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Local chapter rides national's 501(c)(3) status? 

Your Legal Questions Answered

Local chapter rides national's 501(c)(3) status? 

Does 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? 

A local chapter may be able to “ride” on the exempt status of the national organization if the national organization has filed for and received a “group exemption” covering its local units. (See Ready Reference Page: “Group Exemption Can Ease Burden on Affiliates.”) If there is no group exemption, the local units will probably have to obtain their own recognition. The national organization will obviously know whether it has a group exemption and whether it is eager to add local chapters, so you should check with it.
Even if the national provides access to a group exemption, however, a local chapter may want to obtain its own. This is ultimately a type of power issue and the local may not want to maintain its exempt status at the national’s discretion (mercy, whim, sufferance -- you pick the word). If there were a dispute with the national, the local chapter might have to change its name and some of its program, but at least it wouldn’t have to start over with the IRS and would not lose its exempt status arbitrarily.
Thursday, January 5, 2012

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