Changing Not-For-Profit Designation

[MikelS]

What is the name of your state (only U.S. law)? TX

My father is the head of a small volunteer group that provides upkeep, records and improvements to a small rural cemetary for historical preservation purposes. Someone in the undocumented past had the group registered with the government as a 501(c)12 'cooperative'. My father has pursued getting grants to provide funding for some of their improvement efforts but another member (a former IRS agent) told him that since they were not designated a 501(c)3, they could not accept charitable contributions. He also said he thought that what they were doing did not qualify for 501(c)3 status. I disagree. They have documents describing their association, bylaws and a governance structure. They provide a service to the community free of charge (they are all volunteers). I do not believe they have ever filed a tax return as they have never had any income.

Question: do they need to change their 501(c) status to accept charitable donations or grants? If they need to change their status, do they just need to submit the appropriate paperwork? If the latter, do they need to state that they were previously designated a 501(c)12 organization? Should they incorporate as an LLC or remain a loose association?

Thanks for your assistance.

Mike

 

[LdiJ]

What is the name of your state (only U.S. law)? TX

My father is the head of a small volunteer group that provides upkeep, records and improvements to a small rural cemetary for historical preservation purposes. Someone in the undocumented past had the group registered with the government as a 501(c)12 'cooperative'. My father has pursued getting grants to provide funding for some of their improvement efforts but another member (a former IRS agent) told him that since they were not designated a 501(c)3, they could not accept charitable contributions. He also said he thought that what they were doing did not qualify for 501(c)3 status. I disagree. They have documents describing their association, bylaws and a governance structure. They provide a service to the community free of charge (they are all volunteers). I do not believe they have ever filed a tax return as they have never had any income.

Question: do they need to change their 501(c) status to accept charitable donations or grants? If they need to change their status, do they just need to submit the appropriate paperwork? If the latter, do they need to state that they were previously designated a 501(c)12 organization? Should they incorporate as an LLC or remain a loose association?

Thanks for your assistance.

Mike

What they could do is simply close out the 501(c)3 organization and reorganize as a charitable organization.

However, if they are primarily decendents of the persons buried in the cemetary they might be more properly classified as a cooperative.

 

[MikelS]

501(c)12 vs 501(c)3

Thank you for your response. I'm not sure if everyone is descended from the cemetary occupants, some may be historically-motivated volunteers. If that is the case, do they have to re-classify?

If they remain a cooperative, can they operate as a not-for-profit as if they were at 501(c)3? Accepting grants and charitable contributions are their main goals since fund raising is difficult for a small cemetary in the backwoods on rural Texas. However, several foundations provide grants to not-for-profit organizations.

Thanks again for your response.

Mikel

 

[LdiJ]

Thank you for your response. I'm not sure if everyone is descended from the cemetary occupants, some may be historically-motivated volunteers. If that is the case, do they have to re-classify?

If they remain a cooperative, can they operate as a not-for-profit as if they were at 501(c)3? Accepting grants and charitable contributions are their main goals since fund raising is difficult for a small cemetary in the backwoods on rural Texas. However, several foundations provide grants to not-for-profit organizations.

Thanks again for your response.

Mikel

They really need a sit down consult with a local tax professional who is experienced in not for profit organizations.

 

[MikelS]

That's the crux of their problem...they have essentially no funds, especially not enough to pay attorney fees. They operate on volunteer labor and the occasional personal purchase of items needed for repairs and maintenance, such as concrete, wood or gas.

Thanks again. I'll relay to the group and let them decide what to do.

 

[LdiJ]

That's the crux of their problem...they have essentially no funds, especially not enough to pay attorney fees. They operate on volunteer labor and the occasional personal purchase of items needed for repairs and maintenance, such as concrete, wood or gas.

Thanks again. I'll relay to the group and let them decide what to do.

I said tax professional...that does not necessarily mean an attorney or CPA.

 

[MikelS]

Ah, good distinction. I may just ask my tax preparer and eat the cost myself.