Category: Nonprofit

Running a Christian nonprofit is an incredible opportunity to serve others and fulfill God’s calling. However, one of the biggest challenges many nonprofits face is funding. The good news is that there are plenty of fundraising ideas that not only help you generate income but also align with your mission and values as a faith-based organization.

In this article, we’ll explore effective and mission-centered fundraising ideas for Christian nonprofits that will engage your community, strengthen your vision, and glorify God through your efforts.

1. Faith-Based Crowdfunding Campaigns

Crowdfunding has become a popular and accessible way to raise funds for nonprofits. With platforms specifically designed for Christian causes (such as GiveSendGo or Fundly), you can easily launch a campaign that resonates with your mission. Crowdfunding campaigns work best when they’re tied to a specific goal, such as building a new facility, launching a new program, or meeting urgent needs.

How to Align with Your Mission:

• Clearly communicate the spiritual impact of your campaign. For example, if you’re raising funds for a youth outreach program, explain how these efforts will lead young people to Christ and transform lives.
• Incorporate prayer into your campaign by inviting donors to not only contribute financially but also pray for the success of the project.
• Share personal stories, testimonies, or videos that illustrate how your mission is making a difference for God’s Kingdom.

Example:

• If your nonprofit focuses on Christian education, you could run a campaign to raise funds for scholarships for underprivileged students, explaining how the education will shape their faith and future.

2. Host a Benefit Concert or Worship Night

Music and worship are powerful ways to unite the body of Christ. Organizing a benefit concert or worship night is an excellent way to bring your community together while raising funds for your nonprofit. You can invite local Christian artists or worship bands to perform, and charge for tickets, or ask for donations during the event.

How to Align with Your Mission:

• If your nonprofit serves a specific community or cause, highlight that throughout the event. For example, if your ministry supports missions work, share stories from the field or show videos of the lives being impacted by your efforts.
• Incorporate a time of prayer, worship, or testimony that ties the purpose of the event back to your mission.
• Invite guest speakers, such as pastors or missionaries, to share how the funds raised will further the Gospel.

Example:

• A nonprofit focused on homeless outreach could host a worship night with local worship leaders, sharing stories of transformed lives and encouraging people to support the work being done in their community.

3. Biblical Living or Christian Lifestyle Workshops

Consider organizing workshops or classes that offer biblical insights on topics your audience cares about. From biblical financial principles to Christian parenting, these workshops can serve as both a fundraiser and a ministry opportunity.

How to Align with Your Mission:

• Choose workshop topics that resonate with your nonprofit’s mission. For example, if your ministry focuses on family counseling, you could offer workshops on strengthening marriages from a biblical perspective.
• Charge a registration fee for the workshops, and clearly explain that the funds will support your ministry’s ongoing efforts.
• Provide participants with practical, faith-based tools that help them live out biblical principles in their everyday lives.

Example:

• A nonprofit focusing on financial stewardship could host a “Biblical Budgeting and Finance Workshop,” teaching participants how to manage their money according to Scripture while raising funds for their ministry.

4. Church and Ministry Partnerships

One of the best ways to raise funds for a Christian nonprofit is by partnering with local churches and ministries. Churches are often eager to support missions, outreach, and charitable efforts that align with their vision for serving the community. By collaborating with churches, you can tap into an engaged congregation that shares your values and mission.

How to Align with Your Mission:

• Reach out to churches that align with your nonprofit’s cause and mission. Offer to share about your ministry during a Sunday service or special event and invite church members to support your work through donations or volunteerism.
• Host joint events with churches, such as mission-focused dinners or prayer breakfasts, where you can educate the congregation about your ministry and ask for financial support.
• Consider establishing a “church sponsorship” program where churches can commit to supporting your nonprofit monthly or quarterly.

Example:

• A nonprofit focused on global missions could partner with local churches to host a “Mission Sunday” event, where the congregation can learn about the nonprofit’s impact, give financially, and commit to supporting future mission trips.

