The idea behind Code Section 502’s prohibition on exemption for Feeder Organizations is that one cannot convert a for-profit business into a charity simply by contributing all of the profits to charitable organizations. The policy rationale is that permitting businesses to operate on a tax-free basis just because they donate their proceeds to charity permits unfair competition in the marketplace.
How to Keep your Non-Profit Compliant in All 50 States
Most states require you to register your organization if you solicit donations from their residents. Many states also require registration if your organization collects substantial or ongoing donations from their residents, even if you aren’t specifically targeting donors in that state. Download our comprehensive list of each state’s requirements.