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Using another organizations tax status

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Deri

Junior Member
What to do if an organization wants to use another organization's 501c3 status for purchases?
My church has tax exempt status- 501c3. We donate money to another organization monthly which organization is run by members of my church. The organization has a name but no legal filings. They also receive monetary donations from outside donors which is collected and maintained by them. Their contribution letters they send out are in the name of their organization, not the church, and their events are in the name of their organization. This organization is now requesting to use the church's 501c3 status for their purchases. Is this legal?
 


LdiJ

Senior Member
What to do if an organization wants to use another organization's 501c3 status for purchases?
My church has tax exempt status- 501c3. We donate money to another organization monthly which organization is run by members of my church. The organization has a name but no legal filings. They also receive monetary donations from outside donors which is collected and maintained by them. Their contribution letters they send out are in the name of their organization, not the church, and their events are in the name of their organization. This organization is now requesting to use the church's 501c3 status for their purchases. Is this legal?
What does this other organization do?
 

Zigner

Senior Member, Non-Attorney
Just because members of your church run this thing doesn't mean it's associated with the church As you've described it, no, it's not legal for them to use your (the church's) status for anything.
 

LdiJ

Senior Member
Just because members of your church run this thing doesn't mean it's associated with the church As you've described it, no, it's not legal for them to use your (the church's) status for anything.
I am even a bit concerned about them accepting donations as those donation would not be tax deductible as they do not have their own 501(c)(3) status.
 

Deri

Junior Member
Just because members of your church run this thing doesn't mean it's associated with the church As you've described it, no, it's not legal for them to use your (the church's) status for anything.
I didn't think so. I just need written legal justification so I can tell them why.
 

Deri

Junior Member
I do understand that. However, I wanted to have proof to let them know that it is illegal in the fashion that they are doing it, but if there were any options possible, we could go that route.
 

Zigner

Senior Member, Non-Attorney
I do understand that. However, I wanted to have proof to let them know that it is illegal in the fashion that they are doing it, but if there were any options possible, we could go that route.
Tell them no. Tell them it's illegal. It's really not your problem or even place to school them on why.
 

Just Blue

Senior Member
I do understand that. However, I wanted to have proof to let them know that it is illegal in the fashion that they are doing it, but if there were any options possible, we could go that route.
Is there a reason that you feel the need to justify saying "No" to them?
 

Deri

Junior Member
Is there a reason that you feel the need to justify saying "No" to them?
I do not want them to feel that it's a personal attack on them. I know their personality. That's why I wanted to have proof that what they are requesting is illegal. I don't have a problem saying "no", I just thought it would go smoother with documented proof.
 

Taxing Matters

Overtaxed Member
This organization is now requesting to use the church's 501c3 status for their purchases. Is this legal?
Ok, this is a bit unclear as to exactly what the organization is asking the church to do. An organization exempt under Internal Revenue Code (IRC) section 501(c)(3) does not have to pay federal income tax on the income it has that relates to its exempt purpose. So, for example, a church does not pay federal income tax on the donations of church members to fund the church's religious activities. Exemption under § 501(c)(3) offers no benefits under federal tax for buying things.

That said, states generally do allow churches and charities exemption from state and local sales taxes on purchases they make for their religious/charitable activities. The rules for using those exemptions depend on the state and you did not specify the state involved. Nevertheless, it is pretty much universally the case that a church or charitable organization that has a sales tax exemption may not allow any other organization to use their exemption nor may the church/organization buy things for some other organization using its exemption either. So if that other group is independent of your church (even though the members may belong to both) then that other group needs to do whatever the applicable state law says is required to get its own sales tax exemption.
 

Deri

Junior Member
Ok, this is a bit unclear as to exactly what the organization is asking the church to do. An organization exempt under Internal Revenue Code (IRC) section 501(c)(3) does not have to pay federal income tax on the income it has that relates to its exempt purpose. So, for example, a church does not pay federal income tax on the donations of church members to fund the church's religious activities. Exemption under § 501(c)(3) offers no benefits under federal tax for buying things.

That said, states generally do allow churches and charities exemption from state and local sales taxes on purchases they make for their religious/charitable activities. The rules for using those exemptions depend on the state and you did not specify the state involved. Nevertheless, it is pretty much universally the case that a church or charitable organization that has a sales tax exemption may not allow any other organization to use their exemption nor may the church/organization buy things for some other organization using its exemption either. So if that other group is independent of your church (even though the members may belong to both) then that other group needs to do whatever the applicable state law says is required to get its own sales tax exemption.
We are in Alabama. Thank you so much for this information. Can this information be found on IRS website?
 

Taxing Matters

Overtaxed Member
Alabama does not exempt all churches/religious organizations from sales and use tax rules, which makes it different from many other states. See Alabama Administrative Rule (AAR) 810-6-5-.16. Instead, it exempts specific organizations by statute. Those organizations are listed in AAR 810-6-3-.07.05. As result, only the organizations exempt by statute (and shown in that regulation) may claim the exemption. If that other group is not on that list, it must comply with the sales tax rules — trying to use the church's exemption will not work because it is not entitled to the exemption if it is not covered in that list. And the church would be foolish to put at risk its exemption by allowing the other group to use its exempt certificate.
 

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