Hello!
Upon google surfing for some answers, I ran into this page/forum.
I found some amazing valuable information.
I do have some questions!
First, let me state that I am not a 501c3 but I do partake in donating to 501c3 non-profit charities.
My question being:
If we donate to a 501c3, product only (NO CASH) and that 501c3 donates leftover to a 3rd party.
Is that 3rd party able to do as they please with the product?
Example: Could this 3rd party sell the product for a profit?
ANY INSIGHT WOULD BE GREATLY APPRECIATED.
THANK YOU!
Jake -- Interesting points. Your question about can a nonprofit just raise money to distribute to other nonprofits -- the answer is yes. The United Way is probably the most well known example. But that doesn't mean every nonprofit can do that. The IRS cares that you spend your money in line with your mission. If a parent group raised $10,000 a year and gave all of that money to a soup kitchen, that wouldn't be in line with their mission and they could lose their tax-exempt status. On the other hand, a $100 donation probably wouldn't raise eyebrows, and if it were in conjunction with a student community service project, it would actually fit their mission.
what kind of bothered me about this was this example, what if, my non- profit was given $1,000 , I took out a little to pay my employees and expenses and donated the rest to another non-profit (school, charity, etc....). They in turn, took out their expenses and donated the rest to another non profit, as opposed to actually buying food for homeless people, buying school supplies for children or whatever. And after taking out there expenses and salaries, they donated whatever they got left to another non profit and so on and so on until there's nothing left or by the time it actually was put to use there was hardly anything left. Basically all the money was used for a variety of organizations expenses and salaries.
also related to this......can a non profit be a group that raises funds that solely distributes to other non profits, charity's etc.....? and their existence is to just raise funds.
I am CERTAIN that the IRS told me, too, that one 501c3 can donate to another 501c3, no problem. In fact, I understand it to be just about the only way we can give cash away.
Our example: prior to filing for 501c3, our PTO would give each teacher a check for her own use as she saw fit for classroom supplies (or she could take her husband out to dinner...we didn't care because every teacher spends way more of her own $ on classroom stuff anyway). When we began researching Form 1023, I asked the IRS about this example. No, the rep said, it's not kosher to just hand out cash anymore, because our PTO had no way of ensuring the $ was being used within the restrictions placed on a non-profit charity. Thus, the only way we could give the teachers $ was to reimburse receipts that proved the money was spent in accordance with the mission and constitution our PTO has filed with the IRS.
However, if we give $ to another 501c3 (and all non-profit schools are automatically 501c3), then the money is guarenteed to be used in accordance with the IRS's rules, since the other organization has agreed to abide by the same rules that govern non-profit status. Makes sense?
So, it's completely backwards for someone to suggest that an organization could lose its nonprofit status for giving to another 501c3.
IRS Publication 557 ("Tax Exempt Status for Your Organization, page 4) lists the reasons why a 501c3 could have its status revoked. Basically, if your organization doesn't do what you said itdoes, or you engaged in a prohibited acitivity of a 501c3 like intervening in the campaign for a candidate for public office (see page 14).
