Expert: Harvey Mechanic - 11/4/2009

Question
We have just started a new band booster club at out local high school.  Our club will support all students in the fine arts at the school.  We are in the process of writing our by laws.  We had our first meeting on 11/03/2009 and elected officer.  I was elected as the president.  For individuals and companies, do we have to have a 501 (C) (3) status for donors to take a tax deduction?  

Answer
 In order to have donations deductible by the donors
according to Internal Revenue (IRS) Service regulations
and not to be treated by the IRS as a normal, for-
profit  business, you would want to first incorporate
or set up an unincorporated association by Articles of
Association under the State's Nonprofit law stating
that you are organizing under Internal Revenue Code
Section 501(c)(3).  You can check with your Secretary
of State or Corporation's Division of your State for
the details of the process and the filing fees for
Nonprofits, which are usually well under $100.  I
generally recommend incorporating as usually that
provides more liability protection to the members.

After the initial set up, you would need to apply for
a EIN (tax id number)
http://snipurl.com/gij28
and then you could apply for the IRS exemption
determination letter which could be effective
retroactively to the date of establishment of the
organization. The IRS minimum filing fee for such a
determination letter is $300 and goes up to $750.

User fees will increase for all applications for
exemption (Forms 1023, 1024, and 1028) postmarked
January 3, 2010:
     $400 for organizations whose gross receipts are
$10,000 or less annually over a 4-year period
     $850 for organizations whose gross receipts
exceed $10,000 annually over a 4-year period
www.irs.gov/charities/article/0,,id=212562,00.html

See instructions to Application for Exemption
www.irs.gov/pub/irs-pdf/i1023.pdf
in the right column on the first page under "Form 1023
not necessary" discusses who does not need to file and
among those is "Any organization that has gross
receipts in each taxable year of normally not more than
$5,000."

You can review the IRS Publication 557 "Tax Exempt
Status for Your Organization" at:
http://www.irs.gov/pub/irs-pdf/p557.pdf
You must have the required clauses in the
organizational document. Samples start on page 69

See Application for Exemption
www.irs.gov/pub/irs-pdf/f1023.pdf

Harvey Mechanic, Attorney at Law -
Harvey108@hotmail.com