If I incorporate a nonprofit and don't have 501(c)3 status, how will the corporation be affected?

Question

I'm wondering how donations will work, Is it even possible to have a non-profit that is not tax-exempt?

Answer 1

If it's a religious corporation (church) then you do not need to file for exempt status (although you may do so); donations are still exempt and the rules and benefits of exempt organizations apply.

Otherwise, if you don't have 501(c)3 status you may be "nonprofit" as a voluntary association or club, bound to use assets for the purpose intended -- but not benefiting from tax exemption on gifts and bequests and taxable on any earned or not effectively connected income.

Many organizations are so small and collect only actual expenses, so that they see no reason to seek exemption. Indeed, contributions may in certain circumstances be deductible as business expenses. A small trade association might be like that.

Answer 2

You have 15 months from the time you incorporate and start doing business to apply to the IRS for tax exempt status. If you fail to obtain exempt status in this time period you will be taxed as a regular C corporation. You could seek professional help and file for relief under section 9100, but this is expensive. If you haven't filed for exempt status do so immediately.

Answer 3

If you incorporate in your state as a non-profit, your corporation will not need to pay taxes on money it makes. If you are a non-profit with the federal government, it will not need to pay federal tax. Your donors will not get a tax break unless you get the 501(c)3 status. It is the designation that will allow donations to be tax deductible.

It is quite possible to have a non-profit corporation that does have not charitable status.

Answer 4

It is possible to have a non tax exempt nonprofit corporation. For more information, see the following link.

http://www.irs.gov/charities/index.html