5. Faith-Based Product Sales

Another creative way to raise funds is by selling faith-based products such as Christian apparel, Bibles, devotionals, or handmade crafts. Not only does this provide financial support, but it also allows your supporters to spread your message by wearing or using products that align with their faith.

How to Align with Your Mission:

• Choose products that reflect your nonprofit’s mission. For example, if your organization focuses on evangelism, you might sell t-shirts with Bible verses or Christian books that equip believers to share the Gospel.
• Include a note or brochure with each purchase that explains how the funds raised will support your ministry and further God’s Kingdom.
• Consider collaborating with local Christian artisans or businesses to create custom products that uniquely represent your mission.

Example:

• A nonprofit that works with refugees could sell hand-crafted items made by refugees, with proceeds going toward supporting their resettlement and spiritual growth.

6. Online Bible Studies or Devotionals with Donations

Online Bible studies or devotionals can serve as both a ministry tool and a fundraising opportunity. By offering virtual courses or guided Bible study materials, you can create a space where people can grow in their faith while supporting your nonprofit’s mission.

How to Align with Your Mission:

• Choose study topics that connect with your mission. For example, if your nonprofit focuses on helping people overcome addiction, offer a Bible study on freedom and redemption through Christ.
• Charge a registration fee for access to the study or invite participants to donate as they feel led, with all proceeds going toward your ministry.
• Include times of prayer and reflection throughout the study, and provide opportunities for participants to hear more about how your nonprofit is impacting lives.

Example:

• A nonprofit focused on discipleship could offer a 6-week online study titled “Becoming a Disciple of Christ,” charging a fee for access and using the proceeds to fund discipleship training in local communities.

7. Prayer and Giving Challenges

Create a challenge or campaign that invites people to engage with both prayer and giving. For instance, you could run a “40 Days of Prayer and Giving” challenge where participants commit to praying for your ministry and donating a specific amount each day for 40 days. This type of challenge deepens the spiritual connection between your supporters and your cause, reminding them that their giving is a way to partner with God’s work.

How to Align with Your Mission:

• Encourage participants to pray specifically for the needs of your nonprofit and those you serve. Share daily or weekly prayer points to guide them.
• Include Bible verses and devotionals in your challenge to keep the focus on God’s Word and how He is working through your ministry.
• Offer a flexible donation option, allowing participants to give according to their financial ability while participating in the prayer challenge.

Example:

• A nonprofit that supports missionaries could organize a “30 Days of Prayer for the Nations” challenge, inviting participants to pray daily for specific countries and give a set amount toward supporting missionary efforts.

8. Host a Virtual Gala or Silent Auction

With the rise of virtual events, many nonprofits have successfully transitioned their traditional galas or silent auctions online. A virtual gala can include elements like live music, guest speakers, and testimonies, while a silent auction can feature donated items that align with your mission.

How to Align with Your Mission:

• Highlight your nonprofit’s work during the event by sharing stories of how God is using your ministry to transform lives.
• Offer auction items that are faith-based or mission-related. For example, a nonprofit focused on orphan care could auction off handmade items from the children they support, or a Christian business could donate products to be auctioned.
• Include prayer and worship during the virtual event to create a spiritual atmosphere and remind participants of your mission’s eternal impact.

Example:

• A nonprofit focused on discipleship could host a virtual auction featuring signed Bibles, Christian artwork, or tickets to Christian conferences, with all proceeds supporting discipleship efforts.

Conclusion

Fundraising for a Christian nonprofit doesn’t have to be just about generating income—it can be a ministry opportunity that strengthens your mission and deepens your connection with supporters. Whether through faith-based events, online campaigns, or partnerships with churches, your fundraising efforts can reflect your values and draw others into the work God has called you to. By keeping your mission at the center and using these creative fundraising ideas, you can build a strong financial foundation that enables your nonprofit to make a lasting impact for God’s Kingdom.

Starting a Christian Ministry  can be an exciting and rewarding way to serve the Lord and impact the lives of others. Giving back to your local community by starting a nonprofit Christian Faith-Based Organization, can give you a sense of purpose that positively contributes to one’s psychological wellbeing, which is also associated with better physical health!

