Dissolving Non-Exempt and Nonprofit in Massachusetts

Dissolving a Massachusetts nonprofit corporation requires filing a petition with the court. If the nonprofit operated as a tax-exempt charity, the organization must notify the Attorney General's office before filing the petition. A non-exempt, nonprofit corporation is not subject to this requirement. As long as a majority of the nonprofit's members vote to dissolve the corporation, the petition for dissolution can be filed with the court.

A Massachusetts nonprofit corporation can be formed for a variety of purposes, such as charitable, educational, athletic or scientific. A complete list of allowable purposes is set forth in Chapter 180, Section 4 of the Massachusetts General Law. A nonprofit is not exempt from income tax unless it applies for and receives tax-exempt status from the Internal Revenue Service. Massachusetts taxing authorities require a copy of the IRS determination letter as a prerequisite for recognition of exemption from Massachusetts income tax; however, the nonprofit will not necessarily be exempt from other state and local taxes. If the nonprofit corporation does not receive tax-exempt status from the IRS or if this status is revoked, the organization is considered non-exempt and must pay income taxes.

When the purpose for which a nonprofit, non-exempt corporation was established ceases to exist, the members should dissolve the corporation. Chapter 180, Section 11 of the Massachusetts General Law advises that the first step in dissolving a nonprofit, non-exempt corporation is to put the issue of dissolution to a vote of the membership. Unless the nonprofit's articles of organization provide otherwise, a simple majority vote is sufficient to authorize dissolution.

Unlike a for-profit corporation that can dissolve by filing articles of dissolution with the Secretary of State, the members of a nonprofit, non-exempt corporation do not have the option of dissolving the corporation themselves. Chapter 180, Section 11 of the Massachusetts General Law requires the members to file a petition for the nonprofit's dissolution with either the supreme judicial or superior court. The petition must set forth the grounds for the dissolution, such as lack of funding to continue operating. The court will hold a hearing to decide whether the petition should be granted.

After the petition for dissolution is granted by the court, the court clerk is required to notify the Secretary of State that the corporation has been dissolved. The Secretary of State then notifies the nonprofit of the court's order. The nonprofit can now proceed with winding up its operations by doing such things as liquidating its assets and resolving any outstanding liabilities.