and remove “Associate Directors,” assign special duties such as Clerk, Treasurer, fund raising, and other roles, and establish key policies.  The Bylaws also would have specific protections against the Founding Director being out-voted, expelled or removed by a small group of Associate Directors, all volunteers. Would the declaration of “No Members” mean that no one with voting rights belongs to the corporation?  Exactly what do the terms “Member,” “Sole Member,” and “No Members” mean? Answer

Question MarkAn attorney in a state far from me supposedly advised my 75-year-old father in declining health to leave a very large donation in his revocable living trust. He was alone in that community and passed away seven months after the trust was created. No one in our family knew of this donation and no one saw the trust before he passed away. The attorney was the only witness of the trust and was the notary. This attorney is also a member of the board of the nonprofit foundation that received my father’s bequest.  Is this sort of thing common and an acceptable practice for attorneys and nonprofit foundations? Answer

Question MarkIn revising the bylaws of our nonprofit corporation, the bylaws committee has suggested that we say the quorum requirement for the number of directors necessary to participate at a board meeting will be “50% plus one.”  Does that sound like a good idea? Answer

Question MarkThe treasurer of our 501(c)(3) theater organization says we cannot pay some of our local artists to come in and rejuvenate our old backgrounds and/or create new ones unless we make them contract employees.  I see this as no different from paying our local electrician to rewire our lighting booth. One of our actors claims this is a violation of the 501(c)(3) incorporation act. If so, how would we rectify this? Answer

Question MarkMay a former board member of a 501(c)(3) ministry who has been removed from the board sue the ministry for nine years of back wages for their service and for the hours of involvement and contribution of services they gave? Answer

Question MarkOur 501(c)(3) human services agency was recently asked by a funder to certify that our directors did not have a criminal history.  We had not asked this of our directors before, so we put together a brief questionnaire based on the "contractor integrity provisions" and asked board members to submit their own responses.  Is this something that we should be doing regularly (given that histories change)? And if so, how often?  I think some members found it invasive. Answer

Question MarkMay a 501(c)(3) charity pay a finder’s fee to a person who brings donors to the organization? This person is not on salary and does not work for the (c)(3). Answer

Question MarkOur 501(c)(3) athletic organization has in the past collected $250 per player for league fees.  The rest of the funds are acquired through ad book sales and fundraisers.  Is there any reason why all of the funds could not be acquired via fundraisers?  The past treasurer has stated that part of our funding must come from parents to keep our nonprofit status. Answer

Question MarkCan a 501(c)(3) nonprofit organization own intellectual property that generates funds if the funds all go to the 501(c)(3) for charitable uses? Can that same organization hire writers to produce the intellectual property, with the copyrights to be owned by the (c)(3) to generate income for the organization’s mission? Answer

Question MarkMay the president of a nonprofit change the signatories on the bank accounts without getting a new board resolution? Answer

Question MarkOur nonprofit corporation has not held regular board meetings in accordance with its bylaws.  In addition, there was no annual general meeting last year (nor has one been posted this year) to elect officers for positions with expiring terms.  The president says that we are under a moratorium because the bylaws are under revision.  Aren't the existing bylaws in place until amended in the manner prescribed in the governing document(s)? Answer

Question MarkI have seen some 501(c)(3) organizations advertise that 100% of public donations go directly to the charitable cause, while the operating expenses of the organization are covered by private donors.  It would seem to me that the money given by the private donors is earmarked for operating expenses, and thus would not be deductible. Is this the case? Answer

Question MarkI am a member of the Board of Directors for a 501(c)(3) civic theatre that hired a new executive director who has brought us from the brink of disaster seven years ago to a profitable financial position.  Her contract is up for renewal shortly and one of the directors asked the secretary for a copy.  The outgoing board president has objected to our asking for it without going through him and has said we are micro managing the organization.

This has become an issue because the ED is seeking to hire an “artistic associate” who would take a part of her workload.  It seems crazy to us common folk that she could do that without board approval. How can she hire someone to do part of her job and still receive the same pay and benefits?  At this point she continually bullies the board into submission, and recently I have personally caught her in lies to the board, but have not confronted her.  It's getting a little crazy around here and I don't even know where to start looking or even what questions I need to ask. Answer

Question MarkCan a person donate to a 501(c)(3) charitable organization in the United States, ask the organization to donate this money to a particular organization or project abroad, and still claim a charitable contribution deduction here in the U.S.? Answer

Question MarkI am a president of a 501(c)(3) nonprofit organization. I recently got an offer to be the president of another nonprofit organization. Can I be the president of both organizations at the same time? Answer

Question MarkWhat is the maximum contribution as a percentage of total support that an individual can give without tipping a 501(3)(c) public charity into being declared a private foundation? Answer

Question MarkCan a 501(c)(3) organization hire a fundraiser to raise money for its affiliated 501(c)(4) advocacy group to hire a lobbyist? Answer

Question MarkA university told its basketball season ticket holders that they could donate tickets to another charity so that disadvantaged kids could go to the games and the donors could receive a tax receipt for their donation.  Because of a miscommunication, the university failed to notify the other charity about many of the gifts, the charity never had access to them and many of the tickets therefore went unused.  Should the other charity still send acknowledgments and thank you letters to the donors of the tickets the charity never knew about until it was too late? Answer

Question MarkOur private Christian school had a parent "volunteer" to hardwire a computer lab. The board was under the impression from the Principal that this work was going to be performed to offset their unpaid tuition bill. The Principal was under the impression it was "volunteer" work - with our school being responsible for paying only for the wire/cable needed. There was no contract, no estimate, no bidding done. She subsequently sent us a bill for $3600 payable by check or $1800/cash. We were totally caught off guard by this bill. We did not know we were “hiring” her. She is currently an unemployed union electrician, on unemployment. She does not want to be given a 1099 - wants to be paid under the table. She is threatening to sue us if we don't pay her immediately. Side note - her children are no longer attending the school. She also said she did not owe the tuition because she had volunteered at a fundraiser we had last spring. Answer

Question MarkDoes the resignation of the President of a nonprofit corporation result in his termination as an incorporator, director or member of the organization when the letter says nothing about these other positions that he holds? Answer

Question MarkRumors are swirling around our town about misappropriation of trust funds and the ongoing investigation of a prominent attorney who happens to be an executive officer of our nonprofit board. The attorney has emailed friends saying that "mistakes were made" and spoke of a long Federal process winding down. The attorney mentioned plans to leave the profession.  Nothing has appeared in the press yet. What, if anything, should we do now before the news is public or after it appears in the papers to protect our organization? This officer has check signing authority (with a second signature) but no access to our checks. Answer

Question MarkI would like to start a nonprofit corporation that will produce a mobile gaming app.  Users will purchase the app and receive "play money" to play betting games.  All profits will go to charity.  Could this company qualify for nonprofit status? Answer

Question MarkOur 501(c)(3) organization is about to receive three houses from a Charitable Remainder Trust now that the donors establishing the trust have both died. We already have a buyer for all three houses. How should we record the distribution from the trust? Is it an in-kind gift? Or is it an unrestricted gift (nothing in the CRT restricts the use of houses)? Answer

Question MarkA major charity has received a lot of bad comments in social media because it told a church that it couldn't accept donations from the church because it is a religious entity.  Is there a legal reason for refusing the gift? Answer

Question MarkOur 501(c)(3) nonprofit organization received a donation of new shoes from a warehouse that we did not solicit. They sent us mostly size 18s, and there was no paperwork stating the purpose or limits of the donation. Since they did not say whether they may or should be sold in our thrift store, is it legal for us to sell them and put the profits back into our organization? Answer

Question MarkIf a person buys $100 worth of raffle tickets and wins a $500 television set at a charity lottery, the person can’t claim a charitable contribution deduction for the $100 in tickets, right? But may the person give the TV back to the charity and claim a $500 deduction for the gift? Answer

Question MarkA few of our directors get materials about the organization at an email address that is shared with their wife.  As executive director, I am totally against that.  I want to get this brought up at our next meeting but would like some ammo behind me.  I have been doing a web search but not much is coming up.  Do you know any group that has such a policy in writing? Answer

Question MarkCan you see any real benefit to replacing a simple indemnification clause in a nonprofit’s bylaws with two pages of legalese that looks like it was copied from a statute book? It seems WAY over the top to me. There won’t be any board members who read it OR understand it (in my view). Answer

Question MarkIf a founder had a run-in with the law more than 35 years ago that resulted in a criminal record, should it be revealed to the board and will it complicate the 501(c)(3) process? Answer

Question MarkOur 501(c)(3) charitable nonprofit has a monthly informal board and advisory council luncheon. The number of attendees varies from 12-20 people. We ask someone to volunteer to pay for the lunch at $100. Our organization orders and pays for the food and accepts a check for $100 if/when offered. Is it necessary to provide a donation letter to the payor?  Answer

Question MarkIf one of the members of the board of our nonprofit corporation disputes the accuracy and/or thoroughness of the minutes of a board meeting and the Secretary refuses to change them or add the comments, what should the chair of the board do about it? Answer

Question MarkIs it legal for 501(c)(3) charitable organizations to give cash bonuses to employees? Answer

Question MarkI am the treasurer of a registered 501(c)(3) charitable nonprofit corporation and have taken it upon myself to recruit pro bono services for things such as donation of a website design and bands willing to donate their time and talents for fundraising purposes. Is it legal to give these people tax-deduction forms for their donated services? Answer

Question MarkDoes a nonprofit organization that has never filed for tax exemption at the federal or state levels have to provide its tax returns to the public upon request?  If so, what is the legal citation/authority for this?  Would they file something other than a Form 990, like a typical for-profit corporate tax return that is not public? Answer

Question MarkI recently joined the foundation board of the local community college and learned that the foundation had made a loan to the college several years back. The college president is asking the foundation board to make a distribution from the foundation that would retire the loan. This appears to circumvent our spending policy and I question how to fulfill my fiduciary responsibility. Answer

Question MarkIn response to a question last December you said a gift from a donor to a 501(c)(3) nonprofit community band designated for a “holiday gift” for the conductor would not be a deductible as a charitable contribution and would be taxable income for the conductor.  I am on a symphony board and as part of our Annual Campaign we ask donors to sponsor musicians, instrumental sections, first chairs, guest artists, and concerts.  Will there be a problem with the deductibility of these donations? All the musicians and the conductor are independent contractors and not employees. There is no effort to link donations to individuals but rather positions.  Answer

Question MarkIs there any problem with allowing a substantial donor to be a member of the investment committee that invests the money he/she donated to our 501(c)(3) nonprofit corporation? Investment committee members are not paid. Answer

Question MarkShould we be lobbying now to try to protect the charitable contribution deduction as Congress works to prevent the country from going over the “fiscal cliff”? Answer

Question MarkOne of the board members of our 501(c)(3) nonprofit organization wants to sell a parcel of land he owns and donate the funds to our organization. He does not need a tax write off himself. He has offered to sell the property to a third party at a reduced price ($1), in exchange for the third party making a donation to our organization for the balance of the price. Most of our advisors do not see a problem with this transaction, but one person has suggested that it would not be deductible to the third party since the third party is receiving a benefit. The rest of us believe it is deductible since the third party receives no benefit from our organization, similar to corporations offering matching gifts, or charitable donations tied to purchases etc. What is your opinion? Answer

Question MarkOur 501(c)(3) nonprofit corporation subsidizes our annual fundraising gala so that our clients and potential supporters can more readily attend without having to pay the full cost.  It costs us about $100 a person to put on the event, but we allow people to attend for $50.  We make up the difference by having patrons and benefactors pay $200 and $500 for a ticket and offering corporate sponsorships for $1000.  The corporate sponsors get two free tickets in addition to their recognition at the event.  What should we tell the corporate sponsors about how much they can deduct from their payment as a charitable contribution? Answer

Question MarkAs a 501(c)(3) organization, we give contributions to specific breed rescue groups to help pay for veterinary costs incurred while rescuing a purebred dog that meets our criteria.  Most of the organizations are (c)(3)s.  We often get requests from individuals who rescued a dog that meets the criteria for funding from us.  These individuals are always members of our over 2000-member organization.  Is it okay for us to give reimbursements for vet care to an individual/member? Answer

Question MarkI am an elected board member of a 501(c)(3) nonprofit corporation.  Our organization had an issue years ago where there was apparently an attempted coup. In response, the by-laws were amended to state that only board members may vote on new board members. Is there anything in federal or state law that says otherwise for a 501(c)(3) corporation?  It seems to me the members should elect board members! Answer

Question MarkWe're extremely sure that we know the answer to this one, but really would like your advice. Can a 501(c)(3) nonprofit corporation issue stock? Answer

Question MarkI am the organizer of a nonprofit that offers holistic healing services to the underprivileged population at little to no cost. I had been planning to progress into a true 501(c)(3) so that I could compensate the (licensed and certified) practitioners who offer their services with a tax exemption commensurate with their time.

As I have investigated the legal playpen of the IRS, I find that one will not be able to take a deduction for a contribution of their services. Knowing this, would it be impractical to further pursue the 501(c)(3) status? Although we do expect financial donations at some point, right now we are simply organizing in the community with donations of time and space.   The whole point of this organization is so that people who do not have money don't have to exchange money to be provided with healing services. Answer

Question MarkThe bylaws of our organization give total control to the members – the members decide EVERYTHING. There are several classes of memberships. One of the “classes” (which also has the right to vote) permits 16 to 18 year olds to be members.  I know you have to be over 18 to be a director of a corporation. Would our bylaws be violating nonprofit law since the members vote on everything? Answer

Question MarkYou may not have fully understood my question last week about taking a margin account loan secured by our organization’s endowment.  The loan was not used to purchase additional securities but was actually used for an operations bailout following some very poor financial management. My understanding is that the board was unable to find a commercial lender and this was the solution. Does this use of the loan proceeds at the time make a difference? Answer

Question MarkI am associated with a 501(c)(3) organization that runs two medical facilities for its members. It has a self-perpetuating board, although their terms are limited. There is a push for a member-driven organization. My sense is that a member-driven organization would be much too cumbersome and political for running a medical facility. What is your sense of this? Answer

Question MarkSeveral years ago, our board voted to set up a margin loan, secured with part of our endowment, to increase the amount we can invest. I have since come on board and am concerned, first because of the volatility of the market and second because our board treasurer said that it is illegal in another state to have this type of loan in a charitable nonprofit. I am also concerned whether the unrelated business income rules apply to margin investments. The part of our endowment set aside for this loan is being invested and reinvested regularly. The board had to sign over the authority to do that when the loan was made. I hope my uneasiness is unwarranted. Answer

Question MarkThe bylaws of our 501(c)(3) organization provide that no one on the board of directors may be paid, but our volunteer board secretary gets paid as the executive director.  The report to the state says she was paid for her work as executive director and was not compensated for her volunteer work as secretary.  Is this normal or legal?  It seems to me there is a conflict of interest here. What do you think? Answer

Question MarkIt is my understanding from reading previous posts that you think it is good governance policy to have board members for life and that terms of office are not necessarily, per se, good governance practice. If I got that right (and I may have misunderstood you), why in your answer to last week’s question, do you think …"It is highly unusual, and definitely not a good idea, to have a chief executive for life."

If you believe that it is not a good idea to have a chief executive for life, why not apply the same principle to members of a board so that they too, do not serve for life so that there is rotation, new blood, new donors, more people who know about the organization, leadership development etc.? Answer

Question Mark1. Can the chairman of a nonprofit board have the authority to veto any motions? If the majority of the board votes for something the chairman opposes, it is legal if the by-laws provide that the chairman has the power to veto?

2. The same organization’s by-laws say that 10% is needed for a quorum to hold a meeting or approve a transaction. So if there are 10 members and one shows up, has the 10% has been met?

3. This same organization’s by-laws provide that the position of the executive director is perpetual, basically saying that the individual can never be replaced unless the individual resigns. Answer

Question MarkOur club members voted to remove the current secretary for dereliction of duty.  The secretary now refuses to turn over the meeting minute books, bylaw books, briefcase, etc. for the next secretary to use.  What should the executive board do next? Answer

Question MarkIs it legal for the director of a nonprofit to sign the Form 990 tax information return with a stage name other than his legal name? Answer

Question MarkI am on the board of our 501(c)(3) nonprofit animal rescue where the president and treasurer have recently resigned.  When we looked at the books we discovered that grant funds for spay neuter had been used for other purposes that we are not sure of. According to the terms of the grant, the funds were to be used for spay neuter only and if not used by December 2012, unused funds were to be returned.  One of our Board members has now decided that we need to replace these funds and say nothing. What is the possible damage for such action and if the funds cannot be replaced, how does this jeopardize our future applications for grants? Answer

Question MarkIs it a conflict of interest for a political officeholder, running for office or currently serving in an office, to be the Executive Director of a 501(c)(3) charity located in the district they serve? Answer

Question MarkThe 501(c)(3) charity that I work for is facing a tough financial situation and is cutting management salaries by 10% for the next six months.  Can I consider this a tax-deductible contribution to the organization? If not, can I ask the organization to pay me my salary and offer to contribute the equivalent amount so that I receive the tax deduction. Answer

Question MarkWe are a local club affiliated with a national 501(c)(3) organization.  Recently a local business would have donated bottled water for one of our events if we had a federal tax ID number.  What is the solution so that in the future we can get similar donations and the donor a tax deduction? Answer

Question MarkI know that churches may not post signs to support or oppose a candidate for election, but what about other ballot issues? Is it legal for a church to post a campaign sign advocating a "Yes" vote on the November 2012 Minnesota Marriage Amendment? Answer

Question MarkI work for a public school district that has agreed to permit payroll deductions for employee contributions to a local charity. Our boss is on the board of directors of this organization, allots time to discuss it at mandatory staff meetings, and keeps track of those who do or do not donate, with top donors receiving acclaim.  Is this a conflict of interest, especially when there is an underlying concern of backlash if you choose to opt out of donating? Answer

Question MarkCan board members of a 501(c)(3) charitable organization be paid? I think they can but a board president I work with says no. Money, in the form of a contribution, is riding on this. His favorite versus mine. Answer

Question MarkI want to dissolve a 501(c)(3) charitable nonprofit corporation with physical assets and a small amount of cash. I understand that all assets must be donated to another charitable organization. Is that correct? Answer

Question MarkIf my 501(c)(3) charitable organization has had a close working relationship with another nonprofit for a number of years, but now finds out that they have a history of theft and embezzlement, is it best for my group to cut all ties with the other group? Can the "affiliation" have bad legal repercussions on my group if we don't? Answer

Question MarkWe recently asked the treasurer of our 501(c)(3) organization to resign due to inappropriate behavior and acting against a board-approved request. This person is a licensed accountant. This person refuses to give us our computer records as well as our receipts. We cannot go forward except to try to reconstruct banking records, which will still make the records incomplete. This person maintains that as a volunteer they do not have to give us any of the work that they did. This person signed our Form 990 each year. We did pay this person for some of the duties like invoicing and tax preparation. What can we do about this person? Answer

