Does your non-profit actually have tax-exempt status?

PSA for my friends, colleagues, and clients sitting on boards of small non-profits.

Make sure your organization ACTUALLY has tax-exempt status on file with the IRS.

👀

I was recently approached by the Treasurer of a small, decade-old charity. The charity was offered a unusual, sizeable donation. As part of this donation, the Treasurer was to provide the donor proof of the organization’s tax-exempt status.

Except he couldn’t.

Nowhere in the organization’s records was the DETERMINATION LETTER from the IRS. This document would have explicitly stated the organization was granted 501c3 public charity status.

The Treasurer had previously requested a copy of the determination letter from the IRS only to be told no such letter was on file with them. That is, the IRS does NOT have any record of granting this organization tax-exempt status‼️ And this is DESPITE the IRS accepting tax-exempt 990-type tax returns annually from the organization.

Lack of tax-exempt status is problematic for at least two reasons:

1. The organization hasn’t been paying tax on its annual profit.

2. Donors have been claiming tax deductions for contributions.

😕

While I’m helping HIM work through this pickle, here are some thoughts for YOU:

➡️ Look through your organization’s records for either that determination letter or an AFFIRMATION letter - either will give you assurance that the IRS granted the organization tax-exempt status at some point. The letter will also tell you WHAT TYPE of tax-exempt status, e.g., 501(c)(3) public charity, 501(c)(6) business league, etc. Make sure the type matches up to how your organization is actually operating.

➡️ Pull up your organization on the IRS’ website https://apps.irs.gov/app/eos/. For newer organizations, the determination letter may be here. Additionally, you may be able to see a summary of annual 990-type filings + if the organization has lost its tax-exempt status along the way. If there’s anything you see on this site that you don’t see in the organization’s records - download it, save it, and protect it at all costs.

➡️ If you can’t find a determination or affirmation letter internally or at the IRS’ website, request the IRS provide you one. Do so via Form 4506-B (previously Form 4506-A) https://www.irs.gov/pub/irs-pdf/f4506b.pdf or by writing to the IRS https://www.irs.gov/charities-non-profits/exempt-organizations-affirmation-letters. And - with all things IRS-related these days - be prepared to wait.

Does your non-profit have tax-exempt status? Are you SURE?