Related group rules for non-profits

[R. Butler]

Co. A is a for profit service org.

Co. B is a not-for-profit service org.

The owners of Co. A are the directors of Co. B

Co. A and Co. B perform the same type of service just for different clients

Co. A and Co. B share office space and a handful of employees.

I'm trying to determine whether this a controlled group. It smells like one, but I'm not sure that I see it by the definitions.

Not an A-Org. because there is no ownership interest in an FSO.

Not a B-Org. because there are no services provided for an FSO or A-org.

Not sure yet how the directors are appointed to Co. B, but unless they are appointed or controlled by another 501©(3) I don't see a controlled group.

Am I missing anything

Thanks for any guidance.

[Belgarath]

That's a tough question - I don't think the final regs under 1.414© address this - they specifically address two TAQX-EXEMPT organizations, but not an overlapping for-profit and tax exempt.

First, I'd leave it up to counsel. But my own personal opinion is the same as yours - it smells like a CG/ASG, and I'd be inclined to consider it as such, but I'd merely present that opinion to counsel and let counsel and client make that determination!

[rcline46]

I would think that if they put a 403(b) into the non-profit, and a 401(k) into the for profit there would not be any concerns even if the are a CG. And I think they are a CG.