Transferring to another non-profit

[Theodore Tso]

On Tue, Sep 29, 2009 at 11:21:57AM -0700, Josh Berkus wrote:
> 
> > To elaborate on what Michael said, we need to ensure the money remains used for
> > the purposes for which SPI is tax-exempt, and also honor the more specific
> > donor intent. For non-501(c)(3) organizations, additional steps have to be
> > taken to ensure this well enough to satisfy the US tax authorities, hence the
> > consultation with the attorney or CPA.
> 
> For that matter, we couldn't even transfer to "any 501(c)3".  It would
> have to specifically be a 501(c)3 supporting Free Software.  Of course,
> a foundation for a specific project would qualify.

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.

> Based on my own (non-professional) experience with NPOs, I'd say that
> any transfer to a non-US non-profit is likely to be impossible, and
> projects would be far better off just spending their money down to zero
> than trying to transfer it.

Absolutely.  If the we really cared, in theory we could create a
501(c)(6) subsidiary of SPI, and accept money from non-US donors into
accounts owned by the 501(c)(6), which would be earmarked for specific
projects much like the current monies owned by SPI proper.  Those
monies would not be subject to the 501(c)(3) restrictions (but
donations to a 501(c)(6) don't get favored tax treatment for US
donors, which is fine if the donors are not US persons) and so it
would be easier to transfer that money out to a project.  It's
probably not worth the effort to set something like this up, though,
since it would require some profesional legal and tax consultations.

       	         	      		     	  - Ted