The Dissolution Clause: Required for 501(c)3 status | SBDC UNF

The Dissolution Clause: Required for 501(c)3 status

The dissolution clause is required by the IRA when completing a 1023 for 501(c)3 tax exempt status. The clause MUST appear in your Articles of Incorporation from the state you are incorporating from. 

According to the IRS: Your organizing document must permanently dedicate your assets for a section 501(c)(3) purpose. This means that if you dissolve your organization in the future, your assets must be distributed for an exempt purpose described in section 501(c)(3), or to the federal government, or to a state or local government for a public purpose.

If your organizing document states that your assets would be distributed to members or private individuals or for any purpose other than those provided in section 501(c)(3), you must amend your organizing document to remove such statements.

Here is an example of a dissolution clause:

Upon the dissolution of the corporation, assets shall be distributed for one or more exempt purposes within the meaning of section 501(c)(3) of the Internal Revenue Code, or the corresponding section of any future Federal tax code. Any assets not so disposed shall be disposed of by a court of competent jurisdiction of the county in which the principal office of the corporation is located. Disposal shall be made exclusively for exempt or public purposes, or be made to such organization or organizations as the court shall determine to be organized exclusively for such purposes.  
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