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Cash Carryover from year to year (501c3)

8 years 4 months ago #169930 by Craig
That's not so easy to find, since it's not something on the IRS's radar. They assume that a 501c3 will operate like a business and keep a reasonable continuous operating fund. That fund is just as important on the first day of a new fiscal year as on the last day of the old one.

Here's an excerpt from an article from the Chronicle of Philanthropy that might help:

Nevertheless, many executive directors and board members persist in the belief that reserves are "bad" or "frowned on." Some also mistakenly believe that nonprofits are prohibited by law or by the IRS or by ethical standards from making a "profit" and that all excess funds must be immediately put into current programs. That's simply not true. What happens to the "profits" (they can't be distributed to owners or shareholders) is what distinguishes nonprofits from businesses, not the ability to turn a profit.

philanthropy.com/article/Theres-No-Penalty-for-Having/190573

Editor in Chief
8 years 4 months ago #169914 by curious guest
Replied by curious guest on topic RE: Cash Carryover from year to year (501c3)
Where can I find it in black and white that the IRS says it is ok to carry over funds?
18 years 5 months ago #86833 by jrzgirl
Replied by jrzgirl on topic RE: Cash Carryover from year to year (501c3)
Check your by-laws (if you have them). Ours state that we cannot carry more that $800 UNLESS it's allocated for something specific. Since we always have start up costs in the new school year budgeted for and some of the things we discuss on our wish list in the fall doesn't happen until over the summer, we have those expenses listed too for the audit.
Hope this helps.

:D
18 years 5 months ago #86832 by kak
Thanks to everyone for your responses. This was my first time to post a question and I appreciate the information.

I did want to clarify a few things ... First, we do file the 990 forms each year. Second, the donation was a one-time gift, given to the school, not the PTO, from a community organization. The organization asked that the funds be used on items that would benefit residents of the community -- ie outdoor equipment, benches, drinking fountains, etc. We (the PTO) had budgeted for some of the outdoor items this year, but will now use our funds on other items as well as carry some cash to next year. The gift was unexpected and is greatly appreciated!
18 years 5 months ago #86831 by Critter
What's that phrase?...Great minds think alike ;)
18 years 5 months ago #86830 by Rockne

Originally posted by Critter:


And I'm not in complete agreement with Tim's perspective on what the IRS would think of how you spent the money (sorry Tim
[img]smile.gif[/img] ). As long as you spend it in accordance with your group's exempt purpose, or donate it to another 501c3, I don't think the IRS cares whether you dump it all in one transaction or spread it over several years. Report the ins/outs on your annual Form 990/990EZ and you'll keep the IRS happy. Who does care...or at least should care? YOUR MEMBERS.

Shocking, Critter! Shocking! :)

Actually, i think we're in complete agreement. I wasn't implying that the IRS would prefer you to spread it out. I agree with you that they wouldn't care -- provided you're spending it for your exempt purpose.

With so many groups feeling like they have to spend all their funds the same year those funds are raised, I was just emphasizing the point that spreading the spending over several years is perfectly OK.

Tim

PS -- Funny (or technologically scary), I had posted a reponse this afternoon just like yours clarifying the 25k threshold, and it went missing by the time I got home. Hmmmm....

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