Tax Exempt Status

Overview

Having 501(c)3 status from the IRS can really help with donations. Being a 501(c)3 requires some transparency and reporting. This can make donors feel more secure that their donations will go to support the charitable mission.

It's easy to be a non-profit, you just file the paperwork with your state. However, 501(c)3 status can take months to get.

Fiscal Sponsorship

A fiscal sponsor is when a charity with 501(c)3 status accepts donations and in turn uses them to sponsor a non-exempt project. Lots of non-profits do this. You have to find a charity that has a mission that aligns with that of your non-profit. It turns out that some charities have very broad missions specifically designed to encourage new non-profits. Wow, just what you need!

Here's an interesting paper on Fiscal Sponsorship. One extract:

"However, the IRS has a strict policy against “conduit” arrangements. When a donation is made by A to B, earmarked for C, it is in reality a donation from A to C, and if C is not exempt under section 501(c)(3), the gift is not a tax-deductible contribution. To be deductible, the IRS requires that B (the sponsor) have complete discretion and control over the funds, and holds B legally responsible to see that its payments to C (the project) are made to further B’s tax-exempt purposes."

Here is an excellent video of a talk by a lawyer who does pro bono work for non-profits. It is very informative - worth the hour to watch it.

• Social Good Fund does sponsorships.