Friday, July 25, 2014

Tax Exemption!

One of the biggest steps for a nonprofit is applying to the IRS for tax exempt status. While not paying income tax is important, more important is the status of being an exempt organization. It is a symbol to potential donors that you are recognized by the IRS, and it brings legitimacy to your cause as a charity. The 1023 application for recognition as a tax exempt organization is extremely difficult. It took me hundreds of hours, because in order to answer the questions on the form you have to have made hundreds of policy decisions. What type of charity will you be? (We are a 509(a)(2), which is a service-based organization.) What type of charitable activities do you do, will do, might do, could possible consider doing while having a dream one night? What kind of fundraising and how often will you do it? Who are your board members? How much do you pay your officers?

It's a nightmare.

Once it was done, we heard from a friend who had recently gotten her determination letter (approval from the IRS) that it had taken 18 months.

So we assumed it would be awhile. We got our letter only 6 months after we applied. We are tax exempt!

We are officially a recognized 501(c)(3) charity, and it is retroactive to our date of incorporation. Microsoft and Adobe are giving us free software under their charitable giving programs, and our website host is also now covering our website. Other organizations are now helping market our services.

A single piece of paper, and the weight on my shoulders has been significantly reduced. Before our letter came, we were pretty sure that we would be approved and everything would be fine. But of course, we worried. Other states asking us for help building their own similar organizations were told repeatedly, "we are not approved yet, we are not experts, it's an experiment" because we were not 100% sure we had done everything correctly. Who were we to tell people how to do this?

Apparently we did things right, and now we can tell everyone about our experience and the revolution can continue to grow!

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