Understanding the TFP Tax Status

To understand a nonprofit organization and their tax status, this brief description offered by the Internal Revenue Service is provided:

 A 501(c) organization or simply a 501(c), is a tax-exempt, nonprofit organization in the United States.  Section 501(c) of the United States Internal Revenue Code [26 U.S.C. 501(c)]  provides that 29 types of nonprofit organizations are exempt from some federal income taxes. Sections 503 through 505 set out the requirements for attaining such exemptions. Many states refer to Section 501(c) for definitions of organizations exempt from state taxation as well. 501(c) organizations can receive unlimited contributions from individuals, corporations and unions. 

The most common type of tax-exempt nonprofit organization falls under category 501(c)(3), whereby a nonprofit organization is exempt from federal income tax if its activities have the following purposes: charitable, religious, educational, scientific, literary, testing for public safety, fostering amateur sports competition, or preventing cruelty to children or animals. 

Further Tax Status Information

The process of applying for tax-exempt status in the United States through the Internal Revenue Service is an arduous one involving IRS scrutiny of all aspects of an organization.  The entire process is often handled by an attorney, although members of an entity have successfully filed the application on behalf of their organization.  Initially, gathering the legal, organizational and financial documents requires months of work.  The approval process after filing with the IRS has been known to take many months and, in some cases, years.

Missouri Historical Society Photographs and Prints Collections. NS 34725. Scan © 2006, Missouri Historical Society.

The award of tax-exempt status is believed to be far more restrictive during the last decade than it has been in prior decades with organizations finding the IRS to be most reluctant to award the status to far more organizations.  That is, more organizations are declined than has been previous experience, especially for those filing in the most restricted status, that of 501(c)(3).

Organizations obtaining their tax-exempt status or awarded their 501(c)(3) are bound by strict guidelines as to the activities of their organization and must adhere to the original intent stated in the application process or risk losing that status.

THE FOUNDING PROJECT  is a 501(c)(3) education nonprofit.

Donations to 501(c)(3) organizations are usually considered to be charitable donations and eligible as a write-off on taxes depending on your tax situation.  This is not intended to be tax advice and all write-offs and tax questions should be directed to your tax preparer.

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