Need some help with a 501C3
General situation:
an entity set themselves up for a 501C-3 status during Hurricane Katrina. Their NTEE status is " M20 - Disaster Preparedness & Relief Services " Over the years they showed gross receipts ranging from $25,000 to $50,000 With Katrina subsiding, this group has shifted focus to running community events for profit, with large subsides from a governmental entity. My general question is this; (1) how is this legal (2) if you set up a 501C3 under one set of circumstances and then use that number for gain under a different set of circumstances, how is that legal? If its OK, then no harm no foul. If not, then what kind of trouble are they putting themselves in as well as people who give them money under the premise of a 501C-3 who's sole purpose has no relevancy to the foundation of the gift/award/donation? |
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In reference to their shift in focus.. it depends on their Articles of Organization. If their current activities are NOT covered under the Articles of Organization that were in effect when they were granted 501(c)(3) status.. then those activities are NOT tax exempt. If their AofO are no longer applicable, they need to amend them and do all the necessary refiling. Obviously, I am not a lawyer, so take this with a grain of salt.. but I'm pretty sure. |
I don't know much about the topic and think it's an interesting question.
One thing I do know is that nonprofit status is rampantly abused. I compete with consulting firms that are set up as nonprofits, when there's no way in the world they're a legitimate nonprofit. |
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from the IRS... Quote:
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One of these companies was a private, for-profit company until they discovered the nonprofit angle. They then converted to a nonprofit status and their "board of directors" is a bunch of their employees, who report to the owner of the company that made it a nonprofit in the first place. And they do exactly the same thing that they did when they were a for-profit company. It's a complete ripoff. |
Some more info for both of you...
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(check the boxes for FALSE EXEMPTION and OTHER) http://www.irs.gov/pub/irs-pdf/f3949a.pdf |
Marty, here is some more exact info directly from the IRS
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Thanks!
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