Nonprofit 501(c)(3) Status – Considerations
We frequently receive applications from individuals and associations who are seeking Pollination Project funds to pay for filing their 501(c)(3) nonprofit exemption application with the IRS. We ask that before you apply to The Pollination Project for funds for nonprofit filing, please review these materials and make sure you take the time to consider your options and educate yourself on what is entailed in filing and maintaining a 501(c)(3) nonprofit in the US. We have fairly strict criteria for applications that are requesting funds to file for 501(c)(3) status with the IRS. To read the specific criteria, click here.
First thing to know: Getting 501(c)(3) status doesn’t mean that you will suddenly be flooded with donations! Yes, federal tax exemption status does allow donors and foundations to take a tax deduction for their donation to your cause. However, 70% of United States tax filers use the short form and do not receive any tax benefits for their charitable giving, so fewer people actually care about your tax exempt status than you think. To learn more, here’s a very short and extremely useful perspective on the need for tax exemption from well-known fundraising trainer and coach, Kim Klein.
We highly recommend to anyone who is looking to start a new nonprofit: start by launching a crowdfunding campaign, asking your network, friends, family, and other supporters for micro-donations to support your cause. Most crowdfunding sites such as Indiegogo and Kickstarter, are geared towards individuals raising money for good social change ideas and do not require nonprofit status or any other type of formal organizational structure.
We also want to make sure that applicants know about Fiscal Sponsorship as an option for obtaining the benefits of nonprofit status without the filing and legal compliance paperwork that it requires. Here is a short description of fiscal sponsorship and its benefits and challenges. Many Community Foundations and other nonprofit organizations offer fiscal sponsorship programs – to find a fiscal sponsor for your project, go to this Fiscal Sponsor Directory.
If, after doing more research and finding that Fiscal Sponsorship is not a good option for you, one of our favorite sources for information on 501c3 filing is Nolo Press’ book, How to Form a Nonprofit Corporation. In fact, the Pollination Project relied heavily on this book to obtain our nonprofit status in 2012. A short article about the steps you need to take to file for nonprofit status in the US is here. To learn more about what is required to operate a nonprofit, check out this article at Idealist.org.
If you have weighed the options and determined that obtaining nonprofit status is the right path for you and your project, we recommend you purchase the Nolo Press nonprofit bundle which also includes a book about maintaining and operating a nonprofit, as well as a book about fundraising compliance. Contrary to some of these sources, we do not think that it is mandatory to hire an attorney to file your nonprofit paperwork, and in fact, it is important that you and your team develop the visionary materials, budgets and mission statement. We do not fund consultants to help you with your c3 filing because you will learn so much when you and your team to do it yourselves. The Nolo Press book does a great job at outlining and detailing the steps.
Further, depending on the size of your group, it could take 3 months for the IRS to even look at your application. Here is a link for crucial information about IRS timelines and how to make sure your application is processed as quickly as possible. In summer, 2014, the IRS created a new form that streamlines the application process for small groups. This could cut your paperwork and waiting time exponentially.
Thanks for your commitment, your work and for having the guts to reach for the stars.