We've incorporated a non-profit in California. We are a start-up and do not have any assets or employees currently. Opportunities became available in the State of Virgina and we would like to move there to start business. How can we move our non-profit from California to Virginia without losing our 501(c)3 status? Would we need to re-incorporate or simply notify the IRS that our business has moved. We will be offering the same services that we incorporated under in California, and will not have changes in bylaws or structure. We prefer to dissolve in California and do business as a Virginia coroporation so that we don't have to keep up with filings in both states, as we do not anticipate to do any business in California. What is the simpliest way to accomplish this?
This is a problem that the Non Profit subsection of the Tax Section of the California Bar has been urging the government to change for a long time.
Any for-profit corporation can use Internal Revenue Code (IRC) provisions 300 et seq. to reorganize in a different state and take all their old attributes.
With 501's, when you start in another state, you start all over again, including applying for 501(c) status afresh.
The real question is why do you want to move it? You can ease the transition by seeking permission for and registering it in VA to do nonprofit activities (such as fund raising). Then, start a VA charity, apply for recognition and ease the burdens over with time.
There are other options just coming on line for joint venture, contractual relations and the like that you can employ to "ease" it over.
Non profits are so increadibly inexpensive to maintain in idling position, you may want to leave the california nonprofit running so that you can fund-raise here.
The choices are not simple, but they have their up-side. Eventually, all nonprofits want to fund raise on the internet but have a problem where they are not licensed to fundraise in other jurisdictions. Why not look at VA as your second state on the way to filling your slate of 50 states?
I wonder if IRS / congress will ever create a reorganization statute for nonprofits????
Curt Harrington Patent & Tax Law Attorney Certified Tax Specialist by the California Board of Legal Specialization PATENTAX.COM This communication is general information and not legal advice, and does not create an attorney-client relationship. This communication should not be relied upon as any type of legal advice. Please note that no attorney-client relationship exists between the sender and the recipient of this message in the absence of either (1) a signed fee contract and (2) remission of an agreed-upon retainer. Absent such an agreement and retainer, I am not engaged by you as an attorney, nor is any other member of my law firm.
You may be able to simply reincorporate in Virginia. This involves filing dissolution or similar documents in CA and organizational documents in VA. You then simply advise the IRS of the change of address.
Alternatively, if you cannot simply reincorporate, you could sell the assets of the old corporation to the new one and dissolve the old one.
In short, you should be able to have continuity and you should not lose your 501(c)((3) status if you are transferring from one non profit to the other or better yet reincorporating the old one in a new state.
I agree that this is a quirky situation in that so much of the entity's ability to qualify as a 501(c)(3) depends on the state filing documents. They use state law in many ways to control how the entity can be used. So if they did not scrutinize a new state filing to the level of basically forcing a person to apply for 501(c)(3) all over again, people could just end-run one of the ways that the IRS limits the use of the entity for non-approved purposes.
I would seek the advice of an actual attorney to look into ways that accomplish your goals with the least administrative costs. You are correct, in a perfect world, you would like to avoid filing in both states, but going through the Form 1023 process is also costly.
Contracts / Agreements Lawyer
In the long run it really depends on your vision. The previous post about seeking authority seems like the best move at this time. Considering the fact that you set up in California and now ant to operate in Virginia I would hesitate to start up a new organization and shut down another. What if your future brings opportunities somewhere else? Are you sure you will have no ties to California whatsoever? If you are sure of what you want and do not want to stay connected to California then you will have to "start over."