Re: Transferring to another non-profit

From: Jimmy Kaplowitz <jimmy(at)spi-inc(dot)org>
To: Theodore Tso <tytso(at)mit(dot)edu>
Cc: spi-general(at)lists(dot)spi-inc(dot)org
Subject: Re: Transferring to another non-profit
Date: 2009-09-30 00:50:51
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On Tue, Sep 29, 2009 at 08:06:14PM -0400, Theodore Tso wrote:
> There are two issues here. One is respecting the desires of the
> original donor of the money. If it was earmarked for use by a
> particular project, that seems fairly straightforward.
> The second is maintaining SPI's 501(c)(3) status; for this, all that's
> necessary is keeping the IRS happy, and that means that the money must
> be spent for purposes which satisfy 501(c)(3). This doesn't
> *necessarily* mean that the destination organization has to have
> 501(c)(3) status, but it's a lot easier if that's the case. The short
> version is a tax accountant/lawyer specializing in US non-profit tax
> law would need to be consulted.

The third issue is complying with SPI's own corporate purposes; separate from
keeping donors and the IRS happy, SPI can't legally act outside of its
corporate purposes just due to standard corporate law. I doubt this would be an
issue if we give project funds to any place we'd be likely to want to give the
funds, but in theory if we e.g. wanted to give SPI funds to (to pick a pretty
clear example) a US 501(c)(3) organization dedicated to awarding university
scholarships to disadvantaged students, that would not be allowed.

As for donor intent, if we give project-earmarked funds to a non-profit that's
not specific to that project (e.g. FSF or Software Freedom Conservancy), we'd
also need to ensure that they put the corresponding restriction into their
accounting records as well, though I expect you're right we'd need less proof
of this if they have 501(c)(3) status.

Random side note: non-US organizations can also apply to the US IRS for
501(c)(3) status in at least some cases, though I don't know how many do. This
is primarily helpful to attract US donors with tax deductions, but does have
various requirements attached.

Also, thanks for the interesting idea about the 501(c)(6) if we ever want to
explore that.

- Jimmy Kaplowitz

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