Question MarkI am the president of our school music department's 501(c)(3) booster club. Recently, through budget cuts, we came very close to losing our music programs at all levels.  Through a lot of grass roots effort, we restored most of the programs. However, we did lose some stipend positions.  Our club has been asked to pay for those stipend positions, which would be a substantial amount of money and something that we would not be able to sustain beyond one year.  Can we pay teacher stipends, the taxes and retirement contributions that the district has asked of us without being in violation of any federal laws? Answer

Question MarkOur 501(c)(3) nonprofit animal rescue corporation is converting a former veterinary hospital to a kennel facility for the animals. Our Contractor is working under a fixed price contract, but one of our Board members is demanding that she have an itemized list of all materials and/or labor. He is really balking about this and says he did not quote us as cost-plus, and does not need to provide this information. She says it is mandated for a 501(c)(3). I am an accountant and say our proof of expenditure is his signed contract and checks paid to him. Am I correct or is she?  Answer

Question MarkOur small 501(c)(3) nonprofit organization holds an annual free public event with the dual purpose of drawing in new members and raising funds for another charity. Attendance is usually spilt about 50/50 between club members and the general public. We raise funds through a silent auction and a raffle of donated items.  We usually use $1000 of club funds for some advertising but mainly to pay for entertainment, and we raise 2-3 times that amount to donate to the other charity.  A board member is telling us that we can no longer do this because it is a form of private inurement.  He believes we are not allowed to spend any money if it has any direct benefit to our members. Is he right? Answer

Question MarkI am one of two co-founders who started our 501(c)(3) nonprofit corporation in 1995.  For many years we have struggled with coming up with titles for both of us that respect the sacrifices and effort we have invested over the past several years and more clearly reflect the balance of authority that we enjoy now.  Can you suggest position titles that clearly communicate the fact that we share the decision-making role? Answer

Question MarkA public relations firm that our 501(c)(3) nonprofit corporation would like to hire wants to include a finder’s fee in their contract.  This 10% fee would apply to any contributed income received from sources that they solicit.  Is this legal/advisable? And if so, do we have to report them as professional fundraisers on the Form 990? Answer

Question MarkAre 501(c)(3) nonprofit corporations required to use competitive bidding processes to obtain services, equipment or supplies?  Our organization produces a quarterly newsletter and pays a printer to publish it.  Another printing agency believes we must put that job out for bid. Answer 

Question MarkI am president of a 501(c)(3) nonprofit corporation and serve as an ex-officio member of the board of directors.  I have one employee who serves on the board as well.  We both receive compensation for the work we do as employees.  We recently added a new board member who stated that neither I nor the other employee could serve on the board.  Is she correct? Answer

Question MarkFor a number of years our 501(c)(3) nonprofit corporation put the money that was left over at the end of the year into CDs at a local credit union. Some past officers/board members insist on calling it a building fund. Because of current low grant income, can our organization now use this money for operational costs if it is approved by the board and the membership? Answer

Question MarkWho has the responsibility for ensuring that a donor’s wishes are followed?  Where is that in the Sarbanes-Oxley law? Answer

Question MarkA member of a nonprofit corporation was listed on the Form 990 tax return as a board member of the organization, even though she only helped peripherally and was not a director. How can she get her name removed from the 990? And how she can report this if the organization refuses to do that themselves? Answer

Question MarkCan a group of five board members "inform" another director that her conduct is detrimental to the healthy development of a small nonprofit 501(c)(3) private school corporation? They met in secret after the last board meeting, signed a letter and informed the woman that she is entitled to be heard at a special meeting called for the purpose of her removal. Can they do that? Answer

Question MarkOur nonprofit 501(c)(3) charity has had a form letter to acknowledge non-cash donations from businesses but our new treasurer says we can't give letters for non-cash donations for them to use as a tax deduction.  How should these be handled?  Most are less than $250. Answer

Question MarkOur local youth sports league operates as a nonprofit 501(c)(3) public charity.  In order for kids to play, the league charges anywhere from $100-$175 per child per sport.  This is a mandatory fee.  In addition, the league demands that parents volunteer for a specified number of hours per sport doing whatever job they assign:  selling concessions, cleaning bathrooms, picking up garbage after games, etc.  Does this fit the description of a nonprofit charitable organization for tax-exempt purposes? Answer

Question MarkMay a nonprofit 501(c)(3) charity make a grant to a for-profit school in a foreign country to provide scholarships for poor children as long as these scholarships meet the mission of the U.S. charity? Answer

Question MarkWe are about to form a 501(c)(3) nonprofit corporation. Is there any way the initial Board of Directors can have all the powers, not only for 1-3 years but for as long as they wish to remain on the Board? Also there are four directors. How do we invest more powers in one or two of them? Do we write it in our Bylaws? Answer

Question MarkIf a community center, owned by a 501(c)(3) public charity, rents space to a for-profit entity and that for-profit uses the space to generate income for itself, is the nonprofit's tax-exempt status at risk? The only income the nonprofit would derive is the rental income with no share or participation in the for-profit's activities. Answer

Question MarkWhen a volunteer tutor was accused of inappropriately touching a child, we immediately reported to our insurance company.  The insurance company, in turn, directed us to have the volunteer contact his homeowner’s insurance company.  The volunteer refused.  He was mortified that he had been accused, claimed his innocence, and was not about to report this to an insurance representative who knew him personally.  The police, who investigated, found no evidence of a crime and did not file any charges.

We ordered all volunteers removed from the school; however, all but this one volunteer were almost immediately asked back.  All volunteers had clearances on file.  All volunteers received pre-tutoring training.   Tutoring was conducted in a common area with multiple people present.

In the meantime, the attorneys from our insurance company hounded us for details.  They asked for everything we knew, even though hearsay.  They kept brewing up the situation.  Our volunteer did not want to speak to them.

Would you please comment on the interactions between our insurance company and the volunteer’s personal insurance?  What if, as in this case, the volunteer refuses to report and “activate” his own insurance coverage? Answer

Question MarkThe 501(c)(3) nonprofit parent organization associated with our school has acquired a large inventory of costumes over the years, some through donations, others made by volunteers with materials paid for by the school.  Another school outside of our district has inquired about renting some of our inventory. We have been told that there is a law regarding unfair competition with local businesses.  (There is a small locally owned costume company in town.) Can we rent our inventory and if so, do we need to report that income outside of our nonprofit status? Answer

Question MarkI recently joined the board of a county-wide association of nonprofits. Representatives of two large county foundations are also board members. Some on the board see such representation as very beneficial. Others see at least two problems: the voices and votes of the foundation reps carry disproportionate weight and their presence inhibits totally candid discussion.  There are some who are also troubled by the judgment of the foundations which permit their staff to sit on grantee boards and by the willingness of those staff to do so. What would you advise? Answer

Question MarkOur Church conducts a “Sunday school” for children on Saturdays for 4 hours including lunch. It costs $150 a year per child even though the teachers are not paid.  As treasurer, many parents ask me if I can give them a donation receipt for the full amount of the Sunday school payment. It is my understanding that because the parents are receiving benefits from the teaching I can't give a receipt for a charitable contribution. Can you please explain this because I may be wrong? Answer

Question MarkI am starting a nonprofit organization for refugees. Is there a national Articles of Incorporation form to file, or would I have to fill one out for each state? Answer

Question MarkWe are a 501(c)(3) nonprofit high school band booster organization. We charge fair share fees to cover the huge operating costs. We also provide limited scholarships to struggling families. The parents sign a contract acknowledging they will pay the fair share fees, but many families have failed or refused to honor their agreement, which has caused undue hardship for the entire organization. We have been unsuccessful in getting these parents to pay what they owe. If we choose to use a collection agency to try to recover this money, will we jeopardize our 501(c)(3) status? Answer

Question MarkOur school system has several 501(c)(3) nonprofit organizations that raise money for extracurricular activities.  We all maintain our own checkbooks, file our own taxes and do everything that we have been told we need to do.  Now the administration is trying to get all of the clubs to turn their monies over to the school so the treasurer at the board of education has control over the money, and the athletic director has to approve everything that is purchased.  The treasurer, who is new to the school system, says that our system is "barely legal" in allowing these 501(c)(3) groups to operate on behalf of school clubs without running the finances through the school.  With the school funding system as it is, and the lack of trust in the administration, we have great concern about changing the procedure that we think is best for our clubs.  Can you tell me if we are "barely legal" and/or to whom we could turn to for legal advice? Answer

Question MarkOur Gem & Mineral Club initiated a president-elect position in 2008.  The membership approved it and for two administrations all was fine.  This last election a group of "unhappy members" presented a floor nomination for president. On the day of the election it was explained that there could not be a vote for president because he was voted in the previous year.  This group is crying foul, saying that "they didn't know what president-elect meant" and the election was skewed because the definition wasn't given at the time of the nomination. Is there any merit to the complaint and is ignorance of the rules valid? Answer

Question MarkI'm on the board of a 501(c)(6) trade association. The board is looking into changing to a 501(c)(3) charitable organization (educational purpose). Is this possible without having to close the association and start from scratch? Or do we just need to complete and submit a Form 1023?  Answer

Question MarkA 501(c)(3) nonprofit sports organization runs basketball teams for elementary school age kids and rents a gym in a building owned by a third party. The gym was refurbished by the tax-exempt organization. Games and practices are held in the gym and there is a play area where parents can safely put their small children while they watch their other kids play and practice. The tax-exempt is considering renting out the gym for birthday parties when it is otherwise not in use. The rents received will be used to further the basketball program, help pay the rent, maintain the gym, buy basketballs, etc. Will this result in unrelated business taxable income? Answer

Question MarkI'm the new treasurer of a local 501(c)(3) youth sports league.  The former treasurer never sent out donation letters to people who donated in the past.  Can I send out a generic letter and have each participant fill in their name and donation amount, or do I need to produce individualized letters?  Also, what is tax-deductible? We collect a $395 registration fee per player to support the costs of running the club.  Do we need to put a value on the service rendered (playing time in the league) with that amount not being tax deductible, or is the whole registration fee tax deductible? Answer

Question MarkThe executive director of our 501(c)(3) nonprofit corporation wants to run for City Council? It could be really helpful to the organization. What do we have to worry about if she does it? Answer

Question MarkOur small 501(c)(3) nonprofit rural food bank has always opened our board meetings with prayer.  At the last meeting our executive director (an appointed volunteer position) said we were in violation of our tax-exempt status by doing that.  She also stated that we could no longer provide any religious guidance to our clientele on food issue days. Is she right? Answer

Question MarkIf a 501(c)(7) social club pays the start up costs of a related 501(c)(3) charitable organization, may the 501(c)(3) later reimburse the 501(c)(7) for those costs? Answer

Question MarkIs it true that a 501(c)(3) nonprofit literary magazine cannot publish any original works written by its officers (president, treasurer, etc.)? If so, why not?  Answer

Question MarkIn our annual church fund raising auction I sell tickets to three parties that I hold on my property. I supply all of the food, and entertainment. This year I raised over $3,000. What charitable contribution deduction can I claim on my federal income taxes? Answer

Question MarkThere is no reference to having an executive director in our bylaws. Our executive director is an independent contractor.  Can she sign any legal documents on behalf of the corporation? Should legal counsel be sending her any legal documents for the corporation? Answer

Question MarkI am an employee of a county parks department.  We have a 501(c)(3) nonprofit Friends organization that supports us.  I recently learned that another group is planning to form another 501(c)(3) nonprofit corporation to benefit one of our parks.  Can someone do that without our permission?  I know it may sound odd to question someone wanting to raise money for us, but we desire some level of involvement with the organization and they have not contacted us. Answer

Question MarkA member of our 501(c)(3) nonprofit community band organization has made a donation to us designated as a "holiday gift" for our conductor (who is an employee).  Can we accept such a designated gift and is it appropriate to provide additional compensation in this way? Answer

Question MarkI oversee a high demand fundraiser for our 501(c)(3) charitable organization that sells out weeks in advance every year. My committee wants our museum to auction off four tickets to the highest bidder after the event sells out. I think it is disingenuous and unethical for a nonprofit to auction its own fundraiser tickets. Am I overthinking this? Answer

Question MarkOur local chapter of a national 501(c)(6) membership association recently made our scholarship fund a separate 501(c)(3) nonprofit organization. A member's family donated $6000 with the stipulation that that money carry the family's name and the donor be on the selection committee for scholarship recipients. May a donor impose such requirements on the donation? Must we honor these stipulations?  Answer

Question MarkThe president of our 501(c)(3) nonprofit corporation officially resigned on November 4, effective December 26, and has just decided to un-resign. Can she do that without consulting with us, her board of directors? Can we say NO you cannot un-resign? Answer

Question MarkMy son participates in a baseball team that incorporated as a 501(c)(3). We have never seen the bylaws of the organization. I was told at the beginning of the season that we had to pay a $300 fee. The director of the organization was ousted by his own board and I no longer want to be a part of this team. When I asked for my money back, I was told it was a donation and could not get it back? Is this true? Also, our team currently has a surplus of funds. Do we get that money back at the end of the season if we do not continue with the team? Answer

Question MarkI recently acquired an outdoor movie theater and have donated full use to a 501(c)(3) nonprofit theater organization, for which I receive no rent. My accountant says the only way I can obtain a charitable contribution deduction is if I "recognize" income for the theater that would be equal to or greater than the amount of the deduction.  I do not understand. I have other theaters I operate for profit and pay tax on the income. I would be pleased to accept an objective/independent appraisal as a reasonable "rental value" donation. Answer

Question MarkIf a 501(c) (3) charitable nonprofit is given real estate with the intention that the organization will put the real estate up for auction is the donor allowed to deduct the fair value of the real estate or only the auction price? Answer

Question MarkShould the president and board members of a 501(c)(3) private nonprofit corporation know the name of an anonymous donor? Answer

Question MarkI requested a leave of absence as a member of the executive board and the board considered it a resignation. What are the correct options? I had no intention of resigning. Answer

Question MarkCan board members of a private foundation remain anonymous? A family has established a foundation for tax purposes as well as to preserve anonymity so that their donations are from the foundation and not from their personal checks. If family members also serve on the board of the foundation, do their names have to appear in the Form 990-PF or can some (foundation family) board be listed as “Anonymous"? Answer

Question MarkLast week you said a director could make a loan to a charity so that it could purchase a house at a bargain sale price. Will the loan from the director turn the house into unrelated debt-financed property so that a portion of the sale proceeds will be taxable to the charity? Answer

Question MarkOur 501(c)(3) nonprofit corporation reviews its bylaws annually. Prior to the proposed changes going to the membership, they are reviewed by the board of directors. The board forwards all proposals to the membership with recommendations for or against. A rationale is always provided for the board’s recommendation. Recently a member told me that the board should forward all proposals without any recommendation. Is this true? Answer

Question MarkWe have potential donors who might want to sell their home, which is listed now for $899,000, to our 501(c)(3) organization for $100,0000.  They would then take a tax deduction for the difference between its value and the $100,000 we pay.  Can a board member give us an interest free loan to purchase the home so we can sell it and make a profit? Answer

Question MarkThere seems to be a trend toward allowing underage juveniles to serve as voting members of nonprofit boards of directors. Our state nonprofit law was amended to allow one 15-year-old to serve on a board as a voting member. We have a split opinion among our adult directors about inviting a juvenile. If the board is sued, is the juvenile held liable or are his or her parents/guardians? When the 501(c)(3) board enters into contracts must the juvenile recuse himself/herself since juveniles cannot enter into binding contracts? Answer

Question MarkI am the new treasurer of a 501(c)(3) nursery school.  Parents are allowed to leave their children after regular hours for an extra amount of money, which the school considers fundraising dollars.  The teachers stay to “baby sit” the children and are given money to do so.  Should the teachers income be considered pay and be put in their paychecks subject to payroll taxes, or because the teachers are there to help raise extra funds for the school, is it all right to pay them cash for their efforts? Answer

Question MarkI am a board member of a 501(c)(3) charitable nonprofit wholly controlled by a 501(c)(7) tax-exempt social club. We are concerned about the issue of commingling funds. What are the key points for us to keep in mind? Answer

Question MarkI have been the president of our homeowners association for the past 11 years but I will be selling my condo soon and resigning as president.  I notified the board in January but they have basically ignored the situation. There are three other board members, and only one of those actually comes to meetings.  Now, they are calling for an audit/review of the association's financials.  I've put in countless hours running the association (doing literally everything).  At this point I feel that if they want to "find cause" they will.  One board member has even brought up lawsuits.  What can I do to protect myself from frivolous and potentially costly legal action? Answer

Question MarkI have given about $50,000 over the past few years to an organization that I thought was a nonprofit, a 501(c) organization. I have come to find out it is not. What can I do? Answer

Question MarkI am the CEO of a 501(c)(3). There are no term limits in the bylaws and one of the board members has dementia. None of the board members wants to address this issue. How do we get him off the board and should all bylaws have term limits? Answer

Question MarkI am the founder of a 501(c)(3) group home for individuals with autism, founded for my grandson who is autistic, and others like him.  I decided to step down as executive director.  I never paid myself more than $2,000/mo.  I wanted to stay on salary as PR & advocate.  The board says I cannot because of the new employment law.  I'm Founder, was executive director & my grandson lives there.  Is this correct?  They now will not let me see financials, minutes or anything even though it is public information. I live on my Social Security & my husband's retirement & don't have enough money to live on. Answer

Question MarkI am a trained reading specialist who works with dyslexic students. The parents pay me directly some parents contacted me to work with their child at his private school. The school says it must charge me rent in order to preserve its “nonprofit” status. I’ve never heard any other reading specialist mention that a school charge them rent. Is it true that they must charge me rent to preserve their nonprofit status? Answer

Question MarkMay employees of a 501(c)(3) organization campaign for candidates running for election as directors of the organization? All members of our board are member-elected. Answer

Question MarkI am representing myself and several current and past members, past association founding members, past association presidents, past association Directors, past honor recipients, and past conference hosts.  I have been a paying member of this 501(c)(3) association for over twenty years, and I have been attempting for nearly one year to get access to our new Executive Director and National Office Manager contracts.

I have recently been sent a letter by the association's attorney essentially telling me to cease and desist or else the association "will pursue all legal remedies available against" me, that the contracts are "confidential, sensitive, personal and proprietary to the Association."  I did say in my last email that I thought perhaps the entire association membership, the Better Business Bureau, and the IRS might be interested in some of these practices.  The attorney said I am harassing the association. The attorney also said because these "threats" were made, that it therefore demonstrates that the "demands are not made in good faith or for a proper purpose." We are concerned about how our association is being operated and would like to know what specifically the contract spells out in the way of expectations, duties, salary, incentives, bonuses, raises, etc.

