501(c)(3) Application Process

The recognition of your organization as a 501(c)(3) tax-exempt entity by the Internal Revenue Service (IRS) offers many advantages in helping your organization receive donations and establish credibility.

• Tax Deduction for Donors: This encourages donors to donate and receive a benefit, thus incentivizing donors to actively donate to a 501(C)(3) charity or charities.
• Grant Funding Eligibility for the nonprofit: Many foundations and government agencies limit their grants to public charities. Nonprofit organizations also can offer tax deductions to individuals or businesses that give charitable contributions
• Potential Tax Exemption at both State and Federal level: Avoid or minimize paying taxes at federal and state levels, depending the local and state laws.
• Federal Unemployment Tax Exemption: Potentially higher thresholds before incurring federal and/or state unemployment tax liabilities
• Reduced Postal Rates: Discounts on US Postal rates.

Tax Exempt doesn’t always mean taxes don’t need to be paid!

501(C)(3) organizations are exempt from federal taxes, and donations are tax-deductible. However, the organization may still need to pay state and local taxes.

To qualify for 501(c)(3) tax exemption you must be organized and operated exclusively for one or more of the following purposes:

• Charitable
• Religious
• Educational
• Scientific
• Literary
• Testing for public safety
• To foster national or international amateur sports competition
• Prevention of cruelty to children or animals

In addition to your purpose, to qualify for 501(c)(3) tax exemption, you must also:

• Refrain from supporting or opposing candidates in political campaigns in any way
• Ensure that your net profits do not disproportionately benefit any private shareholders or individuals (board members, officers, key management employees, or insiders)
• May not substantially benefit any personal-interest or non-exempt purposes
• May not be organized or operated to conduct a trade or business not related to your exempt purposes
• May not devote substantial attention to attempting to influence legislation (lobbying).
• May not provide commercial insurance as a substantial part of your activities.

On average the IRS takes 6-9 months from the time they receive the application package, however there are exceptions. Animal organizations tend to receive determinations quite quickly, and foreign or housing organizations may take an extended period of time. Doing it right the first time is critical, and that is where BryteBridg’s experience helps. Also, if you are in a hurry our staff can assist with tips to help expedite the process.

IRS Approval Times:

The 1023 EZ is approved on average between 2-6 weeks after submission.

The 1023 Full application on average will be approved between 2-6 months after submission.

During times where the IRS is experiencing delays (i.e. COVID, government shut down, or Tax Season): We have seen delays as long as 8-10 Weeks for the EZ, and up to 3-6 months for the 1023 Full.

The more clear the application and narrative are, the more likely the application will be approved quickly. This is an area where BryteBridge excels and helps our clients receive their approval quicker.

Typically Nonprofits will receive their 501c3 Determination Letter in the mail before it is posted on the IRS website. However, you can look-up your status anytime on the IRS site

Yes, founders, initial board members, and donors may claim a deduction for contributions made to set up and establish the organization on their individual or corporate tax return once the organization has obtained the 501(C)(3) status.

The organization should acknowledge the payments by issuing donation receipts and confirm in writing that no goods or services were received in return (assuming that is an accurate statement), so that the donor has the requisite substantiation letter if ever audited by the IRS.

Helpful resources: IRS Publication 535, Business Expenses: https://www.irs.gov/publications/p535 IRS Publication 17, Federal Income Tax for Individuals: https://www.irs.gov/publications/p17

Disclaimer: Individuals, corporations, and nonprofit organizations should confirm their tax obligations by speaking to a Tax advisor.

501 Board Requirements: You must have at least 3 individuals – President, Secretary, Treasurer. For all public charities, regardless of the number of board members, the majority must be unrelated by blood or marriage.

BryteBridge completes most services within 10-15 business days after receiving all the documentation needed. Much of our services depend on state and federal cooperation and timelines. It may only take a few days for us to do our part, much of the time awaiting communication from the state or IRS. Depending on how fast the state processes its filings, it can generally take a few days to two weeks.

There are, however, times of the year when it can take longer than expected, so you’ll want to plan accordingly. At the end of the year, the states may be short-staff due to the holidays. In addition, there is typically high volume during the early new year as new businesses and nonprofits are being formed or conducting annual renewal filings. We can expedite most services for an additional fee. You may check estimated completion date and monitor orders by logging into your client portal.

If the state or IRS allowed us to retain a copy, then the documents are available to view and download online.

To download documents, sign into the client portal, go to the Completed Orders tab, then click the document name or order number. If the document is available online, sign in to your client portal. Go to the documents tab on the left-hand navigation, then click the document name or applicable folder. If the document is available online, you’ll see it in its sections. If it’s unavailable, write us at [email protected] to request a copy. We can order from the state if we do not have a copy.

Please note there may be a small fee from BryteBridge, and the state requested to obtain copies of aged or documents not readily available.