Section 905 a Subordinate Organization of a 501(c) Nonprofit

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Section 905 refers to the local member organizations (that are not separately incorporated) of an existing national organization with a 501(c) designation.

Important information Section 905 organizations should be aware of includes:

	If the local organization is a subordinate organization (e.g., a chapter, local, post, or unit of a central organization), the central organization needs a group 501(c) tax exemption designation.
	The local subordinate cannot be included under the central organization's 501(c) designation if it is defined by the IRS as a private foundation.
	The local subordinate organization can be included under the central organization's 501(c) designation if it is defined by the IRS as a public charity.

On the basis of the sources and uses of its funds and other factors defined in Section 905 of the Internal Revenue Code of 1986, the IRS will determine if the local subordinate is a public charity.

The HOME Program views subordinate organizations, determined by the IRS to be public charities, as meeting the 501(c) requirement. The subordinate organization must still meet all of the other requirements for CHDOs.

However, qualifying as a subordinate organization may shorten the time it takes to receive a CHDO designation by receiving the required tax-exempt status based upon the credentials of an existing group.