Another 501 (c) 3 question -- conflict of interest

Hi sullyfish,

Thanks for the response.

Again, can you point to some sort of specific regulation? Fund-raising, of one kind or another, has been very much a part of my experience with non-profits.

And you say that we can't conduct "business" unless it is part of our programs -- I think I made it clear that these ARE our programs? What precisely is the problem?

If lawyer-types (joe et al) would like to weigh in too, that'd be nice.

As an example -- I was involved in a non-profit that was set up around hosting a specific conference. The conference was not free. There were several fund-raising events leading up to the conference -- also not free (they were fund-raising events after all).

The conference promised a lot of bang for its buck (whether it delivered is another story -- the point here though is that it did successfully achieve non-profit status), as in more value than the ticket prices indicated. But nothing was provided free, at all, for the duration of its existence.

There's a common misconception that non-profits can't make a profit. That's not true. Non-profits, within some limitations, can charge admission to events, sell products, and do many of the other things that for-profit companies do. What non-profits can't do is divide up those profits and pay them out as dividends or partnership shares. Instead, all profits must be turned back into the organization. "Non-profit" doesn't mean that the organization can't make a profit, it means that no individual can share in the profits from the organization. All non-profits must also have a provision in their charter or bylaws that specifies how the organization's assets are to be distributed in the event that the organization is dissolved -- any remaining assets, after all creditors have been paid, must be directed to other charities or charitable purposes.

Thanks again Joe. Really appreciate your input here.

We do have the dissolution thingie in our bylaws.

That's because any 501(c)(3) organization must have that provision in its bylaws. It demonstrates to the tax authorities that the members of the organization won't just abscond with the funds when it's time to close up shop.

True; all assets must go to another nonprofit.

A CHARITABLE non profit corporation is different from a non profit corporation.

Charities MUST pass the IRS "test" showing that their programs benefit charitable needs and that their revenue comes from donations, grants and memberships.

A group that puts on workshops - charges for them - is no different than a business and that is not a charitable gesture, IMHO.

You are incorrect. There is no distinction between a "charitable non-profit" and a "non-profit." All non-profits are covered under section 501(c)(3) of the internal revenue code.


There is no such requirement.


Your humble opinion is quite wrong.

Joe -pick up the IRS non profit determiniation application - there are over 12 different not for profit designations. - including fraternities, animal rights groups, day care centers, homeower associations, black lung associations, civic assocations, historical societies, etc. etc.

The ONLY non profit that can accept donations that are deductible to the donor on the taxpayer form is the 501 (c)(3) charitable non profit.

501(c)(3) Charities should not charge their clients for services. ( A food cupboard cannot charge the poor for food0

Section of 1986 Tax Code Description of organization General nature of activities Application Form Annual return required to be filed Contributions allowable
501(c)(1) Corporations Organized Under Act of Congress (including Federal Credit Unions) Instrumentalities of the United States No Form None Yes, if made for exclusively public purposes
501(c)(2) Title Holding Corporation For Exempt Organization Holding title to property of an exempt organization 1024 9901 or 990EZ8 No2
501(c)(3)

(also here) Religious, Educational, Charitable, Scientific, Literary, Testing for Public Safety, to Foster National or International Amateur Sports Competition, or Prevention of Cruelty to Children or Animals Organizations Activities of nature implied by description of class of organization 1023 9901, 990EZ8, or 990-PF Yes, generally
All 501(c)(3) organizations are further categorized as one of five types under IRC 509(a):
Sub-class Section Description
Private foundations
All 501(c)(3) organizations that don't qualify as public charities. Some private foundations are additionally subclassified as private operating foundations or private non-operating foundations, which receive some of the advantages of public charities.
Public charities
509(a)(1) Publicly-supported charities.
509(a)(2) Exempt purpose activity-supported charities.
509(a)(3) Supporting organizations for 509(a)(1) or 509(a)(2) charities.
509(a)(4) Public safety charities.
501(c)(4)

(also here) Civic Leagues, Social Welfare Organizations, and Local Associations of Employees Promotion of community welfare; charitable, educational or recreational 1024 9901 or 990EZ8 No, generally 2,3
501(c)(5)

(also here) Labor, Agricultural, and Horticultural Organizations Educational or instructive, the purpose being to improve conditions of work, and to improve products and efficiency 1024 9901 or 990EZ8 No2
501(c)(6)

(also here) Business Leagues, Chambers of Commerce, Real Estate Boards, Etc. Improvement of business conditions of one or more lines of business 1024 9901 or 990EZ8 No2
501(c)(7)

(also here) Social and Recreation Clubs Pleasure, recreation, social activities 1024 9901 or 990EZ8 No2
501(c)(8)

(also here) Fraternal Beneficiary Societies and Associations Lodge providing for payment of life, sickness, accident, or other benefits to members 1024 9901 or 990EZ8 Yes, if for certain Sec. 501(c)(3) purposes
501(c)(9)

(also here) Voluntary Employees’ Beneficiary Associations Providing for payment of life, sickness, accident or other benefits to members 1024 9901 or 990EZ8 No2
501(c)(10)

