501 (3c) Status and Guidelines

A statement from NPYM Finance & Legal Committee

February 2020


A question came to Fiance & Legal committee regarding tax exempt 501C3 status and what an organization should do to maintain that status.  Here is what our committee's research found. The rules are somewhat subjective but here is a list of what you should not do:


1) Divert funds to the private use of individuals within the organization (e.g., clerk and treasurer decide to use Meeting funds for a vacation in Mexico).

2) Divert substantial funds on an organization or entity that is "non-charity worthy." Obviously this doesn't apply to purchases of goods and services.

3) Provide any material support (contributions or staff time) to support candidates for public office.

4) Engage in "substantial" lobbying of elected officials or in grassroots organizing around specific issues. Spending money on research and other ways of informing the membership about issues is not a problem.


So what is "substantial?" A very rough rule is no more than 20% of the organization's budget and/or its staff time. This said, "substantial" is judged by  IRS officials on a case by case basis, and what one official might deem "unsubstantial" another might flag as a problem.

Stick to 10-15 percent of budget and a Meeting is probably safe. And remember, focus on issues, not people.

To get somewhat painful detail, go to p. 46 of this IRS publication: https://www.irs.gov/pub/irs-pdf/p557.pdf

Large organizations like FCNL have two wings, FCNL proper which is not a 501 c 3 and FCNL Education Fund which does outreach, education, and the like and is a 501 c 3.

Addendum : above sent to all Meeting clerks and contacts 2/10/20