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Can a 501(c)(3) entity accept directed, earmarked federal funds without losing its nonprofit status and without violating federal and state law?

This seems to be an unusual question, especially in view of the controversy in Congress over the huge increase in “earmarks” in the federal budget.  Many of those earmarks go to museums, cultural organizations, or other (c)(3) entities.  I am not aware of any federal or state law which provides that the acceptance of federally earmarked funds, without more, would cause a lost of exempt status.

April 17, 2009

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