A faith-based organization refers to charitable organizations or nonprofits affiliated with a religious group or inspired by religious beliefs. 

A nonprofit organization is generally to improve the quality of life for others at a community, local, state, national, or even global level. Faith Based organizations are not dedicated to private or financial gain but to the advancement of their faith and beliefs.

While starting a nonprofit organization is an exciting and rewarding opportunity, it can also be challenging.  A nonprofit is an organization that qualifies for tax-exempt status under the regulations outlined by the Internal Revenue Code. 

There are various categories of nonprofits recognized by the Internal Revenue Service (IRS): Each category has different tax benefits and requirements. While the majority of nonprofits are classified under 501(c)(3) of the IRS Code as charitable organizations.

If your organization is a place of worship, your nonprofit might meet the IRS’s definition of a “church” If your organization qualifies as a church (including integrated auxiliaries and conventions or associations of churches) that meet the requirements of section 501(c)(3) of the Internal Revenue Code you are automatically considered tax-exempt and are not required to apply for and obtain recognition of exempt status from the IRS.

Most faith-based organizations are structured as non-profit religious organizations and will in most cases need to apply for the 501(c)(3) of the Internal Revenue Code.

Here’s are some tips to help you get started :

1. Create a Business Plan:
Develop a comprehensive business plan that outlines your organization’s goals, strategies, and operational plan. This document will serve as a roadmap for your nonprofit’s growth and sustainability.

2. Define the Mission and Vision

• Mission Statement: Clearly articulate the purpose and goals of the organization. This should reflect the core values and principles of the faith tradition it represents.
  What cause or issue will your organization address? What impact do you aim to achieve?
• Vision Statement: Outline the long-term impact you hope to achieve and how you envision the future of your organization.

3. Choose a Name:

Choose a unique and memorable name for your organization. Ensure it accurately reflects your mission and is not already in use by another nonprofit.

4. Conduct Market Research

• Needs Assessment: Identify the needs of the community you aim to serve. This can involve surveys, focus groups, or interviews with community leaders.
• Gap Analysis: Determine what services or programs are currently lacking and how your organization can fill these gaps.

5. Formulate a Strategic Plan

• Goals and Objectives: Set specific, measurable, achievable, relevant, and time-bound (SMART) goals.
• Programs and Services: Define the programs and services you will offer to achieve your goals.
• Resource Allocation: Plan for the resources needed, including funding, volunteers, and facilities.

6. Legal Structure and Compliance

Choose a Legal Structure: Select a legal structure for your nonprofit. Common options in the United States include 501(c)(3) organizations, which are tax-exempt charitable organizations. Most faith-based organizations are structured as non-profits. You may choose between a 501(c)(3) or another type of tax-exempt status, depending on your location and goals. Consult an attorney or legal expert to determine the best structure for your specific needs.

• Incorporation: File the necessary legal documents to incorporate your nonprofit at the state level. This typically involves submitting articles of incorporation to the appropriate state agency. Register your organization with the appropriate state or local government agency.
• Bylaws: Create bylaws that outline the rules and procedures for operating your nonprofit. Bylaws typically cover topics such as board meetings, decision-making processes, and membership criteria (if applicable) bylaws also normally govern the organization’s operations, including the roles and responsibilities of the board of directors.
• Apply for Tax-Exempt Status: If you want your nonprofit to qualify for tax-exempt status, most commonly as a 501(c)(3) organization, you must apply to the IRS.
• Prepare a comprehensive description of your nonprofit’s activities, finances, and governance structure as part of the application.
• File for federal and state tax-exempt status. In the U.S., This process involves filling out IRS Form 1023 (or the streamlined Form 1023-EZ for smaller organizations) and paying the associated filing fee.

Obtain an Employer Identification Number: (EIN):Apply for an EIN from the Internal Revenue Service (IRS). This unique identifier is required for tax purposes, including fundraising and financial transactions.