Is this just a lawyer bluff trying to scare us off?  What should we do at this point? Answer

Question MarkOur nonprofit's bylaws state that there shall be the following elected officers: President, First Vice President, etc. Would having two co-presidents sharing the position of president be legally construed as being in violation of our bylaws and endangering our 501(c)(3) status? (We can't find any one person who wants to be president but there are 2 people who are willing to be co-presidents.) Answer

Question MarkCan our 501(c)(3) organization retain the right to refuse a contribution identified specifically for our youth program from a company whose business practices, based on member complaints, are not in keeping with our organizational standards, are not in the best interest of our organizational goals, and are not in the best interests of our members? Answer

Question MarkThe president of our 501(c)(3) organization has an interest in a social issue that has no part of our 501(c)(3). He insists that he can collect donations using our tax id number for his own social interest organization/movement.  As CEO of our organization, I think that this is an illegal use of our status. He argues that it is legal as long as he gives some of the collected funds to the original 501(c)(3).  Who is right?
Answer

Question MarkMy husband and I started a 501(c)(3) in 1982. We established a board of directors and it is still going strong. Now, however, my husband and I are divorced. He moved out of the state and has no involvement, and mine is minimal. I want to resign but I am President and Founder. My name is still on the original paperwork legally. How do I resign? I do not want to see the organization dissolve, I just don't want any legal responsibility as I move on in my new life. What should I do? Answer

Question MarkI am on the board of a very small water company that services about 25 properties. We are a member-owned nonprofit corporation that is now in the process of dissolving. We have about $6000 worth of equipment and cash but no other property or real estate. We recently received notice from the IRS that we lost our exempt status because we failed to file a Form 990 for three years. They are looking for two years of income tax. I am the newly appointed sec/treasurer of the association, and I didn't know that we were tax-exempt or that we were supposed to file an annual return. In view of our situation, how should we dissolve, and can we disperse funds to our members? Answer

Question MarkCan the president of a 501(c)(3) step down from the board in order to receive a salary from the organization? Answer

Question MarkOur recreational softball league began with an election but since then the board has become secretive.  Recently we have heard that they are using League funds for food and alcohol purchases, amended by-laws that we as members have never seen, appointed themselves for three-year terms and will be appointing two persons to fill vacancies.  My questions are: 1. Are financials required to be made public in a 501(c)(3)? 2. Can they fix the board positions? 3. Can they appoint directors? 4. Can League funds be used for food and alcohol? Answer

Question MarkA man signed a Certificate of Authorization that stated he donated money to a charity of his free will and relinquished all rights to it. Three years later, he demanded the money back, stating it was a loan. Can he get the money back? Answer

Question MarkMy private family foundation gave $500,000 to a hospital foundation’s donor advised fund to be used only to build a specific medical building at the hospital. The hospital partially built the building but then changed its use and scrapped the original plan. We and some other donors have requested that our donor advised funds be returned. Is the hospital foundation legally bound to return them if we demand it? It was very well spelled out what the funds were to be used for. Answer

Question MarkWe made a big donation to our child's school’s fundraising gala recently, but our accountant has discovered that although they do appear to have 501(c)(3) charitable exempt status, they are registered with the IRS as a church and not a school. They don't file 990s. It's not a church. It never has been. We donated to the school; we would never have donated to it as a church, especially as we know nothing about it being a "church". How can this be legal? What can we do about it? And how do we get our money back? Answer

Question MarkIs a nonprofit required to report anonymous donors to the IRS? Several colleagues have said that it is illegal for a nonprofit to not disclose an anonymous donor to the IRS. Schedule B of the Form 990 provides a listing of major contributors but I have seen 990s that list the amounts without disclosing names. Answer

Question MarkOur Orchid Society provides education on orchid culture to our members and other clubs who request our service. We have applied for 501(c)(3) charitable and educational classification.  We have an annual orchid show and plant sale as our only fund raising event. Our members sell plants and supplies at this function and provide us with 20% of the sale proceeds. I've been told that this is wrong and it appears that we are organized to benefit the members. Will this affect our ability to get (c)(3) classification? Answer

Question MarkThe board of directors of our 501(c)(3) nonprofit corporation will not share the new Executive Director’s contract with the members.  If members, who support the organization through their dues and conference fees, are denied access to the E.D. contract, how can they determine if there is possibly excessive compensation taking place?  The new budget has our Association operating at a huge deficit this year which is causing many of us deep concern over our economic stability. Answer

Question MarkOur national nonprofit is in a very difficult financial situation. The elected treasurer could not provide reports to the board last year because staff could not get new financial software to work right.  The treasurer recommended a new accountant who found that we were way in the red.  When a few directors called for the treasurer to be removed, the treasurer resigned. He had made several recommendations to save money that were not well-received (combining the Executive Director’s position with another, etc.) and many perceived he was "thrown under the bus" because of these recommendations.  One Board member mentioned that he might have recourse under a "whistle blower" law for nonprofits (Sarbanes/Oxley?). What do you think? Answer

Question MarkRecently one of our donors gave our 501(c)(3) charity a substantial donation and then turned around and asked us to write out a check in the amount of donation, less $200, to an NGO that we are not affiliated with and is not within our mission. Is this legal and what might he be up to? Answer

Question MarkIn July, 2010, we made a sizable donation to the local 501(c)(3) food bank. We never received an acknowledgement. We called them three times, and their excuses were that the computers were down, they were busy, etc. I realize the people who work there are volunteers and do a lot of good for the community. However, they were not too nice about our request. We thought legally they had to provide an acknowledgment for tax purposes. Where do we go from here? Answer

Question MarkMy mother wants to donate $100,000 to a school in Lithuania. How do we set her up to be a charity so she can write it off? Answer

Question MarkOne of our directors filed for a personal temporary restraining order against a member of our nonprofit corporation. The case was dismissed because neither party ever appeared in court. Now the director who brought the suit wants our Directors & Officers Insurance to pay his personal legal obligations. Can that be allowed to happen? Answer

Question MarkA local private nonprofit organization asked local architects to bid on the design contract for its new building. The architect who won the project is the husband of a board member of the nonprofit. I have always believed that a board member's family would be excluded from getting work from the nonprofit. It doesn't seem ethical or legal. Is it legal? Answer

Question MarkThe supporting organization to its 501(c)(3) parent arts organization has transferred funds to the parent supported organization to cover costs.  Although the transfer is shown as a contribution made on the supporting organization's Form 990 tax information return, the "supported" organization does plan to pay it back so the supported organization shows it as a liability on its financial statement.  Can the parent organization transfer funds to its supporting organization? Answer

Question MarkI am considering incorporating a nonprofit corporation for religious, educational and charitable purposes I talked to my accountant about a “single member nonprofit” which I read about on your website He told me that a single member nonprofit is not possible under our state law. He says that I need to have three board members and that if two of them are related it has to be five board members. Is that correct? Answer

Question MarkA 501(c)(3) organization makes handcrafted wooden cars that they distribute to kids in third world countries.  Several of us throughout this country are about to build these cars and send them overseas using the organization’s model, i.e. the originator's car designs, methodology, logo, stamp, etc.  At the moment, we are merely an extension of his original shop.  Would he and we be served better if we were 'chapters' of his organization? Answer

Question MarkIn our internet group of "Grant Writers," a question recently came up about writing grants on a commission basis.  While most of us believe this is unethical, one person strongly indicated that it is also illegal because you jeopardize the exempt status of the entity by taking a profit from the venture.  He said that earning a percentage of the charity's income is private inurement.  Would you consider commission-based grant writing to always be illegal? Answer

Question MarkOur 501(c)(3) friends of the library group raised money last year for the specific purpose of building an extension on the existing library.  It now turns out that we can’t build the extension, but can build a new building at another location.  One of our donors wants his $5000 contribution back. What should we do? Answer

Question MarkIn one of your answers you state: "One of the key questions to ask before agreeing to serve on a nonprofit board is whether the organization has an indemnification policy properly spelled out in the bylaws, and whether it has insurance to back it up."

I have been asked to join a board that carries officer and director liability insurance but nowhere in its bylaws (or elsewhere) is it written that the organization will indeed indemnify this same group.  Indemnification without insurance seems superfluous, but how about insurance without the bylaw indemnification clause? Answer

Question MarkIs there an easy way to locate applicable regulations regarding policies and procedures a 501(c)(3) charity is required to have in place?  I recently heard there are requirements for record-keeping and harassment policies and I wonder if there are other policies/procedures as well. Answer

Question MarkOur charitable organization is talking to a vendor that will provide the ability for our current donors to becoming solicitors or "champions" by creating a personal fundraising page, so they can raise funds through their contacts, on our behalf.  We obviously have no control over who or where they solicit. The vendor providing the service had not been presented with this issue before. Though we won't be knowingly soliciting contributions from residents in other states, we know that it is possible that our "champions" might.  Do we have to register in all of the states? Answer

Question MarkI am founder of an animal welfare corporation that has 501(c)(3) charitable exempt status. It's time for me to retire and let younger folks take over.  How do I legally go about "giving" it to them? Answer

Question MarkOur 501(c)(3) organization receives occasional donations (primarily through our website) from people in states in which we are not located or operating. Registering under each state's charitable solicitation law would cost more (in fees and time) than the donations are worth.  Can we act in a way that does not trigger the requirement to register in those states? Answer

Question MarkA donor just sent our 501(c)(3) 100,000 Iraqi Dinars in cash with a current value of about US$100. They believe when the Dinar revalues that the notes will greatly increase in value. Since we plan to hold the notes until the Dinar revalues, how do we receipt the gift? Do we use the US dollar value at the time the gift was received? Or, do we use the dollar value at the time gift is exchanged and deposited in our account? Answer

Question MarkOur 501(c)(3) no-kill pet rescue just put $500,000 into a barn renovation on our veterinarian’s property to be used for the pets. If he died tomorrow, his wife would sell the property, and profit from our charitable efforts. Is this legal for a charity? Answer

Question MarkDo I have to file a tax return with the IRS for 2010 for my new nonprofit animal rescue?  We have not even come out of the red with our vet bills yet. Answer

Question MarkCan inactive members sue to recoup funds? Answer


Question MarkThe organization of which I am treasurer is considering changing their corporate name. Who must be informed of this change? Answer

Question MarkRecently I tried to hire someone to pass out flyers for our organization and a member of our board said it is illegal because of our 501(c) status.  We are talking $30 per job.Is that true? Answer

Question MarkAccording to our bylaws, the Executive Committee shall consist of "a President, a Vice President, a Secretary, and a Treasurer".  Grammatically, isn't that four people?  Can one person have more than one job?  We have no VP, so when the present people meet for an Executive meeting, there will be 2 people there. Does the person with two positions get to vote twice? Answer

Question MarkCan a nonprofit culinary arts school own tax-exempt property and sell food to the public for profit? Is there a law regarding the percentage of revenue from tuition as compared to the percentage of revenue from food sales to determine how much taxes, if any, would be owed? Answer

Question MarkWe are a 501(c)(3) church. A church member wants to offer an exercise program in our facility to members and to the community for a charge/profit.  Does that affect our 501(c)(3) status even if we do not charge rent? Should we charge rent? The church does not have a mortgage. Answer

Question MarkWe have several corporations who sponsor our 501(c)(3)’s events and programming with donations varying between $1,000 and $5,000. They in return receive logos on our printed pieces, media etc. including some tickets to the events.  How do I figure out what part of their donation is tax deductible?  How do I value logo placement?  Is there a percentage formula? Answer

Question MarkOur Senior Friendship Club, a 501(c)(3) organization, is moving to other quarters.  We will no longer need some of the equipment. Can we raffle this equipment and give proceeds back to club? Answer

Question MarkOur nonprofit corporation is in real cash trouble and the board is thinking of closing up.  Where can we go for information on how to close and sell off the building and land? And what happens to the money? Answer

Question MarkThe son of an employee wants to commit monthly donations to the program his mom spearheads at our 501(c)(3) agency.  He wants to commit to nearly $20,000 over two years to help assure the program's sustainability and his mom's employment. He is asking that a commitment to his mom's work schedule be documented in the thank you letter? Is this legal? Answer

Question MarkOur 501(c)(3) opera company has received donations of items for a fund-raising auction and food and wine for the event. We have also received meals and costumes for out-of-town performers. Do we set the values or do the donors? Answer

Question MarkI am the Executive President and only remaining officer of a small nonprofit corporation. All of the other officers, i.e. vice president, treasurer, secretary, etc, have dropped out. Our constitution requires so many officers present to conduct business and to vote on constitutional amendments. Do I have authority to appoint acting officers for the purpose of transacting corporate business until properly elected officers take over? Our by-laws are silent on this issue. Answer

Question MarkIs it legal or ethical to call my business “Charity Boutique” if I do not have nonprofit or charitable status? The whole idea of my business is helping local nonprofits on a regular basis since 10% of sales benefit local nonprofits the buyers select. Answer

Question MarkI have just been re-elected President of our small nonprofit animal protection organization after three years off the board. We have been trying to sell some real estate since we inherited it in 2002. My choices of a board member capable of heading the Property Committee to sell this property were zero. I appointed myself head of the committee knowing I would take flack from a non-board member who makes trouble as a hobby. As President, can I appoint myself if I think I am the best person for the position? Answer

Question MarkAs a 501(c)(3) organization, we know that we may not participate in elections but can engage in lobbying activity on legislation. Advocacy is an important part of what we do. Can we take part in “political action” to advocate legislation, or would that raise a red flag on our exempt status? Answer

Question MarkWe are a small 501(c)(3) animal rescue that has applied for and been turned down for insurance. Our board members are concerned about personal liability. What are the risks of our board members being sued individually? Answer

Question MarkMay an incorporated church, which does not have 501(c)(3) status, receive tithes and offerings from its members? Answer

Question MarkThe bylaws of a public school educational foundation state that the corporation shall be managed by a board of directors “with the approval” of the Board of Education, and the board of the foundation is appointed by the Board of Education. Can the board of the foundation change the bylaws to assume separate independent status without the approval of the Board of Education? Answer

Question MarkCan a nonprofit cancel a person’s membership because of a disagreement between some board members who are also volunteers? It is basically a personality problem. Answer

Question MarkAre there specific IRS rules requiring 501(c)(3) nonprofits to use their donations for the purpose intended by the donors and disallowing them from soliciting donations for one purpose and then using them for another? What recourse does a donor have for such a situation? Answer

Question MarkI have been told that our 501(c)(3) charity cannot advertise on our website the services of a provider who is a cash sponsor of the organization and who is offering services at a discount to our members. Is that true? Answer

Question MarkI know you aren’t engaged in the fundraising business, but do you have any new ideas for charitable solicitation that might work? Answer

Question MarkThe Finance Committee of our 501(c)(3) is dragging its feet on a proposal to offer our fundraiser on a shopping cart web site (cost of which is being donated to the group) which we would tie in with our regular web site. The site would also allow members to pay dues, as well as offer the public the option to make donations with their credit or debit cards. They feel it would jeopardize our 501(c)(3) standing. Is that true? Answer

Question MarkIs it possible to ask for the return of money given to establish a scholarship fund? I am the only donor and endowed a fund 5 years ago with a gift in excess of $20,000 to honor a friend.  I have never been invited to a scholarship banquet where the award is given and never gotten a thank you note from a recipient, even though one has been selected each year! I know I am not one of the "big fish" that my university is always after, but would appreciate a little stewardship for my gift and loyalty to my college. Answer

Question MarkIf I should win the lottery and start a 501(c)(3) prior to collecting the winnings, would I be exempt from federal income taxes if I give the winning ticket to the charity? Answer

Question MarkIs it a conflict of interest for our volunteer board treasurer, who is an accountant by profession, to have an employee in his firm handle our internal accounting on a pro bono basis? Answer

Question MarkWhere can we find a 501(c)(3) that has been "retired" that we might quickly take over, rename and establish a new operation without going through the IRS? Answer

Question MarkCan a charitable contribution made on 12/31/2010 by credit card to a call center be deemed tax deductible to the donor in 2010 if processed on January 3, the next business day? Answer

Question MarkIs there a difference in status between a 501(c)(3) church and a 501(c)(3) community organization? I heard that there are more grant monies available if an organization is a community organization rather than a church. It doesn't make sense to me. Answer

Question MarkCan a nonprofit (501(c)) organization have an owner?  I started my organization, selected a board, and run the organization, but I am never sure how to answer the question: “Are you the owner?” Answer

Question MarkWe are a 501(c)(3) charity that is exempt from state sales tax in our home state. We recently sent an employee to another state for training and the hotel insists we must pay sales tax and city taxes on the hotel room. Is that legal? Answer

Question MarkCould distributions from "peer or employee emergency funds” held by foundations of universities, hospitals, businesses etc. be considered insider grants?  The funds are held for employees in need but the employee-donors do not choose the beneficiaries and may not even know who receives help. Answer

Question MarkIf a for-profit business or an individual owns real estate, can the owner lease the property to our charity and can we get the property exempt from real estate tax for the period of the lease?  We have an organization that would lease a warehouse very cheaply to our food bank if we can get an exemption. Answer

Question MarkOur 501(c)(3) nonprofit organization is fundraising by asking local businesses to donate to our organization. One business is asking us to provide volunteers to help it during an event, and in exchange they will provide us the funds. Is this a violation to the rules for 501(c)(3) nonprofits? Answer

Question MarkMay a 501(c)(3) organization make a cash grant to a member who faces significant personal challenges, such as loss of a child, serious illness or long-term unemployment? Answer

Question MarkRecently several artists put together an exhibition to sell their artwork to raise money for a local charity.  I proposed that the buyer make out a check to the charity for the full amount of an artwork, and the charity then pay a percentage to the artist.  We agreed to a 50% split.  The charity would then acknowledge the other 50% to the buyer as a deduction.

