Does being a Nonprofit Corporation mean we're a 501(c)(3)?

What a great question - and one I'm asked all the time.

The short answer: NO! Not even close.

Unfortunately, a lot of people contact me saying they did their own nonprofit incorporation, and now they're ready to apply for grant funding. The truth is all they are is a nonprofit corporation. They are NOT tax-exempt. (And that begs the question: did they incorporate properly? Did they include all the IRS provisions? In most cases they have not - but that's a subject for my next article!)

When one incorporates as a nonprofit organization, that is done through your state. The corporation is now a legal entity, and the articles act as your guideline for running the nonprofit business. Obtaining nonprofit corporate status with your state does not automatically carry over to the federal government, however, and the Feds are the only ones who can approve you for that much sought-after 501(c)(3) status.

"Nonprofit" is really a misnomer, however. A 501(c)(3), while it is in most cases a nonprofit corporation, is should really be referred to as a "tax-exempt" corporation. Meaning as long as the funds you raise are done so with your stated purposes in mind and used for those purposes, those funds will not be taxed.

So pretty much you must first incorporate as a nonprofit corporate with your state. THEN you must file an application with the IRS, requesting tax-exempt or 501(c)(3) status.

Once you've gotten the approval of both your state and the IRS - you may then call yourself a 501(c)(3) nonprofit corporation, and obtain grant funding.

And while most states will automatically recognize your federal tax-exempt status - most will still require you register with them as well, so be sure to check with your state to see what their requirements are for your situation!

For additional information, call Travis Belcher @ 865.694.3900.