Non-profits funneling money to for-profits?

[dnail86]

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

Hello all,

I work at a financial planning firm, and I've been tasked with finding out about the following.

One of the advisors here has taken on some pro bono work for a Christian music group. Musicians struggle until they make it big, and this is compounded if you're in the religious music genre, as their venues are limited.

Is there a way to set up a not-for-profit entity which people could donate money to and receive tax write-offs, and have that non-profit take those funds and use them to offset expenses for a for-profit entity (the band) such as equipment, gas, cost of living, etc?

 

[tranquility]

The question cannot be answered in the abstract as the specific plan is important.

You cannot give to benefit specific persons to get a deduction. In other words, those contributing cannot know you will give to the Crucifixed Thieves band.

Second, what is the charitable purpose? From the IRS website:

A section 501(c)(3) organization must not be organized or operated for the benefit of private interests, such as the creator or the creator's family, shareholders of the organization, other designated individuals, or persons controlled directly or indirectly by such private interests. No part of the net earnings of a section 501(c)(3) organization may inure to the benefit of any private shareholder or individual. A private shareholder or individual is a person having a personal and private interest in the activities of the organization.

 

[dnail86]

The persons who would be donating to the non-profit see the band as a form of ministry, just like any Christian camps, mission work, etc.

You cannot give to benefit specific persons to get a deduction. In other words, those contributing cannot know you will give to the Crucifixed Thieves band.

That point seems to put a fork in the idea though.

Thanks for the response.

 

[tranquility]

If the mission is to spread the Gospel through music, why don't you take the donations and hire the band?

 

[dnail86]

Worst case scenario, they fund it out of pocket.

But if there's a way to get a tax break out of it, that would be ideal.

 

[tranquility]

Even in a non-profit, you have to pay taxes on unrelated business income. There is not a tax break here.

 

[LdiJ]

Even in a non-profit, you have to pay taxes on unrelated business income. There is not a tax break here.

I don't think its a tax break for the band that OP is looking for. I think its a tax break for the people supporting (through donations) the band that the OP is looking for.

 

[tranquility]

If the mission of the non-profit was to spread the Gospel and they accepted donations as a church or educational charitable purpose, couldn't they hire the band and pay them with the donations? As long as there is no identification of paying the band as the purpose of the institution (which would make it problematical as a charity anyway), they could do that. The institution might make some UBI on the receipts from the concerts, but that's fine too.