Wednesday, January 2, 2008

How do I become a non-profit organization?

Question: What is a 501(c)3 agency? Why are the requirements? How do you obtain this "certification"?

A private nonprofit is a state corporation that is usually incorporated through a simple form through your Secretary of State's office. When your agency becomes a state private nonprofit corporation, you can then apply for a 501(c)3 private nonprofit through the IRS. Once certified through the IRS, any donations to your charitable organization is tax deductible. Most foundations prefer to give to 501(c)3IRS certified private nonprofits. It is simply a nonprofit legal entity that most charitable organizations operate under. We recommend that universities, schools, and government agencies create a separate private nonprofit to apply for grants that their usually legal structure will not allow.

Who Can Obtain a 501(c)3?

A governmental entity such as a sheriff's department, could get 501,(c),(3) status so they could apply for foundation grants. How is that possible when they don't fall into any of the 501,(c),(3) categories, (ie. charitable, educational etc.)? I would really like access to these grants but I'm scratching my head.

Any organization or group can apply for a private nonprofit, 501(c)3 status provided their charter or mission focuses on the nonprofit's objective. For example lets say that a county government agency wants to organize a 501(c)3 so they are eligible to apply for foundation grants. Most foundations require that an organization be a certified 501(c)3 to receive a grant. The county government may assemble a group of community agencies whose purpose is to use the 501(c)3 to apply for and possibly share funds from foundations to address community problems. They might name the 501(c)3 the York County Community Partnership and its mission may be to prevent and reduce homelessness, provide affordable health care to those in poverty, create jobs for the unemployed, reduce crime, etc. I would go after very broad human issues as the mission so the private nonprofit could be used to pursue a wide variety of grants. The county government could be the fiscal agent (something that would be well received by foundations) and could receive funds from the 501(c)3, but what you will have created is a separate and legal entity. Many school districts have foundations just like this.

Another option is to apply for a 509(a)1 status which falls under the 501(c)3 umbrella. Being a 509(a)1 designates your organization as a tax-free public charity that receives most of its support form a governmental unit or from the general public. Becoming a 509(a)1 provides public recognition of your tax-exempt status, advance assurance to donors of deductibility of contributions, exemption from certain state and Federal taxes, and nonprofit mailing privileges. Organizations that typically qualify are churches, educational institutions, hospitals, and governmental units. To see if you qualify, simply fill out an IRS form. You can visit the IRS's website or call their tax-exempt help line.

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