If instead the artist wanted to claim that 50% deduction, can the charity acknowledge it as a deduction for the artist?  Is there a standard method used in these circumstances? Answer

Question MarkOur 501(c)(6) veterans business organization recently attended, along with other veterans organizations, a "meet and greet" with a mayoral candidate. We paid one of our members to photograph our attendance at the event. Is there any way this could be considered political activity that could cost us our exemption if these photos are just going into our archives, might someday appear in our newsletter, but are not being used except for souvenirs for the veterans in our organization? Answer

Question MarkWe are the national headquarters of an academic honor society with 501(c)(3) status. Does our tax-exempt status extend to all of our chapters across the country? Those who run chapters often ask to have our EIN so they can establish checking accounts, do fundraising, etc. But we are hesitant to do so. Answer

Question MarkCan the President of our struggling 501(c)(3) take a tax deduction for personally paying most of our expenses during our first year in operation? Answer

Question MarkA member of our nonprofit swim club has offered a bylaw amendment requiring that Board minutes be made readily available to all members and that votes not taken in executive session be incorporated in the minutes, including the voting results by name. Votes on sensitive issues (personnel for example) need not be so published.  What do you think? Answer

Question MarkA person who claims I owe him money has filed a lawsuit against my California charity in effort to recover the claim.  He alleges that the charity is an "alter ego" for me personally (which is untrue) and that entitles him to the money in the charity. Is this legal? Answer

Question MarkCan our small grass roots nonprofit corporation refuse membership to people who do not support our Mission?  They disrupt every meeting, waste precious time, and cause us to lose our focus.  They have also tried to change the Mission to serve their immediate purposes.  Our bylaws require that members support our Mission, Purpose and Goals.  Is that enough? Answer

Question MarkI see many cases where staff at a nonprofit doesn't work very hard, is not organized well, or otherwise appears to be what we would call "classic under-performers" in the for-profit business world.  Is there anything to legally prevent a charitable organization from basing part of employee compensation (bonuses) on the nonprofit’s success or the success of an individual’s role within the organization? Answer

Question MarkIs it against the law to record a meeting of the board of directors of a nonprofit organization? Answer

Question MarkWe are considering whether our charity should raise funds with an internet auction or through text messaging.  Do you see any registration problems? Answer

Question MarkOur band booster organization is incorporating and will seek 501(c)(3) charitable recognition. The officers insist that no provisions for an annual audit are necessary; they believe that having several of the members review the books is sufficient. Is a 501(c)(3) not required to have an external audit? Answer

Question MarkWe are a 501(c)(3) community theatre that produces a play program for every production. We are trying to encourage local businesses and individuals to buy space in it to advertise, or to send personal messages to the cast/crew. We indicate in writing that the charges are a direct donation to the theatre. A candidate for local public office wants to purchase ad space. Can we do this? Answer

Question MarkDoes a nonprofit have to be 501(c)(3)?  We are incorporating and filing/drafting by-laws. Can the 501(c)(3) portion wait if we don't take in any funds and can give charitable contribution receipts by an umbrella org?  Can we still call ourselves a nonprofit until we get 501(c)(3) status? Answer

Question MarkWe have a 501(c)(3) youth sports program. Some members of the board want to allow restricted gifts to the organization for the purpose of paying a specific player’s fees to participate. I have an ethical issue with this type of restriction but is it a valid opportunity? Answer

Question MarkIf a majority of board members of a nonprofit corporation wish to propose a motion of "no confidence in" or "resignation of" the president, does the president have a "conflict of interest" in voting on this motion?  How is such a motion handled in the case of serious dereliction of duties by the president, none "illegal" but basically taking actions without board approval or refusing to carry out actions voted on by the board? Answer

Question MarkA charitable organization is considering a grant to another nonprofit.  One individual serves on the board of both organizations. Even though this conflict of interest was disclosed, should the board member abstain from voting on the grant or should the board member vote if he/she believes that it is in line with the missions of both organizations? Answer

Question MarkIn a sole member corporation, does the Board of Directors simply serve in an advisory capacity?  Where can I get a sample set of bylaws that shows how this works? Answer

Question MarkDoes a 501(c)(3) have a limit on the total percentage it can take in as fees for service.  We operate 3 dental clinics on a sliding fee scale. Does our yearly income have to be less than X% revenues generated from services, with a balance coming from grants, fund raising and other donations? Answer

Question MarkAn employee of our nonprofit religious organization was responsible for getting sponsors for our programs and for organizing and conducting mission trips to another country.  When she quit, did she have the right to take our sponsor list and mission trip participant list and to use in soliciting them for another nonprofit? Answer

Question MarkMay a 501(c)(3) nonprofit use general funds raised from donations to support the operations of a for-profit subsidiary operating discount stores (operating daily)? Answer

Question MarkWe have a large email list but do not know the primary state of all of the people on it.  Which states require registration before we solicit for charitable contributions and what should we do about it? Answer

Question MarkAfter a Board member has resigned, what legal documentation must be amended to remove his/her name from the nonprofit corporation's 501(c)(3) filing? Answer

Question MarkMay a 501(c)(3) organization return a gift that was given to it if the donor requests the money be given back? The gift of $50,000 was given 5 years ago to publish a book that hasn't been finished yet.  The book will probably be finished this year so at that point will be published if the money is still there. Answer

Question MarkOur 501(c)(3) social service organization recently applied for a grant from a public charity that collects contributions from the general public and then makes larger grants to organizations they think can help alleviate problems in the community.  In the interest of “transparency and accountability,” they have asked to see copies of our board minutes for the last year.  Can they do that? Answer

Question MarkI founded a nonprofit humane corporation 4 years ago and was the sole founder and operator until a year ago. I had a board of directors consisting of 5 members. The board recently voted 3 - 2 to terminate me as executive director. I was not given a hearing and was told after a special meeting that I was terminated because I did not possess the skills that the board expected. My termination was really due to a personality conflict between me and one of the board members who got two of the other board members to vote her way and remove me.  Do I have any rights to the organization as founder and the fact that I wasn't given a hearing to defend myself? Answer

Question MarkWe are a 501(c)(3) nonprofit research organization.  A 501(c)(6) business membership association is starting to show strong support for us, as our research is valuable to them. Can the (c)(6) trade association ask its members to support us (either directly, or by collecting donations from members and then sending us one large donation check)?

What charitable solicitation registration requirements would be in play? We know that most "member" organizations are exempt from registrations, but if they are soliciting on behalf of our 501(c)(3), the waters seem to get muddy. Help! Answer

Question MarkWe are a small 501(c)(3) animal rescue that has applied for and been turned down for insurance.  Our board members are concerned about personal liability.  What are the risks of our board members being sued individually? Answer

Question MarkI am on the board of our 501(c)(3) youth football nonprofit.  Our president has harassed and physically raised a hand to a parent.  He is also profiting from our organization in his printing business, and we suspect that he is taking money from our organization illegally.  If we complain, he will kick us out.  When I complained, after he was re-elected president, he refused to give me a badge and told me to leave the field.  Can he legally do this?  Where can we go for help? Answer

Question MarkIs it legal for a 501(c)(3) charitable organization to donate to a 501(c)(6) trade association? Answer

Question MarkCan we sell ads in our nonprofit newsletter? Answer

Question MarkMany states offer exemption from charitable solicitation registration if a charity raises less than a specific dollar amount.  Do these dollar limits apply to funds raised within each state, or do they apply to funds raised in the aggregate in all states? Answer

Question MarkI am a board member of our local youth sports league.  One of our general members is never happy with our coaching selections and continually harasses the entire board. We would like to remove him so we can actually focus on the league. Can we legally remove him as a member (thus not allowing his child to register to play in our system)? Our bylaws are silent on this issue. Answer

Question MarkDoes our volunteer school group need to have 501(c)(3) status to raise funds for the activities we do for the children?  I've been treasurer for 4 years and I was told that we need to do this.  Is it true?  We have an Employer Identification Number - isn't that enough? Answer

Question MarkAs of May 15, the IRS can declare that any nonprofit that has not filed a Form 990 for three years is no longer a tax-exempt entity.  If a 501 (c)(3) has had its finances managed by another 501(c)(3) and the larger 501(c)(3) has filed a consolidated Form 990 for the past three years without mentioning that it is the fiscal agent for the smaller nonprofit, is the smaller nonprofit going to lose its tax-exempt status because it has not filed separately for three years? Answer

Question MarkOur 501(c)(3) organization owns an historic property.  We purchase many items online with a credit card and would like to obtain a card that does not require a personal guarantee. How do we go about getting one?  We have an excellent credit rating. Answer

Question MarkOur organization raised about $5000 10 years ago for a building that was never built. We still have the money and would like to put it in the general fund. We do not know who all of the contributors were and the ones we do know about are no longer around. Can we transfer the funds? Answer

Question MarkAre there standards for solicitation materials used by organizations with a 501(c)(3) tax-exempt status?  I'm concerned about a particular organization that insists the U.S. government is covering up the existence of UFOs, and part of the material they use to solicit donations has been repeatedly challenged and disproved. Can they get away with this? Answer

Question MarkCan a Certified Public Accountant draft bylaws for a start-up nonprofit? Answer

Question MarkI belong to a 501(c)(4) community association that has a separate 501(c)(3) charitable foundation to support our charitable programs.  We are being told that the boards must be separate with either no overlapping members or a small percentage of overlap.  I cannot find anything that addresses this. Can you help? Answer

Question MarkShould our bylaws spell out our organization’s purpose and mission?  Isn’t it helpful to have a clear statement of purpose as one of the first provisions? Answer

Question MarkI am thinking of starting a new 501(c)(6) trade association and providing all of the initial funding, but I would like to get it back when the association is able to pay it. Someone told me that any payment to me would be considered a preferential payment and could jeopardize the organization’s exempt status.  Is that true? Answer

Question MarkI am seeking 501(c)(3) charity status and questioning whether or not to become incorporated.  Why or why not should one be incorporated? Answer

Question MarkWe just learned that our daughter's private school is a 501(c)(3).  We are told that means that a portion of the tuition is tax deductible.  Can you give me the details regarding this? Answer

Question MarkOur 501(c)(3) child care facility wants to allow another 501(c)(3) agency to take over management of the child care program.  We have a mortgage on the building and will "lease" it to the other agency to continue our mission.  Is this legal?  Will we have to pay real estate taxes or lose our (c)(3) status? Answer

Question MarkIf one member of the board of directors of a nonprofit corporation will not approve the minutes of a previous meeting because the director disagrees with what is written (while all others agree), how is this resolved? Answer

Question MarkThe director of our 501(c)(3) dance organization is also a paid teacher of the dance studio where our practices are held.  The studio owner and the director have decided to hold auditions for the nonprofit organization and the studio teams at the same time and charge a fee to each girl trying out. They have also required that to be a member of the nonprofit program you must also be a team member of the studio, which benefits the studio owner and the teacher/director.  Does this jeopardize our charitable status? Answer

Question MarkMy father had real estate worth $50,000 that he deeded to my brother and me.  Later he decided he wanted us to deed it to my Section 501(c)(3) ministry, which we did.  My father has died and I am wondering if there is a way my brother and I can get this inheritance back without taxation. Answer

Question MarkWe are planning to start a nonprofit and another nonprofit group that closed down is offering us its 501(c) status for our new organization. Is this possible? Answer

Question MarkIs it legal for a charitable Humane Society to receive donations and use a staff vet to perform regular vet duties, such as surgeries, vaccines, etc. for the general public? Obviously, the Humane Society can charge reduced fees because of the donations. Is there something that protects a vet in a small business who is unable to compete with the reduced fees? Answer

Question MarkI am interested in converting a financially struggling 501(c)(3) nonprofit to a for-profit. My idea is to continue the mission of the organization but operate as a for-profit. Is this possible? Answer

Question MarkOur 501(c)(3) retirement center often receives a gift like a lift chair or motorized wheelchair when a resident passes on.  The gift usually comes when a family member is clearing out the person's apartment.  To whom should we acknowledge the gift?  Should it not be from 'the estate of the deceased' if the item was in their possession at time of death - regardless of who may have purchased it and/or when? Answer

Question MarkA nonprofit organization wants to partner with me in a situation where I would provide my tax preparation services to individuals attending an event and have the individuals pay me directly at a discounted rate. The nonprofit will secure the location under its name and run the event. Is this legal and if it is, should I be collecting fees directly?  Also, how should a contract be set into place? Answer

Question MarkDoes a very small, rural food pantry need a 501(c)(3) for the public to donate small amounts of cash or food? We have donors who would like to take their $25 donation as a charitable deduction on their income tax return. Answer

Question MarkMay a 501(c)(3) college donate a horse to another charity if the horse was donated to the college and has not been there for 3 years? Is there any law or regulation on this item? Answer

Question MarkIs a whistleblower policy created solely to protect staff or do its protections extend to protect trustees and volunteers? Answer

Question MarkWe have recently formed a nonprofit in support of the arts. We have just submitted the application for 501(c)(3) status. At what point may we call ourselves "tax-exempt" for purposes of solicitation? Answer

Question MarkSeveral years ago an individual's membership in our 501(c)(3) organization was revoked for what was considered an infringement of a by-law. The person was never offered the right to appeal - he would now like to rejoin the organization. Do 501(c)(3) organizations usually offer the right of appeal? Answer

Question MarkDo you consider it a conflict of interest for the executive director to also serve on the board? Answer

Question MarkOur nonprofit has a social worker who assists elderly clients apply for benefits and referrals to other organizations.  She is well respected and has always been very ethical. Her husband was the realtor who sold the home of one of our clients who moved to a retirement community. I'm concerned that clients might be being steered by our social worker when they are in need of a realtor and that it is at least an appearance of improper influence or possibly a conflict of interest.  Should she be told to not speak with clients about her husband's profession or should she give them a list listing several firms (including her husband's) but not list individual broker's names? Answer

Question MarkYou have answered several questions about sole member protection for founders of nonprofit organizations.  Would a sole member clause in the bylaws be sufficient?  I recently filed the articles of incorporation that only asked for the 3 initial directors.  Do I need to amend the articles to include sole membership? Answer

Question MarkI am involved with my local 501(c)(3) kids’ sports league and want to do a 50/50 Super Bowl pool, where half the money goes to the winner and half the money goes to our local league and another charity.  Is this allowed? Answer

Question MarkI am currently President of our school's parents’ organization and recently learned that over the past 10 years "monetary gifts" were given to every employee at our school. This information was never passed on to parents, so in addition parents collect class funds toward a gift. Our purpose is to raise $25,000 for a school assessment, and to enrich the lives of our students. Is it wrong to utilize fundraising money to furnish Christmas gifts for teachers without telling the members? Answer

Question MarkOur 501(c)(3) educational organization operates solely on membership contributions.  One of our primary activities is to work one on one training local governments on the laws which allow them to coordinate local plans and policies with those of state and federal agencies.  This includes traveling to their locations and spending several days.  Local governments are reluctant to make contributions to us for fear of showing favoritism, so we often recoup only travel costs.  May we charge a fee for these services? Answer

Question MarkI'm a new volunteer member of a nonprofit board of directors and am being asked to sign a non-compete agreement.  The agreement covers all areas of the nonprofit’s involvement (marriage and family counseling, youth ministry, music, drama, martial arts, etc.) and applies to a 5-mile radius of any office or ministry location and for 5 years after I leave the board.  Is it customary to ask a volunteer board member to sign a non-compete agreement? Answer

Question MarkI am a director on a three-member board and also one of the founders and incorporators of the nonprofit corporation. Of late, the other two board members discuss issues amongst themselves and do not involve me in matters of importance and decisions. Is this legally valid? Answer

Question MarkA new member of our Board, who is a bookkeeper, wants to have an electronic copy of our financial system so that she can go through and check everything out.  I feel very uncomfortable giving her a copy of all our information. Am I just being paranoid? We have nothing to hide. Answer

Question MarkA 501(c)(7) social club formed a nonprofit organization to carry certain charity and scholarship programs for the club. The nonprofit received 501(c)(3) charitable status from the IRS. Can the 501(c)(7) club appoint or elect the board of directors of the nonprofit? They would hold separate board meetings and maintain separate minutes, records, bank accounts, etc. Answer

Question MarkOur 501(c)(3) is creating a new website and one of our donors has offered to pay the final payment.  Can he pay the company directly, and, if so, can we give him a receipt for an in-kind donation for the amount he paid on the nonprofit’s behalf? Answer

Question MarkIs the local Archdiocese exempt from charitable giving laws?  The Archdiocese just completed a five year capital campaign for each diocesan high school.  Each school had a school specific case statement.  Now that the campaign is over, the Archdiocese has announced the closing of three schools.  Shouldn't the donors (of millions of dollars) be given the opportunity to redirect the funds or have them returned?  What laws govern? Answer

Question MarkSomeone on the board of our 501(c)(3) charity feels we are required to send a letter to each person who bought a ticket for our recent fundraiser to let them know the actual cost of the dinner so they can write off the "donation." The same person feels we have to notify silent auction winners of the actual value of the items they bought compared to the payment.  Are we required by law to do this? I can understand having that information available if they ask, but to send out 300 letters...yikes! Answer

Question MarkOur 501(c)(3) organization recently received a Chinese “knockoff” of a patented U.S. product for sale at our silent auction.  A representative of the company holding the patent agreed that it was a fake.  We told the donor and withheld it from sale.  The donor wants the item back. Should we give it back or give it to the company?  Do we have the right to give the donor’s name to the company? Answer

Question MarkWe are about to implement a more formal pro bono attorney program within our Legal Center to be able to meet the overwhelming needs of our clients.  We would like some input about showing these in kind services on our financial statements.

