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

Asked over 6 years ago - Tucson, AZ

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

Attorney answers (2)

  1. Ellis McGehee Carter

    Contributor Level 8

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    Lawyer agrees

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    Answered . 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.

  2. Ellis McGehee Carter

    Contributor Level 8

    1

    Lawyer agrees

    6

    Answered . 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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