7. Establish Governance

• Board of Directors: Recruit a board of directors with diverse skills and perspectives. Ensure they are committed to the organization’s mission. Choose individuals who are passionate about your cause and can provide expertise in areas like finance, legal, marketing, and fundraising. Your board will play a critical role in governing the organization.
• Policies and Procedures: Develop policies for governance, financial management, human resources, and operations to ensure transparency and accountability.

8. Fundraising and Financial Management

• Budget: Create a detailed budget that outlines expected income and expenses.
• Fundraising Plan: Create a fundraising strategy to generate the necessary funds to support your nonprofit’s mission. Develop a fundraising strategy that includes grants, donations, events, partnerships and other revenue streams.
• Financial Controls: Implement financial controls to ensure proper stewardship of funds. This includes regular audits and transparent reporting.

Receiving Donations:

Depending on your state and local regulations, you may need to register your nonprofit and obtain permits to solicit donations or conduct specific activities. Check with your state’s attorney general’s office or a legal professional for guidance.

9. Set Up Financial and Administrative Systems:

Establish accounting and financial management systems to track income and expenses. You should also maintain clear records of your organization’s activities and operations.

10. Build Partnerships and Networks

• Community Engagement: Build relationships with community leaders, other non-profits, businesses, and government agencies.
• Interfaith Collaborations: Consider partnering with other faith-based organizations for shared initiatives and broader impact.

Officially launch your nonprofit: Begin implementing your programs and services. – Develop a marketing and outreach plan to raise awareness about your organization and attract supporters, volunteers, and donors.

11. Marketing and Outreach

• Brand Identity: Develop a strong brand identity, including a logo, tagline, and messaging that resonate with your target audience.
• Communication Strategy: Utilize various channels, such as social media, newsletters, and community events, to raise awareness about your organization and its mission.

12. Recruit and Train Volunteers and Staff

• Volunteer Programs: Develop programs to recruit, train, and retain volunteers.
• Staffing: Hire staff as needed, ensuring they align with the organization’s mission and values.
• Training and Development: Provide ongoing training and development opportunities for both staff and volunteers.

13. Program Implementation and Evaluation

• Launch Programs: Begin offering your programs and services according to your strategic plan.
• Monitoring and Evaluation: Establish metrics to measure the effectiveness of your programs. Regularly review and adjust your strategies based on feedback and outcomes.

14. Sustainability and Growth

• Long-Term Planning: Develop plans for sustainability and growth, including succession planning and potential expansion of services.
• Continuous Improvement: Foster a culture of continuous improvement by regularly evaluating your programs, seeking feedback, and staying informed about best practices in the field.

15. Comply with Reporting and Compliance Requirements:
Stay informed about reporting requirements, tax filings, and compliance obligations for your nonprofit. Failure to meet these obligations can result in penalties or the loss of tax-exempt status.

By following these steps and remaining committed to your mission, you can create a meaningful and impactful organization that serves your community’s spiritual and practical needs. It’s essential that you seek legal advice and guidance from experts experienced in nonprofit law and governance. Additionally, consider joining nonprofit associations or networks in your area for support and resources as you embark on your journey!

In the United States, Christian faith-based organizations (FBOs) come in various forms, each serving different needs and communities. Here are some common types:

Churches and Religious Congregations

• Local Churches: These are individual congregations where Christians gather for worship, teaching, and community activities.
• Denominational Bodies: Larger organizations overseeing multiple churches, such as the Southern Baptist Convention or the United Methodist Church.

Nonprofit Organizations

• Charities and Relief Organizations: These include groups like the Salvation Army, World Vision, and Samaritan’s Purse, which provide aid and services to those in need.
• Educational Institutions: Christian schools, colleges, and universities like Liberty University or Wheaton College.
• Healthcare Organizations: Hospitals and clinics affiliated with Christian denominations, such as AdventHealth and Catholic Health Initiatives.

Mission Organizations

• Domestic Missions: Organizations focusing on evangelism and service within the United States, such as Youth for Christ and Navigators.
• International Missions: Groups like Wycliffe Bible Translators and Operation Mobilization, which send missionaries abroad to spread the gospel and provide aid.