We could be talking about a large dollar value for these volunteer services and I am not sure if it would skew our bottom line revenue to include all of this.  I understand from our auditor that we have a choice about whether to include it or not.  Do you have thoughts on this? Answer

Question MarkUnlike many nonprofits that are operating under the crushing weight of our economy, we can (attempt) to raise additional funds by focusing additional efforts on ad sales for our magazine. Since another salaried employee is outside our budget, we are curious if we, as a 501(c)(3) organization, could hire a commission-only sales rep for classified ad sales or add a commission incentive for the display advertising rep.  These commission programs would only apply to ad sales and not fundraising, of course. Answer

Question MarkA private foundation provided a very large portion of the money used to construct a new facility for a private school. Upon completion of the facility, the foundation was not pleased with the management of the school.  It demanded that all of the existing board resign and a new board was implanted to run the facility. No written agreements were in place when the donor provided the construction funds. Has a crime or legal violation been committed? Answer

Question MarkI am a professional musician and recently accepted an organist/pianist position with a new church.  I have been told by the finance person that allowing me to teach lessons to church members 2 afternoons a week in a room of the church would jeopardize the church's 501(c)(3) status.  I have offered to pay rent, or fee, etc., but she stands negative on this matter. Is she correct? Answer

Question MarkRecently the new President (and co-founder with me) of a 501(c)(3) charitable corporation has begun trying to fire the entire board of directors. The new president says our legal and financial filings are all “solely under my name” and has encouraged the directors to resign. The IRS documentation was under both names (his name as treasurer and my name as president.) Can the new president hijack the organization? The board is 6 to 2 against him, but the Bylaws do not specify how to remove a president and for which reasons? Can we fire him? Answer

Question MarkWhen a 501(c)(3) charity encourages its friends and donors to share an appeal for support with their friends through a social networking medium, does this raise legal concerns? Answer

Question MarkMay a 501(c)(3) private school give a house to the family members who started the school in exchange for over 50 years of unremunerated service? Answer

Question MarkIf a 501(c)(3) medical clinic for the under- and uninsured charges patients fees for services that don’t cover the total costs of operation and raises the remainder of the budget from charitable contributions, what can be the ratio of fees to contributions? Answer

Question MarkWhen the state nonprofit statute requires notice of a members’ meeting to be given either personally or by mail, does this include electronic mail?  We would like to include email communication/notice in the bylaws as the means of communication. Answer

Question MarkOur for-profit organization would like to host an event to raise funds for a charity.  What is the legal percentage/portion of the proceeds that should be donated to the organization for it to be considered a charitable event? Answer

Question MarkI am a member of a 501(c)(3) service club. I am told that the club cannot make a contribution to a 501(c)(3) youth organization because my wife is a member of its Board and that such a gift is prohibited by the IRS as a conflict of interest. Is this true? Answer

Question MarkI am a member of the board of a 501(c)(3) horseback riding facility.  Another facility near us calls itself a "nonprofit" organization on its web site but is not on the government's list of 501(c)(3) organizations.  Can an organization advertise itself as a nonprofit, but not be a 501(c)(3) organization? Answer

Question MarkOur 501(c)(3) organization, chartered to teach, promote, and foster a particular art form, has members who vote for directors and some officers in periodic elections.  Members receive a monthly newsletter which covers internal organization news and events such as seminars and shows.  They also receive an annual membership directory and some degree of coverage under the organization's general liability insurance.  The per-member cost of these services roughly equals the member's dues.  Are the members' dues tax deductible? Answer

Question MarkAs a board member of a charity, I've been asked to report the number of hours that I work per week even though I receive absolutely no compensation.  I think this is a huge infringement on my privacy and I'm wondering if the IRS truly intended to ask for volunteer hours. Answer

Question MarkThe bylaws of a nonprofit corporation state that it is a membership corporation that requires a membership vote to dissolve, but as a practical matter it stopped operating a number of years ago and has no current members. How do the 3 remaining trustees go about dissolving the corporation? Answer

Question MarkIt seems that there may be an overlap between “private inurement” and “excess benefit.”  What criteria are used to distinguish one from the other?  It seems that excess benefit is the lesser sin and poses a smaller risk to losing one’s exempt status. Answer

Question MarkOur 501(c)(3) grassroots advocacy group is composed of low-income individuals, and our board is elected from our membership.  While always excited about their part in the organization, the current board has become detrimental to the organization, community-wise and work-wise.  We are thinking of disbanding the board in order to reappoint a new board.  But, if we disband the board, is it the same as disbanding the organization?  We want to ensure the continuation of the organization and maintain the support of our community members. Answer

Question MarkWhat is the duration of a 501(c)(3) exemption? Answer


Question MarkHow do you account on the Form 990 for the revenue from a fundraising event?  I understand that if the donor/payor pays $300 for the gala dinner that is worth $50, the revenue has to be divided on the Form.  How do you do it? Answer

Question MarkMy husband and I have a small foundation and want to make a grant to our church for our at-risk youth mentor program.  The pastor says I can’t specify where the money is to be used.  Is that true? Answer

Question MarkI have incorporated a nonprofit and obtained a tax ID number, but haven’t filed yet for 501(c)(3) status.  I am about to host a fundraising event.  Can I solicit money for the nonprofit or will I need to pay taxes on the money donated until the exemption letter is received? Answer

Question MarkWe have a 501(c)(3) youth sports club. Can donations be used to cover the costs of an in-need player (uniform, fees, etc.) or do all donations have to be spread so that all players (regardless of need) benefit equally?  We have been told that we cannot have a “scholarship player.” Answer

Question MarkA local charity asks donors to make contribution checks in the trade name by which the organization does business, not the legal name by which it is registered with the IRS.  The IRS does not have any record of the trade name.  Is it legal to ask for contributions this way and will the donors be able to claim a contribution deduction if they don’t use the official name? Answer

Question MarkI am currently on the Board of a 501(c)(3) organization that requires each director to sign a conflict of interest statement at the first meeting but does not update the form annually?  Is an annual update a legal requirement? Answer

Question MarkCan a 501 (c)(7) nonprofit private social club sell services or products to the general public at a profit used by the  Club to contain members’ dues? Answer

Question MarkHow can someone get a group stripped of its 501(c)(3) charity status? I am concerned about an animal shelter that does not provide basic care for the animals in its care. Answer

Question MarkAre 501(c)(3)’s restricted in the number of fundraisers they can have in a year? Answer

Question MarkMay a nonprofit 501(c)(4) community organization refuse to admit a member because “you don’t fit in”?  The bylaws say that membership “is open to all singers, musicians, entertainers….” Answer

Question MarkMay our independent accountant serve as an uncompensated member of the Board of our nonprofit? Answer

Question MarkCan our 501(c)(3) public charity weigh in on President Obama’s nomination of Judge Sotomayor for justice of the Supreme Court, or is that impermissible electioneering? Answer

Question MarkI work for a web development company that has been donating services and hosting to a new nonprofit that has not yet received its 501(c)(3) recognition. The organization’s site currently claims they have obtained this status.  My question is twofold: 1) Is there a possibility of prosecution for our company or for the organization? 2) If exempt status is not received, can we still claim an itemized donation deduction? Answer

Question MarkIs it proper to set up a 501(c)(3) scholarship fund, where scholarships will be used to send children to a specific for-profit camp?  The scholarship fund will be funded by donations, and the scholarship application process would be open to the public. Answer

Question MarkI have been told by more than one "expert" that an exempt organization that changes its name must file a whole new application for exemption with the IRS. I've seen organizations implement new names as fictitious names just to avoid having to file again.  Are these “experts” correct? Answer

Question MarkYou state that the new Form 990 requires disclosure of the compensation of employees receiving more than $100,000. When you say compensation, are you speaking only of wages or does this include benefits? Answer

Question MarkWhat language should be included in nonprofit bylaws to provide a plan of succession in the event that the founder of a sole member nonprofit corporation (who has exclusive authority to amend bylaws and appoint directors) dies or becomes incapacitated? Answer

Question MarkIf a 501 (c)(3) is considering dissolution and it "owes" money to vendors, can it award severance or bonuses to staff? Answer

Question MarkWhat rules govern the disclosure of nonprofit salaries? I understand that, while only the top five highest paid employees must be disclosed on the Form 990, all salaries are public information and must be released if requested by a funder, whether private or government. Is this correct? Answer

Question MarkI just read your question about lottery winnings over $600, where you said the winner had to pay income tax on the value of the winnings.  Does this same treatment apply to charity auction items? If I bid and win an auction item valued at more than $600 and only pay a percentage of its value, do I have to pay income tax on the difference? Answer

Question MarkMay a nonprofit youth sports club purchase all the equipment and uniforms from the president’s sporting goods store, and can a director run the concession stand as his own profitable business? Answer

Question MarkOur charity has chosen to honor Al Gore at a banquet this fall where he will be speaking about global warming and probably promoting cap and trade legislation.  If that legislation is under consideration at the time of this event, would we be jeopardizing our 501(c)(3) public charity status? Answer

Question MarkIs there a cap on what charities may pay a grant writer? Our shelter would like to pay 20% across the board for all grants obtained, regardless of the amount, but we need to make sure that is legal. Answer

Question MarkAre nonprofit organizations held to higher federal standards than business corporations? Are they subject to more scrutiny from federal agencies? Answer

Question MarkWhat court cases or IRS rulings, if any, define restricted funds?  Can an officer of a charity restrict funds by saying at a fund raiser that funds raised at the event will be used for a certain purpose, or must the donor state explicitly a restriction on the use of the funds? Answer

Question MarkCan officers on a Board abstain from voting? Answer


Question MarkWhat is the best policy to remove board members for improper conduct or otherwise not fulfilling their duties? Our bylaws unfortunately only mention that board members can be removed for 3 unexcused absences from board meetings, not for other behavior including refusal to fundraise.  We also do not have term limits.  The board member in question has been on the board for many years! Answer

Question MarkIs there any precedent for a nonprofit ministry founder taking donated funds and buying property in their own personal name -- (not in the name of the charity) and then leasing it to the charity for a 99-year lease? And is this allowed by the IRS rules for 501(c) (3)? Answer

Question MarkMany groups I know use their websites to solicit donations. This means they receive money coming in from other states where the 501(c)(3) group is not registered to solicit. Because much of their solicitation was done online, through newsletters, e-newsletters, or via e-mails, could they get in trouble for not registering in every state? Answer

Question MarkCan our nonprofit theater company sell advertising space in our programs without jeopardizing the (c)(3) status? Answer

Question MarkWhat is needed to make a gift restricted? Answer

Question MarkOur 501(c)(3) organization was given a donation of merchandise.  The donor is claiming a deduction of $86,000. We sold it at a garage sale for $7000. Can we give the donor a receipt for the $86,000? Answer

Question MarkWe are a 501(c)(3) organization and have a scholarship fund. The scholarship funds reside in the scholarship savings account until it is time for payment and are then transferred to the general account that has a checkbook attached.  Is this considered commingling of funds? Answer

Question MarkMay the founder and board members of a nonprofit get paid a salary?
Answer

Question MarkCan a 501(c)(3) entity accept directed, earmarked federal funds without losing its nonprofit status and without violating federal and state law? Answer

Question MarkOur church is selling its church building and grounds.  Can the proceeds be kept and the church continue to operate out of someone's home?  What about the interest that the proceeds would earn while in the bank?  We will have about $2 million in proceeds. Answer

Question MarkOur Church is considering opening an E-store on our website. If we sell merchandise under "suggested donation" with shipping and handling charges only, can we remain tax exempt? Answer

Question MarkShould a board of directors consist of individuals who reside in another state? Should they be able to come to the state just to vote? Answer

Question MarkIs it necessary to have a conflict of interest clause in a nonprofit's bylaws in order to file a complaint? Answer

Question MarkI want to put a large sum of money I am about to receive into a nonprofit for the purpose of distributing the annual income for charitable purposes of my choosing.  I want this asset to continue protected and run by a family member after I am no longer able to run it.  What is the best vehicle to use to proceed? Answer 

Question MarkA donor to our organization has offered to match gifts from other donors.  Is there anything to preclude another donor from obtaining a matching grant from his employer and asking the first donor to match both gifts? Answer

Question MarkAs a guideline, what is the biggest general concern to be wary of in revising 501(c)(3) bylaws? Answer

Question MarkAfter fifteen years of dedicated volunteer service, I was dismissed from a 501(c)(3) museum without any warning, reasons or a hearing. I have no doubt that I was the victim of a vendetta, perpetrated by an immature, jealous president. A number of members are upset by what has taken place, and their efforts in my behalf have also been ignored. What can I do? Answer

Question MarkWhen paying for services or materials, do nonprofits pay state sales tax? Answer

Question MarkI want to know whether my church is in good standing with the IRS as a 501(c)(3) organization.  The pastor will not provide information on our membership, the Board meeting minutes, or our finances.  What can I do? Answer

Question MarkIs it illegal for a group to claim it is a nonprofit when it has no nonprofit status?Answer

Question MarkOur 501(c)(3) has had the same treasurer since 1986.  She is the only person who signs checks and is fighting adding anyone to the account.  We do not get monthly reports and there are some questions about some things, but we cannot seem to get a straight answer.  Everyone is aware of the situation but she was just reelected.  Are there federal laws governing how the money is to be handled? Answer

Question MarkI'd like to make an interest-free loan to a 501(c)(3) charity.  I've heard I may be taxed on the income my loan generates for the charity.  Could this possibly be true? Answer

Question MarkThe new pastor of our church has driven out half of the members and all the major donors, including me.  He is now asking the members to sell the church building to fund his new video ministry.  If they do so, can those of us who gave $500,000 to reduce the mortgage in the last two years get our money back? Answer

Question MarkAnother member of the board of our nonprofit rape crisis center asked about the salary and benefits for the Executive Director who works 20 hours a week.   We found a 2006 Form 990 that shows it exceeds $90,000.  Is that acceptable for part time under 501(c)(3) rules?   It has slipped by over the years through blind trust on the part of board members. Answer

Question MarkWe are a new nonprofit that uses a fiscal sponsor for our federal 501(c)(3) status but otherwise operates independently as a registered charitable corporation in the state.  Can we get renters’ insurance if we're only incorporated at the state level, or do we need to get our own federal status to accept a lease arrangement? Answer

Question MarkA 501(c)(3) charity solicited funds specifically to help victims of a flood obtain food to feed their horses. The organization distributed 1/2 to 3/4 of the $10,000 it raised to help flood victims. Can they now decide they have helped the flood victims enough (even though there are still flood victims who need assistance) and redirect the funds to something else, such as helping people who lost their jobs to feed their horses? I am one of the flood victims still needing help and they have said no. Answer

Question MarkWhat needs to take place for a 501(c)(3) to merge with another 501(c)(3)?  Does one have to file for dissolution for all of its assets to go to the other? Answer

Question MarkIf a gift to a public school district or public university is fully deductible as you said in an answer to a recent question, why do so many school districts or universities create separate foundations to receive and administer gifts?  Couldn’t they just manage everything through an Advancement Office as private institutions do? Answer

Question MarkMy son recently went on a student trip with a nonprofit organization. We were very disappointed in the difference between what they had advertised and what they actually delivered.  We paid $2500 and did not get what they promised.  How can I report my experience to an agency that will look into this? Answer

Question MarkThe bylaws of a 501(c)(3) organization provide that a Director will serve 3 years.  The state nonprofit corporation law provides that unless otherwise stated, a Director will serve 1 year.  Can a Director continue to serve indefinitely after serving a 3-year term? Answer

Question MarkOur 501(c)(3) organization recently received a store gift card as a donation from a donor.  How should we account for this in our income statement and balance sheet? Answer

Question MarkI was denied volunteer status to work at a volunteer fire department, and they wouldn’t give me any reason for not letting me help.  Does a nonprofit organization have to give a reason for not allowing someone to volunteer? Answer

Question MarkUnder what circumstances should a board chair of a 501(c)(3) organization have the organization's credit card?  There are no policies regarding board spending and expense reimbursement. When traveling for the board, he books other business with his clients and expenses the board. How would the Chair report those funds on his individual tax return? Answer

Question MarkNow that we have a new Administration and a new Congress in Washington, what can we expect for the nonprofit sector?  Answer

Question MarkOur nonprofit secondary school has voluntarily registered under the state’s charitable solicitation registration law, even though we are exempt from such registration. We do it so that our donors will not question why we are not registered. Our Development Office does not include on our materials the legend required of other registrants stating that financial material can be obtained from the state.  Do we need to include the required paragraph even if we are not required to register? Answer

Question MarkIf the annual audit reveals that the income from "public" sources of a 501(c)(3) charitable organization falls to 30%, can the organization maintain its "public charity" status indefinitely by relying the 10% public "facts and circumstances" support test? Answer

Question MarkI currently teach Sunday school at a 501(c)(3) organization.  In lieu of a paycheck and 1099, I would like the organization to keep my salary as a donation.  Would I be allowed to write off the value of my services (the salary I would have received) as a charitable contribution? Answer

Question MarkOn an annual report, should donors be listed with their donations before the net deduction or after? Answer

Question MarkOur nonprofit preschool just purchased a building and the president of the board has been trying to get us to pay off the mortgage in 1/2 to 1/3 the time. Since she is a broker and will handle the details, she will make a huge commission on the $350,000 purchase price. The bylaws say that board members can not work for the preschool. Can she do this? Answer

Question MarkOur 501(c)(3) high school football club is having elections soon.  The parents of one of our players are divorced.  His mother, his father, and his step-father are all running for office.  Can one family member be President and another be Treasurer? Can they all serve on the board?  The club’s constitution and bylaws are silent on the question.  More than a couple of members have raised the conflict of interest question.  Ethically, it is an easy answer, but “legally” not quite sure. Answer

Question MarkOur nonprofit recently received an in depth questionnaire from a charity watchdog group that I never heard of, requesting very detailed information on the organization for “prospective donors” who may want to find out if we are a quality charity. I am reluctant to spend the time answering.  Since the organization already has a quality rating through another group, is this kind of listing really necessary? Answer

Question MarkIs there anything illegal about our 501(c)(3) organization giving a Christmas bonus, or an incentive for a fundraiser that she initiated, to the Executive Director if she is already receiving a salary? Answer

Question MarkA charity received a gift of $100,000 last year to fix the roof of its building.  The Board invested the gift along with its endowment while the market was going up but it’s now worth only about $70,000.  Is the Board liable to make up the difference when it starts the project shortly? Answer

Question MarkI am an Assistant Treasurer of a charity and write the acknowledgement letters for contributions.  I was under the impression we were required by law to give an acknowledgement.  Is this a fact?  I thought if the contribution were under $75, no acknowledgement was necessary.  However, even if the gift is $5, I would acknowledge it. Answer

Question MarkBesides cutting expenses and trying to generate more earned revenue or contributions, are there things that nonprofits ought to be doing to respond to the financial crisis that is so adversely affecting them? Answer

Question MarkA nonprofit forecasting dire cash flow conditions in the late winter or early spring is considering asking a handful of board members to lend money to the organization at low interest rates and with long paybacks.  This is a contingency plan in case all other fundraising efforts and budget cutting moves fail to bear fruit in time.  Is it a conflict of interest for those directors lending the money?  Is it a wise idea? Answer

Question MarkWe are a nonprofit rock club that would like to sell unrelated items on eBay to increase our income and provide for increasing community services as well as member benefit. We know income derived from "unrelated" business dealings becomes taxable, but I have heard that such income derived by the efforts of volunteers (club members in this case) would not be taxable. If this is so, is there any limit on such income? Answer

Question MarkCan our 501(c)(3) parent group sponsor a Forum about a school tax increase election? Our school district is sending the superintendent and a Board Member to speak and, of course, they want the vote to pass. Do we have to have someone there to speak on the negative impact? Is this legal for our group to sponsor without putting our exempt status at risk? Answer

Question MarkOur 501(c)(3) often gets requests from for-profit merchants to advertise on our website. Can we sell advertising space on our website as a way of raising funds? Would there be limits as to what sort of items/services that could be advertised (obviously not political or illegal items)? Answer

Question MarkWhen a Board approves minutes of a previous meeting with some revisions, should the organization make changes to the original minutes to reflect the revisions made at the second meeting or should it leave the previous minutes as they were and specify the revisions in the minutes of the second meeting? Does it even matter? Answer

Question MarkThe bylaws of a 501(c)(3) youth sports organization prohibit board pay but specifically provide that the children of board members do not have to pay the registration fees associated with each sport.

The full cost of each sport in season is about $130 so a parent board member with one child playing 3 different sports over the course of a year receives a benefit valued at approximately $390.  However there are board members with 3 kids playing 3 sports at a benefit worth over $1,000. Would this benefit be considered taxable income to these board members? Answer

Question MarkIs there anything illegal or against 501(c)(3) rules to have mini-phone meetings by a few of the directors where decisions are made and one or more board members are completely excluded from the vote? Answer

Question MarkIf a donor makes a credit card donation to a 501(c)(3) public charity, may the charity pay the credit card fee out of the donor’s gift?  If so, what contribution deduction may the donor claim? Answer

Question MarkAt the last General Membership meeting of our 501(c)(3) corporation, the President arrived with 18 "surprise" general proxy documents signed by members.  The document itself was created solely by the President, with no knowledge or input from any Board Member.