(also here) Domestic Fraternal Societies and Associations Lodge devoting its net earnings to charitable, fraternal, and other specified purposes. No life, sickness, or accident benefits to members 1024 9901 or 990EZ8 Yes, if for certain Sec. 501(c)(3) purposes
501(c)(11) Teachers’ Retirement Fund Associations Teachers’ association for payment of retirement benefits No Form6 9901 or 990EZ8 No2
501(c)(12) Benevolent Life Insurance Associations, Mutual Ditch or Irrigation Companies, Mutual or Cooperative Telephone Companies, Etc. Activities of a mutually beneficial nature similar to those implied by the description of class of organization 1024 9901 or 990EZ8 No2
501(c)(13) Cemetery Companies Burials and incidental activities 1024 9901 or 990EZ8 Yes, generally
501(c)(14) State Chartered Credit Unions, Mutual Reserve Funds Loans to members No Form6 9901 or 990EZ8 No2
501(c)(15) Mutual Insurance Companies or Associations Providing insurance to members substantially at cost 1024 9901 or 990EZ8 No2
501(c)(16) Cooperative Organizations to Finance Crop Operations Financing crop operations in conjunction with activities of a marketing or purchasing association No Form6 9901 or 990EZ8 No2
501(c)(17)

(also here) Supplemental Unemployment Benefit Trusts Provides for payment of supplemental unemployment compensation benefits 1024 9901 or 990EZ8 No2
501(c)(18) Employee Funded Pension Trust (created before June 25, 1959) Payment of benefits under a pension plan funded by employees No Form6 9901 or 990EZ8 No2
501(c)(19) Post or Organization of Past or Present Members of the Armed Forces Activities implied by nature of organization 1024 9901 or 990EZ8 No, generally7
501(c)(20) Group Legal Services Plan Organizations n/a n/a n/a n/a
501(c)(21) Black Lung Benefit Trusts Funded by coal mine operators to satisfy their liability for disability or death due to black lung diseases No Form6 990-BL No4
501(c)(22) Withdrawal Liability Payment Fund To provide funds to meet the liability of employers withdrawing from a multi-employer pension fund No Form6 990 or 990EZ8 No5
501(c)(23) Veterans Organization (created before 1880) To provide insurance and other benefits to veterans No Form6 990 or 990EZ8 No, generally7
501(c)(25) Title Holding Corporations or Trusts with Multiple Parents Holding title and paying over income from property to 35 or fewer parents or beneficiaries 1024 990 or 990EZ No
501(c)(26) State-Sponsored Organization Providing Health Coverage for High-Risk Individuals Provides health care coverage to high-risk
individuals No Form6 9901 or 990EZ8 No
501(c)(27) State-Sponsored Workers’ Compensation Reinsurance Organization Reimburses members for losses under workers’ compensation acts No Form6 9901 or 990EZ8 No
501(d) Religious and Apostolic Associations Regular business activities. Communal religious community No Form 10659 No2
501(e) Cooperative Hospital Service Organizations Performs cooperative services for hospitals 1023 9901 or 990EZ8 Yes
501(f) Cooperative Service Organizations of Operating Educational Organizations Performs collective investment services for educational organizations 1023 9901 or 990EZ8 Yes
501(k) Child Care Organization Provides care for children 1023 990 or 990EZ8 Yes
501(n) Charitable Risk Pools Pools certain insurance risks of 501(c)(3) 1023 9901 or 990EZ8 Yes
521(a) Farmers’ Cooperative Associations Cooperative marketing and purchasing for agricultural producers 1028 990-C No


Contributions to volunteer fire companies and similar organizations are eductible, but only if made for exclusively public purposes.

I believe that is correct. But then that's not the same thing as saying that charities can only accept donations.


Why not? What section of the internal revenue code says that a charity can't charge for its services or products?

501(c)3 charities can charge for services. I'm not sure where he got the idea they can't.

BTW, some charge sliding fee scales.

I've served on the boards of three non-profits. Two were theater groups that charged for tickets, the third was a student media company that charged for the newspaper and yearbook and that sold advertising in the publications and on the radio station. Nobody was givin' nothin' away for free!

joe, I hope you know I wasn't talking about you. I worked in management for two different nonprofits, and also volunteered on board of directors for two nonprofits.

I know you weren't talking about me. I think we're on the same page here. Why sullyfish thinks that non-profits can't charge for their services or products is, I'm sure, a puzzle to both of us.

Charities CAN have revenues.

A theater group for low income kids CAN charge the audience for admission to the play, but NOT "charge" the kids to participate in the theater experience, since that is the MISSION of the charity. The MISSION provides services to the population it serves. That's how it got its 501(c)(3) IRS designation.

A women's group can hold a fundraising tea and all proceeds can go to the theater charity to support costs for putting on the play, paying the theater rent, buying costumes, etc.

A company can donate to the charity also. In fact, the company can hold an event, charge for the event and give all the PROCEEDS, (after expenses) to the charity. But the company itself is NOT a charity.

Oh brother!

Oh, brother, is spot on! How does all these nonprofits survive with so many misinformed people running them?

Well, I must be pretty stupid after being a CEO for 9 years for a 501(c)(3) agency and currently sitting on 3 boards - 2 charities and one non-profit homeowners association. I also have filled out the IRS Determination forms for three groups, written mission statements, bylaws, and developed initial 5- year budgets for the application and am currently a consultant for a family foundation who awards grants to 501(c)(3) agencies. I am program director for our local historical society, also a 501(c)(3).

I just had a businessman approach me wanting to give away $5,000 and asked me to find 10 groups that he could give the money to as restricted grants. I have to verify these 10 groups for him.

But I guess I am full of "misinformation" . . . so ignore all the above.