Social Services

• Community Outreach Programs: Local initiatives providing food, shelter, and other services to the community, often run by churches or larger organizations.
• Addiction Recovery Programs: Faith-based rehabilitation centers and programs like Teen Challenge and Celebrate Recovery.

Advocacy and Policy Groups

• Pro-Life Organizations: Groups like the Family Research Council and National Right to Life Committee.
• Social Justice Advocacy: Organizations that focus on issues like human trafficking, poverty, and racial reconciliation, such as International Justice Mission.

Publishing and Media

• Christian Publishing Houses: Companies like Zondervan and Tyndale House that publish Christian books and materials.
• Broadcasting Networks: Radio and TV networks like TBN (Trinity Broadcasting Network) and Moody Radio.

Faith-Based Business Networks

• Christian Business Associations: Groups like the Christian Business Men’s Connection (CBMC) and C12 Group, which support Christian business leaders and entrepreneurs.

Counseling and Support Services

• Christian Counseling Centers: Providing mental health services with a Christian perspective, such as Focus on the Family and American Association of Christian Counselors.
• Support Groups: Faith-based support networks for various life issues, including grief, divorce, and parenting.

Youth and Family Services

• Youth Ministries: Organizations like Young Life and Fellowship of Christian Athletes, which focus on reaching young people with the gospel.
• Family Ministries: Groups that provide resources and support for marriages and families, such as FamilyLife and Focus on the Family.

Each type of organization plays a vital role in meeting the spiritual, physical, and emotional needs of individuals and communities while promoting Christian values and teachings.

Leading a faith-based nonprofit comes with unique challenges that require a blend of practical strategies and spiritual resilience. Faith-based nonprofit leadership is a calling filled with opportunities to make a significant impact. However, the path is often fraught with challenges that can test even the most devoted leaders. From balancing personal and professional life to managing finances and avoiding burnout, these obstacles can be daunting. This article aims to provide practical advice and spiritual encouragement to help you navigate these challenges with grace and faith.

Balancing Family and Ministry

Practical Advice:

1. Set Boundaries: Establish clear boundaries between work and family time. Create a schedule that allows you to dedicate specific hours to your family and stick to it.
2. Delegate Responsibilities: Empower your team by delegating tasks. This not only lightens your load but also fosters a sense of ownership and growth among your staff and volunteers.
3. Prioritize Self-Care: Make time for rest, exercise, and hobbies. Taking care of your physical and mental health enables you to be more present and effective in both your family and ministry roles.

Spiritual Encouragement:

• Seek God’s Wisdom: Pray for guidance on how to balance your responsibilities. James 1:5 reminds us that if we lack wisdom, we should ask God, who gives generously to all without finding fault.
• Trust in God’s Provision: Matthew 6:33 encourages us to seek first the kingdom of God and His righteousness, and all these things will be given to us as well. Trust that God will provide for your family and ministry needs.

Managing Finances

Practical Advice:

1. Create a Budget: Develop a detailed budget that outlines your income and expenses. Regularly review and adjust it to ensure financial stability.
2. Diversify Funding Sources: Relying on a single source of funding can be risky. Explore various fundraising methods such as grants, donations, and events.
3. Financial Transparency: Maintain clear and transparent financial records. This builds trust with donors and stakeholders and helps in making informed decisions.

Spiritual Encouragement:

• Faithful Stewardship: Remember the parable of the talents in Matthew 25:14-30. Be a faithful steward of the resources God has entrusted to you, using them wisely to further His kingdom.
• Trust in God’s Provision: Philippians 4:19 reassures us that God will meet all our needs according to the riches of His glory in Christ Jesus. Trust that He will provide for your financial needs.

Dealing with Burnout

Practical Advice:

1. Recognize the Signs: Be aware of the symptoms of burnout, such as exhaustion, cynicism, and a decline in performance. Early recognition allows for timely intervention.
2. Take Regular Breaks: Schedule regular breaks and vacations to rest and recharge. Short breaks throughout the day can also help maintain energy levels.
3. Seek Support: Don’t hesitate to seek support from a mentor, counselor, or peer group. Sharing your struggles can provide new perspectives and solutions.