When a vote was for a particular position was tight, the President whipped out his 18 proxy votes to support his preferred candidate. Our bylaws are silent on the issue of proxy votes.  Roberts Rules of Order leave all rules relating to proxy voting up to the association by-laws. Wikipedia says proxy voting is not recommended for ordinary use. The President cites our state nonprofit corporation law which says a member may vote in person or by proxy, unless the articles of incorporation or the bylaws otherwise provide.

We need to know if these 18 proxies are valid.  If we amend our bylaws to prohibit the future use of proxies, would we be in violation of our state law? Answer

Question MarkDoes a “consent agenda” fulfill legal obligations for nonprofit board business and adequate reporting in the organization's minutes? Answer

Question MarkIs there a law that causes the word "pledge" or the phrase “in consideration of the gifts of others” on a properly signed donor commitment form to be a legally binding contract between the donor and the charity? Answer

Question MarkI am the founder and president of my nonprofit organization and do not want any board to remove my authority.  My bylaws say the president shall be a member ex officio of all committees except the nominating committee. Is this a secure wording to protect my interests? Answer

Question MarkI have developed a webstore for our nonprofit animal rescue group and serve as the webmaster for the website that includes the online store. I also operate a personal webstore that sells similar items. I in no way use any contacts from the nonprofit webstore to link to my website. Is this a conflict of interest? Answer

Question MarkIs a nonprofit required to have a lawyer on retainer annually? Answer


Question MarkI have recently opened a nonprofit Christian coffee house and worship center and obtained 501(c)(3) status. We sell coffee, muffins, bagels, etc. Many ladies from the community would like to help with this mission outreach by providing their home-baked pies and other foods. Can we treat this the same as a bake sale we have for the youth group of a church? Also can we sell soup and sandwiches at lunch for a suggested donation? Answer

Question MarkThe 501(c)(3) organization that my husband and I founded operates from a building  on our property. The board wishes to set up a written lease for the portion of the property the organization uses. They want to make sure that if and when we sell the property any monies that have been donated for improvements will be donated back to the organization.  Do you know if this is legal and/or possible? Answer

Question MarkIs there any legal limit on the percentage a telemarketing firm can take from the contributions it solicits for a 501(c)(3) charity? Answer

Question MarkIs it considered “lobbying” for federal tax purposes if a 501(c)(3) public charity seeks to influence the outcome of Resolutions at the United Nations? Answer

Question MarkIs it wise for 501(c)(3) organizations to have term limits for the Board of Trustees? Answer

Question MarkIf a member of our 501(c)(3) nonprofit corporation demands to see all of the records of the corporation for the past two years, is there anything that says we have to give them to her?  The Board feels this is not in the best interest of the members. Answer

Question MarkOur Pastor of 30 years is retiring soon and we did not provide for his retirement.  We have two funds available, one we call our future building fund and one we call a retirement fund.  However, the retirement fund has only enough money to pay the pastor for one year.  May we borrow money from the other fund to offset the difference, with intent to pay it back over 3 - 5 years? Answer

Question MarkMay a foreign citizen serve on the Board of Directors of a U.S. nonprofit corporation? Answer

Question MarkOur church is going to dissolve and has about $10,000 in the bank. What are we supposed to do with that money? Can we give it to the pastor as a gift? Answer

Question MarkIs there any legal or regulatory requirement for a charity's fundraising event(s) to turn a "profit" for the organization? Obviously there's a practical reason but is there is a regulatory one? Answer

Question MarkMy 15-year old son is passionate about civil rights for youth and is committed to fighting to reduce the voting age in our state to 16. He formed a nonprofit corporation and I am not sure that he should file for 501(c)(3) status.  He intends to meet with state legislators in an attempt to get a bill introduced. I am concerned that meeting with legislators might be considered lobbying and might jeopardize the group’s 501(c)(3) status. Answer

Question MarkIs a nonprofit required to post all officers’ names and addresses on its website? I am worried about being exposed to stalker who has bothered me in the past. Answer

Question MarkShould a nonprofit have paid staff as voting members of the board?  And, if they do, how can they avoid conflict of interest issues that may arise? Answer

Question MarkDoes an organization need to register under state charitable solicitation registration laws if it receives unsolicited donations, e.g., those from individuals and organizations that were not approached specifically asking for donations? In other words, how is "solicitation" defined? Answer

Question MarkOur 501(c)(3) social service agency has an aging donor base.  Some of our donors who originally lived in our area have relocated to other states following retirement.  We continue to solicit and receive donations from them.  Do we need to register to solicit in those states, even though we are not soliciting from a wider population within the state? Answer

Question MarkMy organization has a 501(c)(3) from the state. It also has a full federal 501(c)(3) status. But when I tried to get tax-free billing for a hotel function recently, they denied it and said I need another certificate other than the one issued that declared the incorporation and the federal number ID. What is this certificate they are talking about? Answer

Question MarkShould a residential neighborhood association, whose membership is established by deed restrictions but whose dues are not mandatory, establish a 501(c)(3) tax-exempt organization as a means to attract grants from state and local government, and tax-deductible contributions from businesses and private individuals, to support the operations of the association for the benefit of the community? Answer

Question MarkA group of religious leaders in the same state and same denomination form a 501(c)(3) entity separate from their individual churches with one of the purposes to support - not endorse - local political candidates selected after an interview process which is open to all candidates.  Is this allowed under 501(c)(3)? Answer

Question MarkIf a CEO/ED is providing terrible leadership and the Board has not done the yearly evaluation required by the by-laws, is there anything an employee can do to get the Board to evaluate the CEO?  When is it possible to oust a poorly performing CEO? Answer

Question MarkThe director of a 501(c)(3) decides one day she wants to start her own charity and leaves, taking all the money, supplies etc, to start her own organization She uses a very similar name so she can trick people into donating to her new entity. She is now taking in donations without having her 501(c)(3) in place. Is this legal? Answer

Question MarkOur nonprofit is having an election shortly for directors.  Some people rush in on election night to pay their membership dues, even though they have almost 3 months prior to the election to join.  Without it being in our by-laws, can we say "We are not accepting memberships tonight”? We have no way at the last minute of verifying eligibility. Answer

Question MarkAs a 509(a)(2) Private Foundation composed of WW2 veterans (diminishing membership) what are the required minimums for filing Federal tax returns?  Our income is principally from dues and interest.  Our expenses are mainly for a newsletter and postage. We have an annual reunion which also requires assessments and expenditures. Answer

Question MarkIf a company donates products to a public charity to sell through an auction program, what charitable contribution deduction will be available to the donor? Answer

Question MarkA donor purchased $300 worth of raffle tickets and now wants a letter for a tax deduction.  What do we do? Answer

Question MarkIf an individual or corporation makes a contribution to a public school district, is it considered a tax-deductible charitable contribution, or must the gift be given to a separate 501(c)(3) associated with the school district? Answer

Question MarkMay a landlord deduct the difference between the low rental charged to a charity and the higher actual fair market rental value of property that is leased to the charity?  We searched your entire site and couldn’t find anything about a bargain lease. Answer

Question MarkIs it legal to place political literature on parked cars in the church parking lot or place campaign signs on church property? Answer

Question MarkA group of people did a hostile takeover of our organization, and I was removed from the board. Some board members wanted to use the groups' money to defeat the mayor who was running for reelection. Those who disagreed were removed. What can be done about this group?  Answer

Question MarkIs there any requirement for a 501(c)(3) nonprofit to post its bylaws on a website for members to review and see? Answer

Question MarkTo whom should a charitable contribution check be made out if a nonprofit organization has not yet received its letter from the IRS recognizing its charitable exempt status—the individual who founded the organization or the organization itself? Answer

Question MarkOur 501(c)(3) charitable organization received $6,000 of in-kind items, such as printing service, theatrical production service, advertisements.   Where do we show the value of these items on Form 990 under Part I (Revenue) or elsewhere in the form? Answer

Question MarkDoes it make logical/financial sense to acquire directors and officers insurance coverage only for select directors/officers? Answer

Question MarkDoes the local chapter of a national organization have to obtain its own 501(c)(3) charitable status or can it "ride" on the national's 501(c)(3) status? Answer

Question MarkFollowing up on the question last week about the nondeductibility of a gift of use of a vacation condo, what if a restaurant is donating the food, the facility and the services to permit a charity to run a fundraising event? Is the donation of the food tax deductible? Answer

Question MarkCan an employee serve on a private nonprofit corporation board of directors? Answer

Question MarkI donate my vacation condo as an auction item for some of the 501(c)(3)'s with which I am involved. Frequently it goes for $2000/wk or more. More often than not, although I don't request it, I receive a letter from the charity telling me I can claim a $2000 charitable contribution deduction.  Is this correct?  Answer

Question MarkWe recently attended a charity function (car show) which cost $100 per person.  It was advertised as completely tax deductible.  We were treated to an open bar, food stations, free Valet Parking, and a drawing was held for leases on a new car.  Should that entire admission price be tax deductible?  I was told that it was all deductible because the event was completely underwritten. Answer

Question MarkIf our charity receives a cash contribution of more than $10,000 (in actual currency and not a check), must we report the receipt to the Treasury Department?  Answer

Question MarkWhen and why should a well-established 501(c)(3) organization give consideration to establishing a separate Foundation that supports the organization?  What are the benefits and negatives of establishing a Foundation? Answer

Question MarkOur new nonprofit corporation agreed to buy a property for $250,000. The seller has given us a short extension but we may not have the money to complete the deal.  We have already had the engineering and design done for the building, but we have only $400 in the bank.  We have yet to buy directors and officers insurance.  If we can’t pay the engineer and architect, will we be personally liable?  The President signed the contracts in his own name “for the X Center.” Answer

Question MarkI have recently learned that a trade association claims to be nonprofit, filing a Form 990 Return of Organization Exempt From Income Tax; however, the association has never registered with the state attorney general or the charity bureau.  What steps can I take to report this fraudulent activity with the IRS and the state? Answer

Question MarkI formed a nonprofit company in one state and am now getting my MFA in another state on the other side of the country. Can I "move" my nonprofit company to the new state or do I have to start a new one? Answer

Question MarkCan a 501(3)(c) charity (a hospital) have a for-profit subsidiary that is taxed as a "C" Corp? Answer

Question MarkIs it legal for a nonprofit Board to conduct electronic meetings or make decisions via email without actually meeting face to face? Answer

Question MarkMay donor-restricted funds be pledged as security for a bank loan? If not, could donor-restricted funds nevertheless be used to satisfy creditor claims if the nonprofit has no other assets? Answer

Question MarkSeveral officers and I were recently voted off a nonprofit board for holding an “illegal” Executive Committee meeting without the “permission” or knowledge of the Executive Director. As a former secretary, I am sure we were in compliance with the bylaws.  What recourse do we have against the President, the Executive Director or the nonprofit for removing us? Answer

Question MarkDoes the treasurer for a nonprofit have to be a board member?"  A woman wants to donate her time to do a charity's books but doesn't want the responsibility of being the Treasurer.  At what point does she cross a line and become some kind of de facto treasurer? Answer

Question MarkMay a nonprofit and a for-profit have the same name, but maintain separate corporate structures, accounts and legal identity? Answer 

Question MarkDoes a 509(a)(1) still hold nonprofit status?  Is it able to apply for nonprofit funding? Answer 

Question MarkCan a church or other charity give away a car that was given to it?  I was told no, but the church wants to give it away.  Can the church legally do it? Answer 

Question MarkCan a standing committee create its own separate by-laws? Answer 

Question MarkOur executive director and board president are the same person.  This president/director has recently made announcements, on behalf of the organization yet without the board's knowledge, that he is leaving his position as director.  What authority can the board call upon to rein him in and fix this mess? Answer

Question MarkIs it necessary to name a Finance Committee as a standing committee in the bylaws of our nonprofit? Answer

Question MarkOur 501(c)(3) school has a computer use policy that states that the email system is school property.  Is it proper for school employees or spouses to use the email system to send unsolicited emails regarding political campaign issues? Answer

Question MarkOur organization is converting from for-profit to nonprofit in order to seek grants and donations for ongoing support.  Can we approach private foundations to obtain grants before being officially recognized by the IRS as a 501(c)(3) entity? Answer

Question MarkWe are a 501(c)(3) charity and would like to put a place for donations on our website.  Can we receive a donation from someone in another state and use it in our home area? Answer

Question MarkWho should appoint the auditors for a nonprofit? Answer

Question MarkAs a nonprofit, do we need to change auditors every so often? If so, how often should we change? Answer

Question MarkThe bylaws of our nonprofit corporation, a chamber of commerce, do not specify how to remove a board member, in this case the President. We have 7 members of the Board. At a meeting, we voted 4-0 to dismiss her. We also drafted a letter for her removal that 5 directors signed and one did not. What are the rules regarding this matter? Answer

Question MarkFor our charity auction, a donor provided a getaway sailing weekend complete with meals, water taxi and accommodations on the sailboat. The donor also captained the boat for the trip. The trip sold for $2400. What can the donor claim as a charitable deduction? Answer

Question MarkOur Chamber officers are not following the bylaws. The bylaws state that a nominating committee should be appointed and a slate of names be submitted for voting by the membership. This was not done last year. The president called individuals she and the VP felt would be good on the Board. No directors or members voted. Recently, other bylaws have been disregarded. What is your advice? Answer

Question MarkCan our 501(c)(3) organization keep the list of board members confidential and refuse to make it available to the public? Answer

Question MarkIn one of your questions last week, you wrote about sales in which the seller says "a portion of the proceeds are to benefit" a certain charity. How would the seller give receipts to those wanting them? They'd have to say what % of their donation is going to a charity, right? Answer

Question MarkWe recently hired a new employee who states that a 501(c)(3) corporation has limitations on the titles that can be given to employees or created by the company. Is this true? Answer

Question MarkIs it appropriate for a 501(c)(3) charity to accept money from a politician who is running for office or is holding office? Answer

Question MarkMay the president of a small 501(c)(3) corporation appoint her husband to be the organization's pro bono attorney to give legal advice and handle routine legal matters? Answer

Question MarkI have dissolved a scholarship fund and have requested that the balance be refunded to me. The director told me that it could not be done because it would violate the rules of Section 501(c)(3). Is this correct? Answer

Question MarkCan a nonprofit pay for cost of the lunch at a Board meeting with organizational funds? Answer

Question MarkWe are a Canadian charity with many U.S. donors who make contributions with no tax benefits. Are there any legal restrictions to the nature and/or extent of fundraising solicitations that we may carry out in the U.S.? Is there any way we can offer U.S. tax benefits to our U.S. donors without going through a U.S. 501(c)(3) fiscal agent? Answer

Question MarkCan a 501(c)(3) organization provide information in its newsletter or on its website about openings on local elected boards and information about running in local elections without fear of losing its 501(c)(3) status? Answer

Question MarkI was a Board member of a $5 million Educational Foundation of which my husband became President. Our marriage dissolved and he dissolved the Board. I know of an instance where he "borrowed" $50,000 from the Foundation for personal use without board knowledge or approval. Is this behavior legal? Do I have any recourse considering I'm no longer with the Foundation? Answer

Question MarkOur bylaws provide that our Board Chair can vote only in the case of a tie. Isn’t that a good idea? Answer

Question MarkWe are a multi-state public charity with donors in many different states. We primarily solicit through mail appeals and phone work, as well as personal visits. We don’t hire outside professional solicitors, but rely on staff for the work. Do we have to register in every state in which we have donors? We are registered in the state where our office is based. Answer

Question MarkI believe a nonprofit organization has been violating nonprofit law for years by having hired board members and their family members for paying jobs in the organization. To whom should I report this activity in the state and/or federal government? Answer

Question MarkThe board of a nonprofit arts organization voted to disband and close up shop due to financial difficulties -- much to the dismay of many in the community. Can anything be done to resurrect the organization? Answer

Question MarkI have been told that a 501(c)(3) corporation needs to have insurance. What kind of insurance does a non-profit need? Answer

Question MarkIn a traditional nonprofit organization, what is the difference between board chair, vice-chair or board president, vice-president? Is one more correct? Answer

Question MarkThe founder of our nonprofit is the only person who signed the incorporation papers. A year ago, she resigned from the board at odds with the other four board members. As the sole incorporator, can she now dissolve the corporation? Answer

Question MarkWe are a 501(c)(6) trade association intending to establish a separate 501(c)(3) charity for scholarship activity. Can the board of directors of the 501(c)(6) serve as the board for the new organization? Answer  

Question MarkIs a nonprofit organization that is not recognized as a tax-exempt charity under Section 501(c)(3) out of line when it sells ads as a sponsorship for an event and gives the business people the belief their ad is tax deductible because the event is held by a nonprofit organization?  Answer 

Question MarkThere were irregularities during the election of the officers of our nonprofit corporation and a new election was required. Does the incumbent president remain in office until the election is held, or is that office vacated and filled by the vice-president? Answer

Question MarkThe Executive Committee of our nonprofit corporation is violating one bylaw after another. Other directors are also pointing it out but nothing stops. Their conduct has cost the organization a lot of money. Should I just walk away or is there a legal way to stop them? Answer

Question MarkIn a recent Tax Matters item (August 1-15, 2006), you said that because of the new Pension Protection Act "Charities that now think they must provide a substantiation letter only for gifts of more than $250 will want to assure that their donors are in a position to claim the deduction for their gifts and will want to acknowledge all [cash] gifts, no matter how small." Is this an affirmative duty of the charity? Or just a nice thing to do for donors? We get a lot of $1 donations and it costs us more to receipt the donation than it's worth. Answer

Question MarkAs a member of the Board of Directors, I have been told that the salary of our Executive Director is protected information not available to me or the public. Is this correct? Answer

Question MarkOur nonprofit has been slowly increasing the balance in the corporate bank account without any plan for how to reinvest the funds. Is there a limit to how much a nonprofit can have in a savings account or carry over without being spent from year to year? Answer

Question MarkCan the Executive Director of a nonprofit corporation fire a director for not agreeing with him? Answer

Question MarkWe are a nonprofit youth baseball organization recognized as an exempt community organization under Section 501(c)(4). We believe that we should be a 501(c)(3) charity. Is there an advantage to changing and if so what do we do to change? Also, we cannot find our articles of incorporation. How do we obtain that information if the State does not have a copy either? Answer

Question MarkOur board president bought our thrift store manager a new car and paid for it with money donated to our shelter. He also owns a printing firm which charges thousands to the shelter, yet all our documents that go out to the public say the printing is donated. What can be done to get this unethical man off of our board? Answer

Question MarkCan a for-profit business owner start a nonprofit public charity? Answer

Question MarkIs it possible for a 501(c)(3) nonprofit organization to go into a partnership with a for-profit business corporation on a 50-50 basis? Are there different tax issues involved? Answer

Question MarkWe are planning on moving our small, nonprofit theatrical production company to another state. Do we have to file for 501(c)(3) status again once we move, or is our existing status valid in any state? Answer

Question MarkCan a person give money to a church and designate that it to be given to a person outside the church? Answer

