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Merger under state law may result in a new entity or in one of the
parties to the merger ceasing its existence. In either case, the IRS
must determine whether the post-merger entity continues to be organized
and operated for section 501(c)(3) purposes.
Accordingly, you should notify the IRS, by letter to
EO
Customer Account Services, of the merger, and submit copies of any
amendments to your articles of organization or by-laws as part of the
merger transaction. You may also wish to consider whether the merger
will result in other adverse tax consequences, such as recognition of
gains on assets transferred.
See an
article on the effect of Internal Revenue Code section 337 and
Treasury Regulation section 1.337(d)-4 on exempt organizations.
You may want to request a
private letter ruling on the tax consequences of a merger.
New Information
about Mergers and Terminations
Most tax-exempt organizations that end their operations, either through
shutting down, transferring their assets or merging with another
tax-exempt organization, must inform the IRS about the details of the
action. To understand how this is accomplished we suggest you read:
New Fact Sheet on
Termination or Merger of Exempt Organizations
Nonprofits
continue to pursue merger and acquisition activity as
they react to market conditions and move quickly to
increase their geographical footprint and reap the
benefits of economies of scale. However, the opportunity
for an M&A to fail is greatest after the deal is closed,
especially if the combined businesses are expected to
operate as a cohesive organization with little
preparation for integration.
Edward
Charles will help in resolving issues such as cultural,
operational integration issues before the organization
sign agreement papers. We will assist regarding which
leaders will assume control, what technologies will be
preserved and what service standards will be followed.
The ability to retain key people in the operation will
be
critical to the success of both parties.
The process is designed to assure a quick but smooth
integration of two nonprofits. Please use the
Register form to begin
the process.
Additional Resources:
Bridging The
Organizational Divide - The Making Of A Nonprofit Merger
By John Emmeus Davis
http://www.nw.org/network/pubs/studies/documents/makingOfNonprofitMerger.pdf
Navigating A Non-Profit Merger: Participatory Tools For Success, The
Lifeworks Story
http://www.meetingsolution.com/Files/6b.NavigatingMerger.pdf
Making a Merger Go Smoothly for Nonprofit Workers By Marilyn Dickey
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