Is it required to move left over funds from a year into reserve?

Started by JamesS21 • 6 replies • 1114 views

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JamesS21 (Michigan)
Posts: 1

Posted:

We have a homeowner who is claiming that all funds from last year (08) must be placed in reserve and can not be used to pay bills that arrive this month, or we will lose our non-profit status in Michigan. Is there any truth to this?

RogerB (Colorado)
Posts: 5,067

Posted:

No James, that is not true.

JohnK3 (Pennsylvania)
Posts: 967

Posted:

I agree with Roger, unless the docs state otherwise. We just keep the cash in our operating checking account.

MaryA1 (Arizona)
Posts: 7,043

Posted:

James,

As Roger and John have stated, this is not true. However, if this homeowner is insistent, then ask him/her to show proof -- that should put an end to the claim!

MaryA1 (Arizona)
Posts: 7,043

Posted:

James,

Meant to mention one other thing. The IRS does not make the determination as to whether or not an org is non-profit; that is determined by the state. The IRS only makes determinations on tax-exempt status for orgs, under one of the 501(c) designations. Nonprofit does NOT mean tax-exempt.

JosephW (Michigan)
Posts: 882

Posted:

I don't know of any Michigan law that requires this. Here is the link to Michigan's Non-profit Corporation Law.

http://www.legislature.mi.gov/(S(ln21yl55cjshqa45wo0nxeex))/printDocument.aspx?objectName=mcl-Act-162-of-1982&version=txt

I didn't see anything along the lines the owner was talking about, but you can check. Also, ask your accountant, or whoever is doing the year-end books.

Joe

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ChuckW1 (Ohio)
Posts: 1

Posted:

This may vary from state to state..... but generally, you can "elect" to transfer excess funds into a Reserve Account at the end of the year to avoid a tax consequence on the remaining money. It is an option, not a requirement.

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