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How should (c)(6) nonprofit deal with charitable contributions?

Your Legal Questions Answered

How should (c)(6) nonprofit deal with charitable contributions?

Our nonprofit is a 501(c)(6) women's networking organization. We would like to request donations from our members and the public to fund a $5,000 college scholarship. We aren't a charitable organization, so do we need to register under our state’s charitable solicitation statute?  Do we need to disclose that we aren't a charitable nonprofit so our donors don't attempt to take charitable deductions?  

Whether you have to register under the charitable solicitation registration act of your state (and any other state in which you solicit contributions) may depend on whether anyone involved in the solicitations is paid for their effort and how much you raise every year.  Some states do not require registration when done entirely by volunteers until after the total raised reaches a relatively low figure, such as $25,000 in Pennsylvania.  The fact that you are not a charitable organization does not eliminate the requirement to register when you are soliciting for a charitable purpose such as scholarships. 

If you are a non-charitable organization with annual gross receipts normally totaling more than $100,000 a year, you would be required to tell you donors that the contributions are not deductible. (Tax Code section 6113) Even if not required, it would be a good practice to do so.

You might also want to consider setting up a small charitable organization controlled by your (c)(6) that can solicit on its own and provide deductibility for gifts.  Filing your application on the 1023-EZ Form and filing an annual 990-N, both of which are possible for organizations with gross receipts normally less than $50,000 a year, does not present a heavy administrative burden and would give deductibility to your donors (if they don’t use the standard deduction) for their gifts.  

Tuesday, April 12, 2022

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