Are Contributions Deductible?

March 5, 2014

If your charity does not have 501(c)(3) status, you should inform donors that their contributions are not tax-deductible. Be aware that some potential donors may not be comfortable giving money to an organization that is not officially exempt.

If your 501(c)(3) status is pending, you should also inform donors of its pending status. Once you receive your exempt status, donations received while your application was pending may be treated as tax-deductible contributions retroactive to the date of your organization’s formation. However, if your application is not approved, contributions will not be considered tax-deductible for donors.

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Karmen A. Booker is an Attorney, Business Consultant and Owner of Compu-Perfect Professional Services, a business consulting firm specializing in Business Entity Formation (Corporations, Limited Liability Companies, and Nonprofit Corporations), Completing 501(c)(3) Federal Tax Exemption Applications, Grant Research and Writing services, and more.

She is also the author of the

Attorney Karmen A. Booker has developed the “Nonprofit Sample Templates” e-book that provides templates for the following:

  • Sample Mission Statements
  • Sample Business Plans
  • Sample Donor Solicitation Letter
  • Sample Thank You Donor Letter
  • Sample Press Release
  • Sample Letter of Inquiry
  • Sample Corporate Donation Letter
  • Sample Board Member Application
  • Sample Board Member Agreement
  • Sample Volunteer Application
  • Sample Volunteer Agreement
  • AND MORE

This “Nonprofit Sample Templates” is a valuable resource for all Nonprofit Organizations who desire to use effective tools that will undoubtedly help them acquire funding and provide quality services for their target markets.

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Getting Funding for Your Nonprofit Organization

February 19, 2014

Can I get funding for my nonprofit while I am in the process of incorporating or getting tax-exempt status?

Technically, yes. However, your initial support will probably not come from foundation grants since most institutional funders generally require proof of 501(c)(3) status and prefer to support organizations with a proven track record of fiscal responsibility and programming successes.

Most of your startup funding will likely come from your nonprofit’s founders, board members, volunteers, community members, or other interested individuals.

State agencies, like the secretary of state or the attorney general’s office, generally require organizations to register before soliciting charitable contributions, and will impose fines on unregistered fundraisers.  Contact Attorney Karmen A. Booker at (301) 408-1082 or e-mail her at kbooker1000@yaho.com  so she can complete the Charitable Solicitation Registration for you.

You will therefore need to think creatively about how to finance the initial stages of your organization’s growth. Here are a few ideas:

  • Create a list of family, friends, businesses, and other potential supporters who might be interested in your organization’s mission, and think of ways to get them involved.
  • Identify types of support other than money that might assist your startup venture. In-kind gifts, such as free services, space, equipment, and other non-financial donations, can come from local businesses, professionals (i.e., pro bono legal or accounting help), or other community entities.

Are contributions tax-deductible?

If your charity does not have 501(c)(3) status, you should inform donors that their contributions are not tax-deductible. Be aware that some potential donors may not be comfortable giving money to an organization that is not officially exempt.

If your 501(c)(3) status is pending, you should also inform donors of its pending satuts. Once you receive your exempt status, donations received while your application was pending may be treated as tax-deductible contributions retroactive to the date of your organization’s formation. However, if your application is not approved, contributions will not be considered tax-deductible.

******************************

Karmen A. Booker is an Attorney, Business Consultant and Owner of Compu-Perfect Professional Services, a business consulting firm specializing in Business Entity Formation (Corporations, Limited Liability Companies, and Nonprofit Corporations), Completing 501(c)(3) Federal Tax Exemption Applications, Grant Research and Writing services, and more.

Attorney Karmen A. Booker has developed an E-book  called “Fundraising for Nonprofits”. It  provides Fundraising Tips that include but are not limited to:

  • Developing a Fundraising Plan
  • Writing a Fundraising Letter
  • Over 15 Specific Fundraising Projects, and more.

GET YOUR COPY TODAY – $5.00

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What are Limits on Nonprofit Activities?

December 8, 2012

In addition to keeping corporate records, nonprofit corporations must follow some additional rules and abide by certain prohibitions in order to retain their tax-exempt status:

*  Nonprofit corporations cannot contribute money to political campaigns or participate in political campaigns. If they do, the IRS can revoke their nonprofit status, and can assess a special excise tax against the organization and its managers.

*  Nonprofit corporations can engage in only limited lobbying activities. Tax-exempt 501(c)(3) nonprofits that influence legislation to any “substantial degree” face the loss of their nonprofit status. However, for tax-exempt nonprofits that want to participate in lobbying, the IRS simply sets a limit on the money they can spend on political activities.

*  Nonprofit corporations must not distribute profits to members, officers, or directors. A nonprofit corporation cannot be organized to financially benefit its members, officers, or directors. However, reasonable salaries and expense reimbursements are permitted.

*  Nonprofit corporations must pay taxes on income from “unrelated activities.” Sometimes, a nonprofit organization will earn income through activities that aren’t directly related to its nonprofit purpose; for example, the directors of an organization dedicated to preserving open space may collect a consulting fee for advising other nonprofits. The IRS requires nonprofits to pay corporate income taxes on such unrelated income over $1,000, whether or not the group uses that money to fund its tax-exempt activities.

* Nonprofit corporations cannot make substantial profits from unrelated activities. If a nonprofit spends too much time on unrelated activities, or if the unrelated activities generate “substantial” income, the group’s nonprofit status may be jeopardized. Nonprofit corporations that plan to engage in activities that aren’t related to their tax-exempt purpose should consult a lawyer or tax expert with experience in nonprofit law.

*  When a nonprofit corporation dissolves, its assets must be distributed to another tax-exempt group. Since tax-exempt organizations and their assets cannot be owned, they can never be sold. If the directors of a nonprofit decide to disband the organization, they must donate its assets to another nonprofit group. This also means that once property goes into a nonprofit corporation, it cannot later be distributed to a member or director.


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