Starting a Nonprofit: FAQ
Who is eligible for 501(c)(3) status?
There are three components for an organization to be exempt from federal income tax under section 501(c)(3) of the Internal Revenue Code. A not-for-profit organization must be (1) organized and (2) operated exclusively for (3) one or more exempt purposes.
What is a 501(c)(3) nonprofit organization?
- organized and operated exclusively for exempt purposes; The exempt purposes set forth in section 501(c)(3) are charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, and preventing cruelty to children or animals.
- none of its earnings may inure to any private shareholder or individual; and
- it may not be an action organization that attempts to influence legislation as a substantial part of its activities nor participate in any campaign activity for or against political candidates.
For more information, see the IRS brochure: Applying for 501(c)(3) Tax-Exempt Status.
What are the other 501(c) status organizations?
The IRS defines 25 organizations under the 501(c) tax-exempt status, the following are the 6 most common.
- 501 (c) (3) – Religious, charitable, educational, etc.
- 501 (c) (4) – Social welfare
- 501 (c) (5) – Labor, agriculture organization
- 501 (c) (6) – Business leagues
- 501 (c) (7) – Social and recreational clubs
- 501 (c) (8) – Fraternal beneficiary societies
Alternatives to Starting Your Own 501(c)(3) Nonprofit Organization
If you are not sure you are ready to take on all the obligations of running a 501(c)(3) organization you may want to consider starting a new program within an existing nonprofit. You can:
- Contact other nonprofits in your area that provide similar services and inquire if they might be interested in partnering with you to add a program that will meet the unmet community needs you have identified.
- Identify another 501(c)(3) to serve as your fiscal agent. The Colorado Nonprofit Development Center is one organization that provides this service. Click here to learn more about Fiscal Sponsorships.
What is the 501(c)(3) tax exemption process?
Check out this step-by-step guide to applying for your 501(c)(3).