Question MarkOur church has finished a building campaign and some of the elders say that the gifts for the building fund can be spent on other purposes. They cite an IRS Revenue Ruling and the cy pres doctrine. Are they correct? Can I get my gift back and, if I do, will I have to declare taxable income? Answer

Question MarkOur nonprofit uses a for profit fundraising group that runs a fundraiser at which people are invited to come at no cost to learn about the program. The invitation indicates that they will be asked to give a contribution and that a meal will be provided. It is usually very successful. Acknowledgements provided to the donors indicate that "no goods or services were received in exchange for the donation." Is this appropriate since the attendees did receive a meal? Does the fact that the meal is provided "for free" to all whether a donation is given or not mean that we can legally say "no goods or services were received." Answer

Question MarkIs it legal for the minutes of a meeting of a nonprofit corporation’s Board of Directors to exclude ALL names so as to protect privacy? Answer

Question MarkOur nonprofit organization has always made our Board meetings
open to the public. At our last meeting, things became quite disruptive
and interrupted the flow of the meeting. The next meeting we had was
not open to the public. Some members of the Board believe that this
is an illegal action. Are they right? Answer

Question MarkWhat is required to convert a private foundation to a public charity? Answer

Question MarkOur 501(c)(3) historic home museum rents out the museum for dinner parties, showers, meetings etc. Can we allow political candidates to rent the Center to use for campaigning purposes? We technically have no involvement other than the rental contract. Answer 

Question MarkIs it okay for our church to send the pastor and his wife to a conference of the fellowship and pay for it all if there is no reason to send the wife? How about gifts to visiting ministers? Are these examples of payments that “inure to the benefit of an individual” that could cost the church its tax exemption?  Answer 

Question MarkThe Church which I Pastor left one of the major denominations last year and our 501(c)(3) was under their umbrella. Do we need to file again for that status with the IRS or are we covered? Answer

Question MarkWhat is the fundamental difference between a "Non-Profit" ["NPO"] and a bona fide, Christian Church? Over the years, I have observed even lawyers refer to churches as "Non-Profits" or "Non-Profit Organizations". Sounds to me like an oxymoronic, impossible, mutually exclusive concept. But, I am not a lawyer. Answer

Question MarkWhere Articles filed more than 35 years ago say the membership shall consist of the incorporators but the Bylaws are silent about member voting rights and no member meetings (or vote) have ever occurred, do the members that still survive have the right to vote on a fundamental corporate change after Board approval? Answer

Question MarkOur nonprofit softball team is dissolving after less than a year in existence. We have some money left over from sponsorships that we solicited but did not use. Some of the parents want us to distribute the money to them since they paid the players’ fees. We were thinking of transferring the money to another team and might merge. What should we do? Answer

Question MarkWould it be proper to complain to the IRS if a nonprofit engages in an active lobbying effort? This nonprofit has a 501(c)(3) status. It has come to my attention that a nonprofit must have a 501(c)(4) status in order to lobby. Answer

Question MarkCan a nonprofit organization maintain the right to refuse membership to anyone it chooses? The bylaws say it can, but isn’t that susceptible to bias and discrimination? Answer

Question MarkWhy is proxy voting different for nonprofits? Shareholders of a business can vote by proxy, but directors of a nonprofit can’t. Is there any explanation for this? Answer

Question MarkOur articles of incorporation state that our 501(c)(3) religious nonprofit cannot own stock. Is there any way we can change the articles or adopt a new policy on investing? Answer

Question MarkIf I want to pay for a service to a 501(c)(3) organization, do I get a personal tax benefit or write-off for paying the cost of that service? Answer

Question MarkCan a pastor discuss politics from the pulpit? If so, how far can he/she go. Can a pastor have political events at his home as a private citizen? Answer

Question MarkCan you borrow from "designated funds" to pay other bills, and then replace the funds later? Answer

Question MarkWhat is the difference between public charities, private foundations, and donor advised funds? Answer

Question MarkAre we required to renew our nonprofit (501(c)(3)) status? With the state? With the IRS? Answer

Question MarkWe are a small 501(c)(3) theatre group. All of our board members serve without pay. Our annual budget is $10,000 to $15,000. Some of our members have substantial property. Do we need board insurance?  Answer  

Question MarkOur nonprofit committee has worked under the auspices of our city government, which covers all our functions under its insurance. If we become a separate 501(c)(3) organization, will we be liable for accidents or can we still remain under the city’s insurance? Answer 

Question MarkOur 501(c)(6) business association has taken on a local charitable cause. Can we form a wholly owned subsidiary that obtains 501(c)(3) status in order to solicit charitable grants and contributions?  Answer 

Question MarkI asked a 501(c)(3) organization for a balance sheet and financial statement, over 4 months ago and they have not responded. Do they have a time limit as to when they need to respond?  Answer  

Question MarkIs it okay to claim and advertise that you are a nonprofit organization to your consumers and clientele before filling a 501(c)(3) application for recognition of exemption?  Answer 

Question MarkI would like to know if 501(c)(3) organizations must charge tax on merchandise SOLD. I understand that they do not pay tax on merchandise purchased. Answer

Question MarkOur Executive Director would like to supplement our publishing dollars by selling ads. I have been told by our grant writer that we cannot do this because the income would be treated in a different manner than the grants we are funded with. Answer

Question MarkCan a charity participate in a referendum on gentrification? Answer 

Question MarkAre officers of a nonprofit corporation required to give a written copy of the by-laws to each of the members or is it sufficient to allow members to read the rules in an open meeting.  Answer 

Question MarkOur charity currently uses PayPal to processes credit card payments for donations. We ask anyone who uses this payment option to include an extra amount to cover the transaction fees that the site charges. Is the total amount tax deductible to the donor? (i.e. if I donated $508, $500 to the organization, $8 for transaction fees, is the entire $508 tax deductible or just the $500 that goes to the organization?) Answer

Question MarkCan a U.S. corporation whose main objective is to fund a religious orphanage/school in a foreign country get 501(c)(3) status and collect donations from American donors that are tax deductible to the American donor? Answer

Question MarkI have started a nonprofit organization and would like to file an IRS 501(c)(3) application. I need to have this status within the shortest possible time. Please let me know how long it might take.  Answer

Question MarkI am wanting to start a nonprofit 501(c). Could you please give me some information on the first steps in starting? Answer

Question MarkWe have received a request from a for-profit organization for a membership list from our 501(c)(3) charity. We have always guarded this list against use for any purpose other than our stated mission and have not divulged it. I am greatly concerned that this membership list will be used to solicit business for the companies that are requesting it. Are we required to provide them our membership list? Answer

Question MarkIf we change our nonprofit mission statement and bylaws with minor word phrases, whom do we legally have to notify? Or do we just keep the new version which was approved by the board of trustees at our national office? Answer

Question MarkOur school is a 501(c)(3). If we have a parent organization that raises funds for our school, should it have its own EIN for its checking account or use ours? Answer

Question MarkCan the founder of a 501(c)(3) nonprofit, who does not hold a board position, be voted out of the organization by board members? And if so, what protection does that founder have to safeguard that which he or she has founded? Answer

Question MarkOur Church is a 501(c) (3) which has a Camp with about 30 cabins where we spend about 10 days a year for Church services. Many parties are interested in renting our facilities. Would such rentals affect our status with the IRS and cause us to be subject to local real estate taxes? Answer

Question MarkCan a for-profit have a nonprofit subsidiary? Answer

Question MarkI am a volunteer. A grateful patient gave me a personal gift worth about $200. Is the gift considered compensation for my work? Answer

Question MarkI requested a copy of the budget from a 501(c)(3) children’s home that I contribute to. I was told it is not their policy to provide budgets. Aren’t they required to? Answer

Question MarkI am the treasurer of a 501(c)(3) community center. We are thinking of closing the Center. What happens to the exempt status? Does it also cease? Can it be held in the hope of reopening the Center, or can it be transferred to another entity? Answer

Question MarkIs it a problem to pay for alcohol as part of a Board meal with 501(c)(3) funds? Answer

Question MarkOur nonprofit corporation is now 10 years old. We have always had just the 4 officers and members. As we are growing, we would like to start a voting board along with the officers. How do we go about doing this? Answer

Question MarkIf funds are stolen from a 501(c)(3) charity, does the Board have an obligation to report it to the police if the funds are returned? Answer

Question MarkWhere can I find information on how to take a company back to a for-profit organization? The company was started as a for-profit for the first 5 years and then turned into a nonprofit for 4 years. The owner wants to sell it but first needs to make it into a for-profit again? Answer

Question MarkMy wife and I have a private family foundation. We work with at risk inner city kids for educational tutoring. Can we become a public charity or create a public charity with just the two of us as trustees? Answer

Question MarkIs there a legal method for a group of “affiliated” 501(c)(3) organizations to join under one holding company so they are legally tied together? They are now affiliated by some common board membership and shared services. Answer

Question MarkIs there a law that says churches are exempt from disclosing their finances and salaries? Answer

Question MarkCan a tax deduction be taken for 2005 even though the commitment and the gift were made in 2006? Answer

Question MarkOur 501(c)(3) is holding a retreat for families of individuals with a certain disease. A family with a vacation rental is willing to donate the home for the retreat if they can have a charitable contribution deduction. Will they be able to claim a deduction if they provide the house? Answer

Question MarkCan two independent 501(c)(3) organizations merge? Answer

Question MarkCan our 501(c)(3) accept a donation to be used by an individual member for her expenses or must it be used for the entire membership to be deductible? Answer

Question MarkI am doing volunteer work for a 501(c)(3) organization that says only paid “members” can see the bylaws and charter. I thought these had to be available to the general public upon request, but maybe I was confusing it with the tax return. Please advise. Answer

Question MarkHow secure is a donor’s life annuity under a 501(c)(3) charity giving plan?
Does the Government offer any guarantee if the plan operator falters? Answer

Question MarkTwice a year our 501(c)(3) charity publishes a newsletter for which we charge recipients. Is it illegal to give the newsletter (for free) to individuals who donate to our organization with the understanding that they will claim their donation as a tax deduction? Answer

Question MarkIf a requirement for a grant is to be a nonprofit organization with the 501(c)(3) exemption and my foundation status classification is 509(a)(1), does that mean I am not eligible for the grant? Answer

Question MarkAt the last election of officers, the members voted for officers for terms of two years. Before the next election, the Board extended the terms for another year. The bylaws used to require that any changes had to be approved by the members, but the Board changed the rule so they can make changes without notice or approval from the members. Are there any IRS rules that vest power in the members? Answer

Question MarkDid you ever hear of a law that says a 501(c)(3) organization cannot conduct an auction of any kind? Answer

Question MarkCan a husband and wife be members of the board of directors? And can a member of the Board be a paid employee of the corporation? Answer

Question MarkIs it true that the Katrina tax relief bill, which provides that donors may deduct up to 100% of their income this year, does not apply to gifts to supporting organizations or donor advised funds? Answer

Question MarkWe would like to start a Foundation in honor of our mother who gave her life to volunteer causes. The Foundation would support some of her favorite charities. How should we go about it? Answer

Question MarkIs it illegal for a charity to use money allocated to a building fund for general operating purposes? Answer

Question MarkCan a nonprofit corporation that has no members (according to its articles of incorporation and bylaws) charge “membership dues” as a fundraising activity? Answer

Question MarkThe deed to our church contains a reverter clause stating that the property will revert to the grantor if the property is no longer used for religious purposes. Since the church is a nonprofit corporation, is that clause still enforceable? Answer

Question MarkOur 501 (c)(3) corporation has an endowment fund. Is there, by law, a requirement that a certain percentage of the interest be spend annually? Answer

Question MarkOur 501 (c)(3) corporation is considering making a contribution to a hurricane relief fund. Is it legal for a 501 (c)(3) corporation to make such donations to another charity? Answer

Question MarkOur 501 (c)(3) corporation is banned from engaging in political activity, but we are considering ways to help hurricane victims and thought one way we could be helpful is to contact our representatives in Congress to ask them to provide funds to aid governmental relief efforts. Are we allowed to do so? Answer

Question MarkHow do you find out if an organization has 501 (c)(3) status in your state or another state? Answer

Question MarkIs there a statute prohibiting convicted felons from serving on a 501 (c)(3) corporation board? Answer

Question MarkWe have a nonprofit organization with an executive board and a general board. One member of the executive board shares information of the executive board meetings with a general board member. Do we have grounds to remove this person from the position? Answer

Question MarkI understand that a foundation cannot make a grant to a nonprofit, where the grant is more than half of the agency's budget. For example, if a nonprofit's annual operating budget is $100,000, a foundation cannot make a grant of $51,000, the theory being that it may be able to exert undue influence and "tip" the agency to do the foundation's bidding. Is this true? Answer

Question MarkIs it legal to charge a percentage of gross income from fundraising as salary instead of a base salary? Answer

Question MarkI would like to start a nonprofit organization for the spreading and teaching of the arabic language.  A foundation overseas for spreading the Arabic language makes books that I would like to sell in order to generate income to support my cause.  Also I would like to open institutes for teaching the language also for a fee.  Would I be able to file for a non-profit status on these conditions? Answer

Question MarkAre meeting minutes, which are distributed, read and approved by vote of both the Executive Board and the General membership, a legal document? Are they up for any interpretation if something is called into question and those that did not agree with what was reflected in the minutes say that was not they intended so they aren't going to do it as set forth in the minutes? Answer

Question MarkOur nonprofit has two boards: a foundation and exceutive board. Some members are on both boards & actually influence both boards, irrespective of bylaws. Is this practice legal and acceptable? Answer

Question MarkOur theater company just became a 501(c)(3).  Some of the members only want members on the board, but others believe the board should have "outsiders" who are "disinterested" parties.  No one gets paid, but we believe members are somewhat "interested" and therefore a board with members only will not be acceptable for public funding. What do you think? Answer

Question MarkWe have a home owners association that has filed only State requirments and received the exemption but have never filed for federal exemption. Is this organization valid? Answer

Question MarkCan I open a nonprofit but not be tax exempt? Answer

Question MarkA friend and I were asked last year to open and run a food pantry by a lady who has a food pantry in another county. We have been running it under her and her 501(c)(3). She has told us she wants to close her food pantry and we must close ours. How do we continue running our pantry and get a 501c3 status of our own? We would now like to continue under the name of her organization. Answer

Question MarkCan a 501(c)(3) take a sabbatical as an organization to regroup? Answer

Question MarkSome grant funding mentions 501(c)(3) status and we are a clinic that is part of a law school.  Do we need to apply for 501(c)(3) status in order to get grant funding?  Does the educational institution status of the law school count? Answer

Question MarkI think the organization I just took over is 501(c)(3) but I can't find a certificate or anything in the materials handed down to me from last year's president. How might I go about obtaining a certificate? Answer

Question MarkI would like to use an online store to sell items for a profit so that we may raise funds. Should I be concerned about tax problems connected to our income? Answer

Question MarkI am currently working for a 501 (c) (3) organization and we are looking to replicate the model in other sites. Will the 501 (c) (3) status carry over to the replicated organization or will papers need to filed again? Answer

Question MarkDoes the Fair Labor Standards Act (FLSA) apply to a 501(c)(3)? Answer

Question MarkA group of us located in Maryland are looking into starting a Church. I am a little confused as to whether or not the Church can be an LLC if in the future it may become 501(c)(3). Answer

Question MarkWe have sent our child to ABC Christian school. At the beginning of the year, the "President" of the school board told us that the host XYZ church which contributed funds to the school would be reducing its contribution 20% per year and that we (THE ABC SCHOOL) had to stand on our own two feet within the next several years. As a result, parents doubled their charitable donations and many of us gave thousands in goods, cash and services way beyond the tuition payment. The school hosts an annual big fund raiser and at the conclusion of the fund raiser, the hosting xyz church board closes down the school and keeps the money. On investigating the status of the school which was advertised as being separate from the church as in its own 501(c)(3) with its own board of directors, we find out that such is not the case. The school as such never existed but was actually part of the church. What can we do? Answer

Question MarkWhat is the process for turning a for-profit company into a non-profit? Answer

Question MarkI am a board member for a high school aquatics booster club and I am wondering how to go about getting replacement proof of our 501c3 filing/status for fundraising purposes. We have a tax id# but I need proof of our current tax-exempt non-profit status. Answer

Question MarkI have read Nonprofit Issues articles about employee classifications (hourly, salaried-non-exempt, salaried-exempt) and reviewed info at the DOL website.  Currently all staff at our organization are classified as salaried-exempt.  I have asked the Board to review the classifications, because I don't believe everyone qualifies as exempt.  What can be done if the Board chooses not to address these issues or not to change policy?  Should I do anything? Answer

Question MarkAs a tax-exempt organization, we refused to show an employee/member the Form 990. It was done basically out of ignorance. We are now being told we must pay a hefty fine for each day of refusal. What is the fine for not making the Form 990 public? Answer

Question MarkMy daughter belongs to a dance company that has 501(c)(3) status. Each member has fundraised to go on tour to London with the company. My child has received donations from her sponsors in the amonunt of $10156, and due to the recent terrorist attacks in London, I have decided not to sent my daughter.  The Dance Company has informed me that they plan to keep my child's donated funds and put those funds towards another child.  My question is can the Dance Company use donations ear-marked for my child for another child? My child's sponsors are requesting their donations back. What can I do or how should I proceed? Answer

Question MarkI recently became the president of a 501(c)(3) corporation. In the past, the Board met an hour prior to the general meeting. I prefer to have board meetings at a different time and place. I welcome non-board members to attend, but I am unsure of the exact legal obligation we have to inform membership of our meetings, how far in advance, and by what method they must be notified. Answer

Question MarkIs it legal for members of the same household to have a controlling or equal share of the Board of a 501(c)(3) nonprofit organization? Answer

Question MarkIs there a cost in changing the name of an established 501(c)(3) organization ? Also, what would the process be to change the name but keep the same Tax ID number? Answer

Question MarkAs a member of an nonprofit orginzation, can I be excluded from meetings? Answer

Question MarkI have heard that there is a restriction from political involvement for 501(c)(3) organizations.  What, if anything, does this mean? Answer

Question MarkI have coordinated a charitable event for the past 9 years and donated the proceeds to a local 501(c)(3). We are growing and expect to raise over $100,000 this year. I am considering filing for 501(c)(3) status for my organization. The most important question is, if I become a 501(c)(3), am I legally permitted to donate all the proceeds from my annual event to one 501(c)(3) organization or will I be forced to give to more then one organization? Answer

Question MarkIf my 501(c)(3) offers benefits (or small gifts) for membership/donation monies, how does that impact the amout which the donor can claim as a tax deduction for the gift? Answer

Question MarkI incorporated a not-for-profit organization (religious/cultural) in January of 2004. I was the incorporator and I appointed 3 other members to the board of directors. In the beginning, the directors were not interested in running the organization because of the organization's lack of funds. I was in full control. Now, the organization owns real estate worth $400,000 and has big commitments to build a center! The other directors now are trying to reshuffle things and gain more power. I believe the other directors are steering the organization away from the objectives that I have set. Right now bylaws are non-existent. What can I do? Answer

