AboutHarvey Mechanic Expertise Federal tax issues of nonprofit 501(c)(3) public charities only. Establishing and maintaining legal requirements for such non-profit organizations in the United States, including Internal Revenue service filings and requirements. I will not be working on this free forum to answer question about Nonprofit's Unrelated Business or how to fill out forms. This forum is only for legal questions about a specific nonprofit asked by members or those otherwise directly effected by the specific nonprofit organization.
Experience I have been practicing law and especially the law of nonprofit organizations since 1990 when I was admitted to the New York Bar.
Expert: Harvey Mechanic Date: 7/6/2008 Subject: need to file form 1023
Question According to IRS Pub. No. 557, our organization is not required to file form 1023 because its gross receipts during year 1 will be less than $7,500. It says that such an org is "exempt automatically."
In such a case, how can potential donors know that an organization has 501c3 status? What does the organization gain by filing 1023 and formally gaining recognition as an EO? What do you advise?
Answer On the top of page number 19 of:
IRS Publication 557 "Tax Exempt Status for Your Organization"
www.irs.gov/pub/irs-pdf/p557.pdf
we see, "These organizations are exempt automati-
cally if they meet the requirements of section
501(c)(3)." You stated that "such an org is exempt automatically, but you forgot the significant part, "if they meet the requirements of section 501(c)(3)."
Later on that page the IRS has:
---start of excerpt ---
Filing Form 1023 to establish exemption. If
the organization wants to establish its exemp-
tion with the IRS and receive a ruling or determi-
nation letter recognizing its exempt status, it
should file Form 1023. By establishing its ex-
emption, potential contributors are assured by
the IRS that contributions will be deductible.
--end of excerpt ---
Therefore, if an organization did not have the IRS determination letter a contributor would not have assurances of deductibility unless the donor was convinced that the organization was organized and operating properly as a 501(c)(3) organization. I am assuming that yours is not a private foundation.
I generally advise organizations file 1023, but if you have a group of convinced donors then you may not need the determination letter.
Harvey Mechanic
Attorney At Law
Harvey108@hotmail.com