Spiritual Encouragement:

• Rest in God’s Presence: Jesus invites us in Matthew 11:28-30 to come to Him for rest. Spend time in prayer and reflection, allowing His presence to renew your strength.
• Rely on God’s Strength: Isaiah 40:31 reminds us that those who hope in the Lord will renew their strength. They will soar on wings like eagles; they will run and not grow weary, they will walk and not be faint.

Overcoming Resistance and Criticism

Practical Advice:

1. Listen and Learn: Approach criticism with an open mind. Constructive feedback can offer valuable insights and opportunities for growth.
2. Communicate Clearly: Ensure clear and transparent communication with your team and stakeholders. Address concerns promptly and respectfully.
3. Stay Focused on Your Mission: Keep your mission at the forefront. Let it guide your decisions and actions, even in the face of resistance.

Spiritual Encouragement:

• Stand Firm in Faith: Ephesians 6:10-18 encourages us to put on the full armor of God so that we can stand against the devil’s schemes. Trust in God’s protection and guidance.
• Find Strength in God’s Promises: Psalm 27:1 reminds us that the Lord is our light and salvation—whom shall we fear? The Lord is the stronghold of our life—of whom shall we be afraid?

Maintaining Vision and Motivation

Practical Advice:

1. Set Clear Goals: Establish clear, achievable goals that align with your mission. Regularly review and adjust them as needed.
2. Celebrate Successes: Take time to celebrate milestones and successes, no matter how small. This boosts morale and motivation.
3. Stay Connected to Your Why: Regularly remind yourself and your team of the purpose behind your work. This can reignite passion and commitment.

Spiritual Encouragement:

• Seek God’s Vision: Proverbs 29:18 tells us that where there is no vision, the people perish. Seek God’s vision for your organization through prayer and reflection.
• Persevere in Faith: Hebrews 12:1-2 encourages us to run with perseverance the race marked out for us, fixing our eyes on Jesus, the pioneer and perfecter of faith. Stay focused on Him as you lead.

Conclusion

Leading a faith-based nonprofit is a journey of faith, resilience, and dedication. By combining practical strategies with spiritual encouragement, you can navigate the challenges that come your way and continue to make a meaningful impact. Remember, you are not alone—God is with you every step of the way, providing strength, wisdom, and guidance.

May you find encouragement in these words and practical steps to overcome obstacles and lead your organization with faith and confidence.

To Incorporate a Nonprofit You Need to Do The Following:

–Choose a business name:
Check the state-by-state information on the various laws that apply to name a nonprofit in your state.

–Appoint a Board of Directors:
Draft your bylaws with guidance from your Board of Directors. These are the operating rules for your nonprofit.

–Decide on a legal structure:
Choose whether your organization will be a:

Corporation:
In general, a corporation is formed under state law by the filing of articles of incorporation with the state. The state must generally date-stamp the articles before they are effective. You may wish to consult the law of the state in which the organization is incorporated. Note that for a corporation to qualify under section 501(c)(3) of the Code, its charter or articles of incorporation must contain certain language. Publication 557 contains suggested language.

Association:
In general, an association is a group of persons banded together for a specific purpose. To qualify under section 501(a) of the Code, the association must have a written document, such as articles of association, showing its creation. At least two persons must sign the document, which must be dated. The definition of an association can vary under state law. You may wish to consult the law of the state in which the organization is organized. Note that for an association to qualify under section 501(c)(3) of the Code, its articles of association must contain certain language. Publication 557 contains suggested language.

–File your incorporation paperwork:
You must next file formal paperwork or articles of incorporation, and pay a small filing fee to your state. State law may require charitable organizations to register and file periodic reports.

–Apply for tax-exempt status:
A nonprofit organization may be eligible for exemption from federal income tax to determine your eligibility you must Apply for Section 501(c)(3) Status.  

–Obtain necessary licenses and permits:
Check with your state, federal and local authorities for the nonprofit licenses and permits needed to comply with federal, state, and local rules?

