Hello and thank you for your question.
As you may know, IRS Section 501(c)(3) is the section of the tax code
that defines nonprofit, charitable, tax-exempt organizations.
The Foundation Center
http://fdncenter.org/learn/faqs/html/501c3not.html
Your organization, in order to qualify for 501(c)(3) status, was
required to demonstrate that its assets are dedicated to an exempt
purpose. One common way to fulfill that requirement is for the
organization's certificate of incorporation to provide that, upon
dissolution, the assets would be distributed for one or more exempt
purposes, or to the federal government. Another way to fulfill that
requirement is to be able to show that upon dissolution the assets
would be distributed by a court to another organization to be used in
a manner as in the judgment of the court will best accomplish the
general purposes for which the dissolved organization was organized.
The Organizational Test Under IRC 501(c)(3) [page 4]
http://www.irs.gov/pub/irs-tege/eotopicc85.pdf
The issue of the applicability of state law in relation to Reg.
1.501(c)(3)-1(b)(4) as to a particular organization arises only where
the organization itself has not provided for the distribution of is
assets upon dissolution in its articles of incorporation, organizing
document, or trust instrument. When state law satisfies the
provisions of the regulations, it is not necessary to require an
organization to amend its articles of incorporation or organizing
document, or to require a trust to obtain a judicial decree amending
its trust instrument, in order to satisfy the organizational test for
qualification under Section 501(c)(3).
Id.
So what we've seen so far is that your organization probably has a
provision in its certificate of organization that specifically
authorizes and requires that it does exactly that - - that upon
dissolving it must distribute its assets to another 501(c)(3)
organization. And even if it has no such provision in its
certificate, it would have qualified under 501(c)(3) by semonstrating
that New York law has the same requirement.
The text of the New York Not-For-Profit Corporation Law is found at
http://caselaw.lp.findlaw.com/nycodes/c76.html
There are 4 types of New York Not-For-Profit corporations:
Type A - A not-for-profit corporation of this type may be formed for
any lawful non-business purpose or purposes including, but not limited
to, any one or more of the following non-pecuniary purposes: civic,
patriotic, political, social, fraternal, athletic, agricultural,
horticultural, animal husbandry, and for a professional, commercial,
industrial, trade or service association.
Type B - A not-for-profit corporation of this type may be formed for
any one or more of the following non-business purposes: charitable,
educational, religious, scientific, literary, cultural or for the
prevention of cruelty to children or animals.
Type C - A not-for-profit corporation of this type may be formed for
any lawful business purpose to achieve a lawful public or quasi-public
objective.
Type D - A not-for-profit corporation of this type may be formed under
this chapter when such formation is authorized by any other corporate
law of this state for any business or non-business, or pecuniary or
non-pecuniary, purpose or purposes specified by such other law, whether
such purpose or purposes are also within types A, B, C above or
otherwise.
New York Not-For-Profit Law Section 201(b)
http://caselaw.lp.findlaw.com/nycodes/c76/a3.html
Article 10 of the Not-For-Profit Law governs Non-Judicial Dissolution
http://caselaw.lp.findlaw.com/nycodes/c76/a11.html
Please go to the above link and read sections 1002, 1003 and 1005
closely (since they are quite lengthy, I won't copy and paste them
here).
Your organization needs to adopt a plan of dissolution (Sec 1002(a)),
then it needs to obtain the approval of a justice of the supreme court
in the judicial district in which the office of the corporation is
located (Sec 1002(d)), and it needs to file a Certificate of
Dissolution with the Department of State (Sec 1003).
With that done, the answer to your question is yes, it can and must
donate the assets to another not for profit professional organiztion:
"S 1005. Procedure after dissolution.
(a) After dissolution:
(1) The corporation shall carry on no activities except for the
purpose of winding up its affairs.
(2) The corporation shall proceed to wind up its affairs, with power
to fulfill or discharge its contracts, collect its assets, sell its
assets for cash at public or private sale, discharge or pay its
liabilities, and do all other acts appropriate to liquidate its
business.
(3) After paying or adequately providing for the payment of its
liabilities, the remaining assets of the corporation shall be
distributed in the following manner:
(A) Assets received and held by the corporation for a purpose
specified as Type B in paragraph (b) of section 201 (Purposes) or which
are legally required to be used for a particular purpose shall be
distributed to one or more domestic or foreign corporations or other
organizations engaged in activities substantially similar to those of
the dissolved corporation pursuant to a plan of distribution adopted as
provided in section 1001 (Plan of dissolution and distribution of
assets) or as ordered by the court to which such plan is submitted for
approval under section 1002 (Authorization of plan)."
Id.
Search terms used:
"new york not for profit corporation law"
"corporation law" not-for-profit dissolution "New York"
"new york" 501(c)(3) dissolution
Thank you again for bringing us your question. If you find any of the
above unclear, please request clarification. I would appreciate it if
you would hold off on rating my answer until I have a chance to
respond.
Sincerely,
Google Answers Researcher
Richard-ga |
