Our 501(c)(4) social welfare organization would like to sell its assets to a for-profit and dissolve. Our articles of incorporation mandate that proceeds of the dissolution should flow to the member organizations who are board members and whose organizations are all 501(c)(3) organizations. What concerns would such an arrangement represent? Is there any way to avoid the appearance of a conflict of interest here?
So long as the purchase of your assets does not involve a conflict of interest transaction, I see nothing wrong in selling them to a for-profit entity. That should not cause a problem.
The IRS does not have specific rules for the disposition of net assets upon the dissolution of a 501(c)(4) social welfare organization. Unlike dissolution of a charity, where the remaining assets have to be dedicated to charitable purposes, there is apparently no specific IRS rule for dissolution of a (c)(4).
Some states may have their own rules for the disposition of such property, but not all do. Having the assets flow to 501(c)(3) charities should avoid regulatory problems, however. You don’t tell us the purpose of the organization or anything about its history, but there is a general sense that nonprofit assets distributed on dissolution should be used for similar nonprofit (usually thought to be “charitable”) purposes.