Lot of passionate individuals, or groups of people wish to contribute their lives for a good cause, and many of them either join a charitable organization, or start their own. But, establishing and running an organization is not an easy task. One must first be confident and convinced, must have enough support in terms of technical, programmatic, and legal support to start a nonprofit.
If you are a nonprofit organization, and you wish to acquire a 501c3 status in United States, let us understand what it means, who can get it, what are the processes and advantages:
What is a 501(c)3 or 501c3 organization?
A 501 (c) organization is a tax exempt organization in the United States. Among this category, the most common are 501(c) (3) organization, which are most commonly non-profit charitable organizations. A 501(c) 3 organization is exempt from federal income tax, and thus also allows donors to reduce their taxable incomes. 501c3 exemptions are applicable only in cases of organizations doing religious, charitable, literary, educational and related activities.
Note that not all registered nonprofits are tax exempt. Only those who get 501c3 status are.
How can an organization obtain 501c3 status?
Organizations can apply for 501(c)(3) tax exemption by filing IRS Form 1023. There is filing fee also involved depending on the yearly gross receipts of the organization. You will also be required to submit financial statements and budgets. It will be better to hire an attorney who has experience of obtaining this status for nonprofits. Also note that the organization has to file application for 501 c 3 status by the end of the 27th month after it was legally formed.
What are the advantages of having 501 c 3 status?
Apart from the obvious tax-exempt status, a 501c3 organization has many other advantages:
- Donations from people to your organization will be tax-exempt
All individual donations and corporate donations will be exempt from tax, so it benefits the donor and receiver organization both. - It can help you get grants from the government and private foundations
Many of the grant opportunities require that you have this status before applying for funding. So, obtaining this status is very important to become eligible for such funding opportunities. - A 501c3 organization gets extra perks
A 501c3 organization can get many other benefits like discounted postage rates, special mailing privileges, free or discounted rates from media, email services, etc. - Recognition as an international non-profit organization
Having 501c3 status for your organization can also help your organization achieve recognition, as it will have larger audience and better reputation. - Attract more International volunteers
It can also help you get international volunteers for the good cause you are working for, and international status. - Better networking opportunities with international NGOs:
Obtaining 501c3 status will also help your organization get networking opportunities, and partnering with international NGOs and groups can help getting global exposure.
So, obtaining 501c3 status in United States can open up many doors of opportunities for your nonprofit. But before beginning the process, you will need to understand the entire process, prepare for the process after consulting an attorney, and perhaps even hire an attorney. You will also need to consider the costs of obtaining this status as per your organizational gross receipts. If all the requirements are fulfilled, you are good to go, and this can be a boost to the growth of your organization.