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Nonprofit Law/Is 501c3 status relevant to itinerate ministry?

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QUESTION: Harvey,

I am planning to setup a nonprofit entity for the sole purpose of personal ministry. I want to be able to have separation between income/expenses, bank account, etc from my household and ministry. Would applying for 501c3 status be relevant for this type of entity or is a different form of nonprofit more suitable? I do not currently have an entity setup in any state and am only in the planning stage. I want to be prepared legally before starting. Any insight or advice is most useful. If it helps I am located in the state of Alabama.

Thanks,
Josh

ANSWER:  If you want donors to be able to deduct donations and not to have your sales income, if any, taxed as long as you comply with fundraising guidelines for 501(c)(3) organizations, you would need to establish a charitable trust, or incorporate under a state's nonprofit corporation
law.

  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 $400 and goes up to $850. http://goo.gl/TXwq9

See the IRS Publication 557 "Tax Exempt Status for Your
Organization" at http://www.irs.gov/pub/irs-pdf/p557.pdf
in the right column on p age 25 under "Organizations Not
Required to File Form 1023" discusses who does not need
to file and among those is "Any organization (other than
a private foundation) normally having annual gross
receipts of not more than $5,000.  These organizations
are exempt automatically if they meet the requirements of
section 501(c)(3)."

The organization must have certain IRS-mandated clauses
in the organizational document even if your organization
is not required to apply for federal exemption but if you
want the benefits of being an exempt organization.
See, starting in the middle column of page 26 of
Publication 557  under "Organizational Test". Samples
start on page 77.

Harvey Mechanic
Attorney at Law
Harvey108@hotmail.com

P.S. This response is intended to be a general statement of law, should not be relied upon as legal advice and does not create an attorney/client relationship.






---------- FOLLOW-UP ----------

QUESTION: So is 501c3 the only classification that grants tax deductibility to donors? I'm more interested in that than being exempt from paying taxes myself. I understand there are many forms of nonprofits and am trying to clarify the differences between the best options for my intended function. Thank you again for your assistance.

Answer
501(c)(3) is the only classification that grants tax deductibility to the donors unless the organization was created by Congress or there is a fund under another 501(c) entity and that fund itself qualifies under section 501(c)(3), or it is a cemetery society or some other types of organizations near the bottom of the list that have purposes much different than yours.  The IRS shows that in that Publication 557 on pages 68-69.
http://www.irs.gov/pub/irs-pdf/p557.pdf  

Harvey Mechanic
Attorney at Law
Harvey108@hotmail.com

P.S. This response is intended to be a general statement of law, should not be relied upon as legal advice and does not create an attorney/client relationship.

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Harvey Mechanic

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I am an attorney and I volunteer time to answer general questions about U.S. Federal income tax issues of nonprofit 501(c)(3) public charities only. Those questions could be about 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 questions about Nonprofit's possible unrelated or for-profit businesses or how to fill out forms. This forum is only for general questions about federal tax law, not as the law applies to your specific situation. If you do not make your question public then I will not be spending much of my donated time on answers that would not benefit the public. If you have other questions, please contact me at Harvey108@hotmail.com I will reply from my email. In any case, do not reveal confidential information to me until after I have contracted with you to provide personal legal services. My responses on this forum are intended to be general statements of law, should not be relied upon as legal advice, and do not create an attorney/client relationship. For me to consider your individual situation and how the law applies, I would need to gather extensive information about the situation. To search my previous answers you can do a Google search by "site:allexperts.com/q/nonprofit" without the quotes and then add your search terms before hitting enter.

Experience

I have been practicing law and especially the law of nonprofit organizations since 1990 when I was admitted to the New York Bar and I have maintained my status with the Bar since that time.

Education/Credentials

B.S. Columbia University in New York City, 1970

J.D. (Law Degree) Brooklyn Law School, 1990 -- Cum Laude.


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