Before you can be sure that tax-exempt status is right for you, you’ll need to understand some of the benefits and responsibilities that come with tax-exemption, the steps required to become tax-exempt, and the rules your organization must follow after you apply.

You must admit there are a lot of financial benefits to applying for tax exempt:

-exemption from federal income tax

-contributions to your organization are tax-deductible

-you may be exempt from paying state income, sales, and employment taxes.

-you have access to reduced postal rates

-you are exempt from paying federal unemployment tax, and

-you can receive tax-exempt financing.

-With all these great benefits, comes great responsibilities.

Responsibilities

Responsibilities include recordkeeping, certain annual filing requirements, and disclosure requirements.

Record-keeping
• Keep detailed record-keeping
o Financial
o Non-financial

You should keep detailed records, including records you’d probably want to keep for any business. For example, you’re required to keep books and records detailing all activities, both financial and non-financial.

Annual Filings can include
• Form 990
• Form 990-EZ
• Form 990-N (Post Card)

The IRS doesn’t need to see all of your records on a regular basis. But the records you keep will allow you to have everything you may need to submit your required annual filings.

Most public charities recognized as tax-exempt under section 501(c)(3) of the Code are required to file an annual information return: either Form 990 or Form 990-EZ.

Certain categories of organizations are exempted from filing Form 990 or Form 990-EZ – including churches and very small organizations. However, most small organizations that aren’t required to file Form 990 or 990-EZ must file an annual electronic notice, the Form 990-N, also known as the e-Postcard.

Public Disclosures

There are specific records that need to be made public upon request. Section 501(c)(3) organizations must make their exemption application and the three most recent annual information returns (your Form 990s) available to the public, upon request and without charge (except for a reasonable charge for copying). If your organization has $1,000 or more in gross income from an unrelated business, it must file Form 990-T,
Exempt Organization Business Income Tax Return, and that must be made available as well.

You should make the documents available at the organization’s principal office during regular business hours and requests can be made in person or in writing

Tax-exempt organizations are commonly referred to as 501(c)(3)s. 501(c)(3) includes public charities and private foundations. The 501(c)(3) is a process with a life cycle, there are 5 steps to a life cycle of a tax-exempt organization:

-Starting outnumber

-Applying for exemption number

-Require filings

-Ongoing compliance and

-Significant events

The first two steps, starting out and applying for exemption, are unique because you should only do them once for any single organization. For the purposes of this tutorial, we’re only going to concentrate on creating and maintaining one organization at a time.

What’s different about the other three steps is that a single organization has to deal with each of those issues multiple times. Some required filings are annual, for example:

Lifecycle – Starting Out

When you’re creating your organization, you may need to create organizing documents based on the requirements of your state. You’ll need these if you apply for tax exemption. If you’d like to apply for tax exemption, which is a federal-level status, you’ll need to acquire an employer identification number, or EIN.

Even if you have no employees, you still need an EIN. Your EIN is similar to your personal social security number, only it’s for your business. It identifies you to the IRS.

Next, you need to determine what type of tax-exempt organization you have. You’ll need this information when you apply for tax-exempt status. If you decide to apply, you’ll probably need more information on the EIN.

Lifecycle – Applying for Exemption

-Apply to the IRS for Tax-Exempt Status

-Form 1023

To apply for tax-exempt status, you’ll need to fill out Form 1023 or Form 1023-EZ

You may be eligible to file Form 1023-EZ, a streamlined version of the application for recognition of tax exemption. You must complete the Form 1023-EZ Eligibility Worksheet in the Instructions for Form 1023-EZ PDF to determine if you are eligible to file this form. If you are not eligible to file Form 1023-EZ, you can still file Form 1023.

Lifecycle – Required Filings

Once the IRS has granted your organization tax-exempt status, it’s important that you meet the mandatory annual filing requirements. You’ll need to file annual exempt-organization returns, and you could be required to file unrelated business income tax filings and other returns and reports to StayExempt.

Lifecycle – Ongoing Compliance

An organization can avoid jeopardizing its tax-exempt status. To do that, you’ll need to understand employment taxes, public disclosure requirements, and other ongoing compliance issues.