Question MarkIs it illegal for one nonprofit organization (school) to give to another nonprofit organization (another school) for a fundraiser? Answer

Question MarkThe youth organization that I coach at let the 501(c) number lapse. How can we reinstate with our paperwork? The officers have changed without leaving proper paperwork. We rely heavily on sponsorship, therefore, our sponsors need to be able to get tax credit. Answer

Question MarkI am a member of a non-profit golf club (600+ members).  I was denied access to the finanical records, by-laws and meeting minutes.  What is the law? Answer

Question MarkSome members of our 501(c)(3)women's service club have decided to drop out and form a social club among themselves. They say they do not intend to file with the IRS to become tax-exempt. However, they intend to raise funds and donate to local charities. What rules govern and/or limit them? Answer

Question MarkWe are a 501(c)(6) trade association. One of our members has requested we post our board of directors meeting minutes on the association's website.  We always distribute the minutes to our board but are reluctant to post them on our website for "the world" to view. Legally, what is our responsibility in regards to making minutes available? Answer

Question MarkAre there laws that preclude a private (religious) association from diverting funds given by its members for a specific project (for, say, the publishing of a book, or for scholarships for students) into its general operating funds? Who should one talk to if one knows such a thing is going on? Answer

Question MarkCan a for profit company set up a 501(c) organization under its umbrella? Answer

Question MarkCan a 501(c)(3) nonprofit enter into a business activity in competition with previously established for-profit businesses? Answer

Question MarkCan an Executive Committee of the board approve new by-laws prior to submitting them to the board for approval? Answer

Question MarkI received a charity request from the "Fraternal Order of Police" who claims to be a nonprofit organization. The form states "contributions...are not tax deductable." I thought any legitimate nonprofit charity organization was tax deductable. Please explain. Answer

Question MarkAre there published IRS standards for determining reasonable (acceptable) salaries for the principals of a small non-profit religious organization (2-3 employees)? Is there an acceptable level of payroll as a percentage of Gross revenue? By what measure would the IRS determine whether or not an individual's salary is excessive? Answer

Question MarkWe are a 501c3 that supports the education of our kid's competitive dance troupe.   When we have fundraisers and opt to disperse funds back to the members, does it have to be dispersed equally amoung members or can it be ratio'd by how much they participated in the fundraising? Answer

Question MarkWe are a performing arts 501(c)(3) organization that charges an audition fee for the various levels of dancers.  Parents are wanting to know if this is considered a tax deductible fee? Answer

Question MarkWhat happens to the assets of a nonprofit corporation if it dissolves at the end of its term of existence within the articles of incorporation.  No bylaws exist to address this issue nor is it addressed in the articles.  I am told that the assets revert to the State. Can this corporation be reinstated even though its original term has lapsed? Answer

Question MarkOur 501(c)(3) is interested in purchasing some land as a bargain sale where the land owner could then take a charitable deduction of the difference between sale price and fair market value.  The ministry wants to in turn sell the land to a family member who is going to build a house.  Are there any problems with this, especially in the area of selling the land to a party in interest? Answer

Question MarkDoes the Board of Directors of a 501(c) corporation have the right to hire an attorney to represent the corporation if one of the members of the organization will be taking legal action against the corporation for what the member percieves to be irregularities? Can the Board make the decision to hire an attorney? Does the Board have to present this issues to all members for a vote? Can the fees for this attorney be paid from the general corporate funds? Answer

Question MarkI have allowed an emergency needs program seeking their own non profit status to use our 501C3 during their waiting period of application. Now they have their own non profit standing. Can they file their taxes under their new Tax ID number --  or must they file their taxes under mine. Answer

Question MarkDoes a nonprofit volunteer fire company need file for a 501(c) status of some kind to receive tax deductible contributions? Revised Answer

Question MarkIf we secure contributions from other states for our nonprofit organization, do we need to register or do anything? Our contributions are targeted to individuals seeking $200 or less per individual. Answer

Question MarkCan you tell me what percentage of income a 501(c)(3) organization must spend each year to retain its charitable status? Answer

Question MarkI'm a board member of a nonprofit sports club for kids. We're redoing our bylaws. We came across an entry that stated executive board members, Active members, Reserve Members shall pay an annual fee of $5. No one has done this in the last 10 years of the organization. Can we remove it or is there a reason that it's there? Answer

Question MarkIf we, as a grassroots mental health organization have filed for our 501(c)(3) status but have not yet been approved can we do business as a non profit and accept funding from a private corporation for services rendered during this application time? Answer

Question MarkNew to the Board of directors, I find that while attempts are being made towards financial accountability by a new president, older board members are stonewalling the effort. What can the new President do to force these members to comply with the non-profit laws? There are real concerns of fraud that can be substantiated. Who does the new President turn to since this half the board wants to move forward and forget about their neglect last year? Answer

Question MarkIf a sum of money is donated as a memorial to a nonprofit organization with a 501(c)(3) status and the money is deposited into the general fund of the organization to be used in purchasing something in the name of a deceased person as a memorial, can the monies be withdrawn from that organization and given to another nonprofit organization? Answer

Question MarkI am currently in the middle of the IRS advanced determination letter process. The IRS has a hang-up because I am the only Director. There is no internal revenue code law that says there must be 3 people on a board of Directors. Do you know of any 1 person 501(c)(3)s? Answer

Question MarkWill a D& O Policy help my organization? My company has failed to do the following;
1. remit taxes to the state and IRS
2. remit collected medical insurance premiums to carrier in a timely manner which has caused insurance to lapse on four occasions
3. mismanaged a government grant. Answer

Question MarkWhat is the total allowance of monies that the President and VP can contribute into the ministry of a 501(c)(3) yearly. Also when would the IRS question the amount of donations given to other ministries, in excess of multiple ministries yearly? Answer

Question MarkIn nonprofit charitable organizations are secret, closed assemblies allowed? Answer

Question MarkWe are a group of 15 bed and breakfasts who collect dues, stage fundraisers, promote tourism, participate in community events, and contribute to needy members of our community.  We cannot seem to convince a bank to provide us a checking account without formal IRS status.  Is 501(c)(6) right for us? Answer

Question MarkWhat is the advantages and disadvantages of becoming a 501(c)(3) verses a 501(c)(6)? Answer

Question MarkCan a nonprofit hire a professional fundraiser to secure funding for special events or donations and can their fee come from a designated percentage of funds solicited and secured on behalf of the organization? Answer

Question MarkBy law what does a charity have to do if it receives a donated car and wants to sell it? Answer

Question MarkI am the director of a nonprofit and want to rent an area of my home to the organization. Is this illegal? Answer

Question MarkThe treasurer of our PTO insists that we carry over at least $4000 for the next school year in case we don't have as successful a fundraiser next fall.  I think that is excessive.  Are there any laws regarding the carryover of funds?  Shouldn't we spend the money this year's classes raised on them? Answer

Question MarkWe have an existing 501(c)(3) organization. We are applying for another 501(c)(3) for a similar cause. Can we receive donations to the established one and hold/transfer those donated funds to the new one when we receive our advance ruling letter from IRS. If so is there a proceedure we need to follow? Answer

Question MarkI am trying to find out whether our organization is recognized as a church for tax purposes. Is there any other category under which we could be exempt. Answer

Question MarkI belong to a 501(c)(3) organization, that is a Food Pantry, but also, gives out money for help with utilities and rent. Every year they are holding back at least 40,000 dollars in the account. Is this against all rules. The primary is Food Pantry, is utilities and rent unlawful, and who do I contact for an Audit? Answer

Question MarkBased on some other answers you've given, donations of labor for plumbing, electrical, etc. work are not considered revenue for our new 501(c)(3) organization. However, can those individuals claim the value of those donated services on their taxes as charitable donations? And on a related note, is it better to have them donate the materials used and have us pay for their labor, or visa-versa; or does it really matter from a tax standpoint for either us or those who donate how donations are made? ...we are starting a Homeless Services Center. Answer

Question MarkHow much public disclosure is required of a 501(c)(3) organization? What are the basic requirements regarding annual meetings and open membership, if any? Answer

Question MarkI am forming a multi-media production/publishing entity which focuses on educational, religious, & literary themes, as well as socio-political themes, which will be offered to religious & educational institutions, as well as the public at-large. In consideration of forming as either as an LLC or a 501(c)(3), 1)Can an LLC accept charitable contributions? 2)Can a 501(c)(3) also be a 527 corp? Answer

Question MarkIs there anything a nonprofit subsidiary can do to ward off a forced merger/consolidation with its nonprofit parent where the parent is the sole member of the subsidiary? Answer

Question MarkI worked for a non-profit with the mission of restoring a theatre, the current board has decided they are tired and wish to possibly dissolve the corporation and abandon the project. There are over $2.5 million in private and public funds invested in this project. Also the property is privately owned with a 95 year lease with the nonprofit. If the nonprofit should disband what happens to those funds that were invested? Can the capital improvements be turned over to a for profit corporation? Answer

Question MarkOur organization temporarily lost the status of the public charity with the IRS, because we did not fill out form 8374 in time. Now the form is at the IRS, but in the meantime we need to know if we can apply for the grants and accept donations from our supporters? Answer

Question MarkMy organization is creating a separate 501(c)(3) foundation. Bylaws of the foundation state there are no dues. The organization would like to donate part of their yearly dues to the foundation. Is this appropriate? Answer

Question MarkUnder New Jersey Law, are members of a nonprofit organization entitled to a listing of its members with names, addresses, phone numbers and email information? Answer

Question MarkI work for a non-profit education foundation that awards grants to synagogues (primarily) and some religious schools for family education programs. Do the grantees have to renew their 501(c)(3) certification or is it a one time thing? Answer

Question MarkA Board Member who has resigned has asked to continue to receive Board minutes. This person may rejoin our Board again in the future. We are a Private Foundation. Our Board Minutes often have sensitive and confidential information. Should we provide the minutes to this person? Answer

Question MarkI am the president of a nonprofit football league and also a photographer. I take photographs for several teams in the league and sell copies to parents if they want them. I don't get paid by the league. I was told that I would have to either stop taking the pictures or resign my position as president because this activity is illegal. Is there such a law? Answer

Question MarkWhen hosting an event or fundraiser and we use the phrase: "a portion of the proceeds to benefit..." are we legally obligated to state what portion is directed to the non-profit, if asked? Answer

Question MarkWe are in the process of updating our by-laws. Is there a specific procedure we must follow by state/federal law to do this? Answer

Question MarkCan personal legal ramifications (for example, safeguarding a board member's personal assets from lawsuit) be curtailed by establishing an indemnification clause in a nonprofit's bylaws? Answer

Question MarkWe award grants to community based organizations for educational projects within in their communities. We would like to display photos of children engaged in these educational activities on our website. What are the legal things we need to consider? Answer

Question MarkI am the co-founder of a new non-profit organization and the question has come up as to whether or not I can assume a paid position within the organization. Can a co-founder ethically become an executive director? Answer

Question MarkI have a 509(a)(1) organization and would like to use an organization’s 501(c)(3) status [to obtain contributions]. Is there a group I can use as an incubator until I get a 501(c)(3) status? Answer

Question MarkHow can I stop my Church from withdrawing money from the “principal” of our endowment? Our church raises $100,000 a year but spends $250,000. Our pastor says we should be thankful we have the endowment for this purpose. Answer

Question MarkIf my city gives our charitable organization a house to use as a shelter can it be used as in-kind money? Answer

Question MarkCan a charity give money to a charity created by a politician who currently holds office and is running for office? Answer

Question MarkA Board on which I serve wants to have a raffle that will give away money and a car. Can you tell me what the dollar threshold is for reporting the winnings to the IRS. Must we ask for people to give their SS# in order to collect their prize? Answer

Question MarkIf people give money specifically designated towards a “building fund” of a church for a new sanctuary, and some of the money is used to build the pastor a new office in the OLD building by vote of the deacon board (without congregational input), is this permissible? If people contribute money specifically earmarked for a new vcr/tv setup for a Sunday school room, and it is used instead for 'general funds' purposes, is this permissible? Answer

Question MarkI want to spend the rest of my life creating and directing musical choral ensembles. Is a nonprofit organization the way to go? Answer

Question MarkI have been concerned about a drop in my church’s endowment from 160mm to 90mm from 2000 to 2003. It is now 100mm. The head of the investment committee is a broker. I am a Chartered Financial Analyst, my polite inquiries have not been received well... Have fiduciary boundaries been approached? What can I do? Answer

Question Mark501(c)(3) versus 509(a)(1). What is the difference between these two statuses? Answer

Question MarkOur synagogue wants to acquire several bank certificates of deposit for different terms. Our president and financial secretary will be the signatories. Can these signatories be changed if we elect new officers? Will there be a penalty? Answer

Question MarkThank you for the information on in-kind things. (See To the Point, June 1-15, 2004.) Just 2 weeks ago I attended a workshop given by the IRS and they told me we could not report the in-kind support we received in the way of office supplies, health insurance and liability insurance coverage for our employees, postage cost etc. Now I think they gave me the wrong information. The organization that gave us that start up support has given us a copy of their monthly accounting reports that verify what they contributed to us in 2003 well over $25,000. As of October 1, 2003 we are totally independent of the in-kind they were helping us with. It has been replaced with a direct grant and we have set up our own relationships with vendors. Answer

Question MarkWe are a new charity that has not received any grants or other cash donations yet, but have received in-kind services. Do we still have to file a Form 990? Answer

Question MarkIs a nonprofit organization required to allow the public to sit in on its entire Board Meeting or just the part allocated for Public Comment? Answer

Question MarkCan the directors of our nonprofit corporation vote by proxy? Answer

Question MarkIf our charity creates a limited liability company in which the charity is the sole member and a donor gives it a piece of real estate, will the donor be entitled to a charitable contribution deduction? Answer

Question MarkFor code of conduct and falsifying fact issues within a committee, after raising it to the chair of the Board, no resolution was achieved. Where is the next authority to report such issues? Any organization governing nonprofit organizations? Answer

Question MarkHow long is a nonprofit required to retain General Ledgers and other original books of financial records? If the guidelines state “in perpetuity,” what constitutes perpetuity when an organization is 100 years old? Answer

Question MarkI’ve been the executive director of my organization about 20 years. We had a good year this year and my board wants to give me a one-time “achievement bonus” of a few thousand dollars. Is this okay? Answer

Question MarkI am trying to find out how quilts can be donated to a museum and deducted from taxes. I need a copy of the form and an explanation if the amount is over $5000. Answer

Question MarkOur small performing arts organization has no directors and officers insurance and no indemnification clause in its bylaws. When I asked about this, I was told that the state law protects us so that it is unnecessary. Is that correct? Answer

Question MarkOur nonprofit sponsors a tour of musicians. Do we have to take out Social Security and taxes, or may we simply pass the honorarium along to them? Answer

Question MarkHow much surplus revenue can a nonprofit organization maintain in its treasury?Answer

Question MarkMy son belongs to a performing arts group, where there has been some highly irregular activity by chaperones, including the director, on trips. Both adults and kids have gotten drunk and much of the behavior has been unmannerly. The board knows we don’t approve, but doesn’t seem to care what we think. As parents, how do we confront the board and prevent something tragic from happening? Answer

Question MarkMy company assists not-for-profit organizations and I need to track down what legal percentage a not-for-profit can spend on administrative costs.Answer

Question MarkOur Board of Directors is about to negotiate a new 20-year lease with our landlord. We are concerned that the Board members who are signing the lease won’t be personally liable for the lease if, worst case scenario, our organization becomes bankrupt. Answer

Question MarkA friend of mine had a horrible horseback riding accident and is paralyzed from the waist down. He has no health insurance. Several of his friends are willing to raise money for his medical care and I am wondering what sort of trust, foundation or other entity should be set up so that donations could be tax deductible. Answer

Question MarkCan I be held accountable if I do not agree with a board decision that is too risky and causes damage? Answer

Question MarkI am a member of a nonprofit organization. The directors say they do not have to hold open meetings. Is this OK? Answer

Question MarkOur nonprofit corporation has no bylaws. Are we in violation of the law? Answer

Question MarkI just won a gourmet dinner for 12 in a charitable lottery. It will be prepared personally by a world famous chef in his own home. The charity says it’s worth $13,000. Isn’t that great? Answer

Question MarkIf a synagogue never filed for recognition of exemption under Section 501(c)(3), what would be the implication if they were operating for several years, assuming that they had no unrelated business taxable income? Answer

Question MarkIn your last issue you stated that a social entrepreneur can structure a nonprofit so that he or she can control it. I teach a How to Start a Nonprofit course and have stated exactly the opposite. Can you explain what you mean? Answer

Question MarkIn operating our small private foundation, can we give away significantly appreciated stock to meet our annual distribution requirement without recognizing capital gain subject to foundation excise taxes? Answer

Question MarkI am trying to find out what the federal tax laws are regarding tipping--the maximum amount that a single foundation can give to a single organization without causing it to lose its public charity status and become a private foundation. I understand that it goes by percentage of income, but I don’t know that the percentage is. Answer

Question MarkI am considering converting my business from for-profit to nonprofit. The name is trademarked in my name personally. Will I be able to keep the trademark? I don’t want to lose control after all the work I have done. Answer

Question MarkYou have previously suggested that a founder can control a nonprofit organization by serving as the sole member and appointing the Board. How might the IRS respond to an application for section 501(c)(3) status for a sole member corporation that will seek federal grants to carry out its mission? Answer

Question MarkWe have been told that the President of our Board has no vote. Says who? Answer

Question MarkI have been asked to serve on the board of a local Chamber of Commerce. Should I be concerned that it does not have directors’ and officers’ insurance? Answer

Question MarkDoes our Parent-Teacher Association have to collect and remit state sales tax on the items we sell at the school store? Answer

Question MarkMay a Board member of a charitable organization be paid? Answer

Question MarkMay our organization accept a contribution from a political action committee? We are recognized as a public charity. Answer

Question MarkOur controller says we should not record Public Service Announcements on radio or television as an in kind donation because the stations are required to give a certain number each year. What should we do? Answer

Question MarkWhat are the pros and cons of incorporation for our church, especially as it relates to limited liability? Answer

Question MarkCan you explain why we list our membership dues on the line for reporting gifts, grants and contributions on our Form 990 tax return and not on the line for membership dues and assessments? Our foundation members are wondering whether their dues are grants or administrative expenses. Answer

Question MarkDo we have to disclose the names of donors listed on Schedule B when we give out our Form 990 tax return in response to a request for public inspection? Answer

Question MarkThe business hosting our annual fund raising dinner in its auditorium wants to deduct the rental value as a charitable contribution. Is it appropriate to do so? Answer

Question MarkWe include the rental income from our low income apartment house on line 6 of our Form 990 tax return under gross rents. Is that correct?

Answer


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