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Ellis McGehee Carter

Ellis Carter’s Answers

7 total

  • Does having seperate EIN #'s affect incorporation?

    We are a local nonprofit sorority at a university. This means we only have one active chapter. We have recently organized a National Board which consists of several alumni from the organization. We are looking to start a second chapter at another ...

    Ellis’s Answer

    Each separate corporation should have its own EIN number. If there is only one corporation conducting the different chapters as activites under different trade names, it would be in error to have more than one EIN. Also, you should not apply for an EIN prior to forming a corporation. The EIN won't technically apply to the corporation your forming if when you applied for it the corporation did not exist.

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  • What is the process for setting up and starting a 501 c 3, non profit organization

    what is needed for a non profit organization besides a 501 c3?

    Ellis’s Answer

    The legal steps are as follows:

    • Make sure the chosen name is available and reserve it.
    • Prepare the governing documents which include articles of incorporation and bylaws for non-profit corporations. The articles and bylaws should explain how the Board of Directors is chosen: by Board vote, by designation by an individual or entity, by a membership, or through some combination of these.
    • The articles must be signed by the incorporator and filed with the appropriate state agency. Frequently, thy must be published. This starts the legal existence of the organization.
    • An EIN number must then be obtained from the IRS at www.irs.gov.
    • An organizational meeting must be held or consents in lieu of an organizational meeting must be signed by all the directors. At this meeting, the board is seated, the officers are elected, a banking resolution is passed, and all of the appropriate policies and governing documents are approved.
    • The next step is to apply for tax-exempt status to the IRS and, depending upon the state, the appropriate state agency.
    • To obtain 501(c)(3) status, most new organizations are required to file Form 1023, Application for Recognition of Exemption with the IRS. This form must be filed within 27 months of incorporation to ensure that the exempt status relates back to the date of incorporation.
    • Issues such as private inurement, private benefit, conflicts of interest, compensation, fundraising, public support tests, lobbying activities, political activities, etc., scientific research, advocacy, etc. may indicate a need for professional guidance.
    • The determination process can be completed in a few months in rare cases where the file is complete and no complex issues are raised. More frequently, the file is assigned to an agent to develop additional facts. In such cases, it can take 6 months or more before the file is assigned to an agent. In such cases, the process usually takes 6 months to a year.
    • Ongoing filing requirements include:
    - Form 990, 990-PF, or 990-N and equivalent state forms;
    - Typically, an annual report with the appropriate state agency;
    - In some states, there is a need to register with the Attorney General;
    - Fundraising registrations are required by most states and some local jurisdictions.

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  • Is it legal to receive a tax deduction for donations to non profit organizations

    Regarding not-for-profits: core business is providing scholarships into a program. Donor is 'donating' funds to put someone specific (not a family member) through the program, but NOT on scholarship - at normal program price; thus obtaining the t...

    Ellis’s Answer

    The rules governing deductibility of charitable gifts are surprisingly complex. Assuming the charity is a valid 501(c)(3) organization, a legally binding requirement that specifies the identity of the scholarship recipient destroys the deductibility of the gift.

    There is an old case that says "charity ends where certainty begins." Thus, earmarking or legally designating a gift for a specific person would generally make the gift non-deductible by the donor. It is possible, however, that a donor could provide non-binding "advice" regarding the identity of the scholarship recipient.
    In 2006, new laws were passed that govern "advised" donations. Any attempt to create an advised gift would have to comply with these rules.

    Work with a lawyer or CPA who specializes in advising tax-exempt organizations if your organization plans to permit donors to provide advice regarding the ulimate recipient of the scholarships.

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  • Are taxes incurred on monetary gifts given to a non profit homeowners association

    A non-profit homeowner's association has been established in the state of Washington. The association collects monthly fees from its residents. Every once in awhile there's not enough money to purchase things for the association and/or the infra...

    Ellis’s Answer

    Certain types of income may be exempt for a home owners association if it makes an 528 election. This is an annual election that should generally be considered by the association's CPA every year. Depending upon the association's sources of income, it may be more favorable to be taxed as a taxable corporation in some years and as a partially tax-exempt organization under Code Section 528 in other years.

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  • Does it violate any regulation regarding tax exempt non-profit organizations if they give a religious title to a community event

    Does it violate any regulation regarding tax exempt non-profit organizations if they give a religious title to a community event ? For example, can a non-profit, tax exempt organization host an agency "Christmas Party Fundraiser" or an "Easter ...

    Ellis’s Answer

    I don't know of any law specific to non-profits that would bar this practice; however, I could see a religious discrimination employment claim developing out of this scenario. Also, the non-profit risks alienating constituents who are not Christian.

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  • Procedure for setting up non profit organization and taking online donations, 501(c)(3)

    Is it legal to take online donations for a defense fund, do you have to sign up as a non profit org, do you have to pay taxes if all the money goes to pay for legal fees for someone. Thanks

    Ellis’s Answer

    If the organization has not applied for tax-exempt status by submitting an application for exemption using Form 1023 to the IRS, then it is not exempt. Contributions may be made to it, but they will not be deductible by the donor.

    If the organization has submitted an application for exemption and recieved a determination that it is exempt under Section 501(c)(3), then it should not matter that the majority of its funds are spent on legal fees if those fees are reasonable and necessary to fullfill the organization's charitable purposes.

    If the defense fund is not yet qualified as exempt under 501(c)(3), it will need to find out whether it has a charitable purpose that will qualify it for such status. Not all defense funds will qualify under 501(c)(3). For example, a defense fund set-up to assist one person or small group of individuals will not have a broad enough class of beneficiaries to qualify. Charity begins where certainty ends. Similarly, if the defendents are not poor and distressed, they may not qualify as beneficiaries of charitable funds.

    Determining whether a defense fund can qualify under Code Section 501(c)(3) is a complicated and fact specific analysis that will require the assistance of a lawyer trained in Section 501(c)(3) law.

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  • Procedure for setting up non profit organization and taking online donations, 501(c)(3)

    Is it legal to take online donations for a defense fund, do you have to sign up as a non profit org, do you have to pay taxes if all the money goes to pay for legal fees for someone. Thanks

    Ellis’s Answer

    If the organization has not applied for tax-exempt status by submitting an application for exemption using Form 1023 to the IRS, then it is not exempt. Contributions may be made to it, but they will not be deductible to the donor.

    If the organization has submitted an application for exemption and recieved a determination that it is exempt under Section 501(c)(3), then it should not matter that the majority of its funds are spent on legal fees if that is the organization's primary program.

    If the defense fund is not yet qualified as exempt under 501(c)(3), you need to find out whether it has a charitable purpose. Not all defense funds will qualify under 501(c)(3). For example, a defense fund set-up to assist one person or small group of individual will not have a broad enough class of beneficiaries to qualify. Charity begins where certainty ends. Similarly, if the defendents are not poor and distressed, they may not qualify as beneficiaries of charitable funds. Determining whether a defense fund can qualify under Code Section 501(c)(3) is a complicated and fact specific analysis that will require the assistance of a lawyer trained in Section 501(c)(3) law.

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