Lifecycle – Significant Events

Significant events all have to do with your tax-exempt status. The events include, but aren’t limited to:

-Audits
-Private letter rulings and
-Termination proceedings

An organization must have one or more specific purposes to qualify as tax-exempt. A 501(c)(3) organization (also known as a public charity) is one that is organized and operated exclusively for purposes that are:
• Religious
• Charitable
• Scientific
• Testing for public safety
• Literary or educational
• Designed to foster national or international amateur sports competition, or
• For the prevention of cruelty to children or animals.

There are many kinds of organizations that fall under these categories. For example, organizations that provide relief to the poor, distressed or underprivileged; those that lessen neighborhood tensions; or those that defend human and civil rights usually qualify as charitable organizations. Educational organizations can be schools, museums, symphony orchestras, training for the unemployed, dance classes, and zoos.

Apply for an EIN

The first step is to apply for an EIN, there are a number of ways you can apply for an EIN. The fastest is to go to the IRS website or call our toll-free number and get an EIN you can use immediately. You can also fax your Form SS-4, Application for Employer Identification Number, and you’ll receive your EIN within 4 business days. or do it the old-fashioned way by completing Form SS-4 using the form’s instructions and mailing it to:
Internal Revenue Service Center
Attn: EIN Operation
Cincinnati, OH 45999
Fax-TIN: 859-669-5760
Visit the IRS website for more information

Organizing Documents

Next, you’ll need to gather your organizing documents. An organization can’t qualify for exempt status without an organizing document. To qualify for exemption under Section 501(c)(3), the organizing document must contain three provisions. See sample document.

By-Laws

By-laws are an organization’s internal operating rules. Federal tax law doesn’t require specific language in the by-laws of most organizations. However, state law may require you to have by-laws, so it is a good idea to contact your state to find out the specific requirements.

Organizational and Operational tests

All types of tax-exempt organizations must meet the Organizational and Operational tests

Organizational Test:

The Organizational Test is used to determine if the organization is
properly organized. To pass this test the organization must:
• Limit its purposes to one or more of the exempt purposes listed in Code section 501(c)(3)
• Not permit the organization to engage in a nonexempt activity and
• Assets of the organization must be permanently dedicated to an exempt purpose.

If you write your organizing documents correctly and include these provisions you need to have in your organizing documents, this test will be easy to pass.

The Operational Test

The operational test covers how your organization is actually operated. To pass the operational test, your organization must show that its principal activities will be to further its exempt purposes. Conversely, your organization has to limit the participation in certain kinds of
activities and absolutely refrain from others.

Though this test is conducted when you’re first applying for tax-exempt status, if the balance of your activities gets out of line after you receive your status, or your organization engages in prohibited activities, you can lose your tax-exempt status and be subject to both taxes and penalties.
Some prohibited activities including intervening in political campaigns.

If your organization openly endorses a candidate, that’s a prohibited activity. There are many other kinds of political (and other) activities that aren’t allowed which could possibly jeopardize your tax-exempt status such as unrelated business income, required discourses, and employment issues.

Public Charity VS Private Foundation

-Statutory Charities
-Churches
-Schools
Organizations providing medical or hospital care (including medical education and research)

Other Public Charities
• Organizations that receive significant public support
• Organizations that provide support to other public charities.

When an entity qualifies as a tax-exempt organization, the IRS presumes
it’s a private foundation unless it can show that it’s a public charity.

The main difference between a public charity and a private foundation is where the money comes from. Generally, a public charity has a broad base of support while a private foundation has very limited sources of support. There are also different tax rules – so, for example, public foundations are subject to excise taxes that aren’t imposed on public charities. There are more differences – there is more difference but for now, I will focus on public charities.

Some organizations automatically qualify as public charities based on the Code, so they’re called Statutory Public Charities. Some examples are churches, schools, and organizations providing medical or hospital care (including medical education and research).

These organizations still have to pass the Operational and Organizational tests. Or, if your organization receives significant public support or it provides support to other public charities, you may qualify that way. Otherwise, you’ll have to demonstrate you are a public charity by other means.