Coastal Community Foundation

Is your organization “non-profit”? What is a “non-profit organization”?

Every day throughout the Lowcountry, groups of good people get together and decide to conduct a program to benefit people in their community -- a program to feed the hungry, to perform dance or theatre, to create jobs, to mentor youth or to educate adults . . . The list could go on.

These programs are “charitable” because their purpose is to do something for the public good -- to change people’s lives for the better. But that doesn’t mean that these programs are “non-profit”. “Non-profit” status has to be “given” by the Internal Revenue Service. And it’s not easy.

Most Foundations and many businesses are only allowed to make contributions to charitable groups that have been “certified” by the I.R.S. as “non-profit organizations”.

A group of concerned citizens may have worked successfully for twenty years to help the youth in their community, grow up without any drugs, alcohol, teen pregnancy or crime. But if the I.R.S. hasn’t said that group is non-profit, it’s not -- it doesn’t matter how much good it’s done, and it doesn’t matter if anybody has profited from the program or not.

The IRS makes it difficult to get non-profit status, because “bad” groups could misuse it. So the IRS has procedures to follow for getting non-profit status -- procedures that take a lot of time and, for most groups, a lot of money.

We’ll give you the outline for how to be recognized as “non-profit” by the IRS in a minute, but first, this: Some groups should avoid the time, trouble and expense of getting non-profit status from the IRS. If they have succeeded without that classification, there may be no need.

However, if an organization operated well for twenty years on their own terms, and now they’re ready to move toward new funding sources for more expensive programs, here’s what they need to do.

1. File with the Secretary of State of South Carolina to be incorporated as a non-profit organization in the State of South Carolina. A lot of groups think that when they’re certified by the state as non-profit, then they’re non-profit -- but they’re not. Only certification by the IRS makes them legally “non-profit”.

When a group applies to the State to be incorporated as a non-profit, the State will ask for Articles of Incorporation, financial information, and more. And they’ll want a $25 check for filing fees for incorporation, and then an annual check for $50 for the group to maintain non-profit corporation status.

To ask for instructions and forms required to establish a non-profit corporation in South Carolina, write or call the Secretary of State at:

Charities
Office of the Secretary of State
PO Box 11350
Columbia, SC 29211
Phone: (843) 734-2168

www.scsos.com

2. Next, your group must apply for a federal employee identification number (EIN) from the IRS. You get this by asking the IRS for a copy of form SS-4, filling it out and sending it back in.

3. Once your group has an EIN, you are ready to apply for tax-exemption to be recognized by the IRS as a non-profit organization.

There are several different “types” of tax-exempt, non-profit organizations, each with its own code number. Most code numbers begin with “501(c)”, and then a number. Most foundations and corporations are legally allowed to give only to non-profit organizations that are designated as “501(c)(3)” by the IRS. Charitable donations cannot be given by most foundations and corporations to groups designated “501(c)(6)”, for example. Being classified by the IRS as a “501(c)(6)” means your group is considered a Chamber of Commerce or other business-related tax-exempt non-profit organization -- and these don’t always operate for purely charitable purposes. Getting an IRS designation of 501(c)(3) testifies that your group operates for purely charitable or educational purposes, and that donors to your organization can claim a full deduction.

The form to fill out to get recognition as a 501(c)(3) non-profit, tax-exempt, charitable organization is Form 1023, available from the IRS. It isn’t easy to complete -- a lot of planning and paperwork must be done before you even start, in order to answer all their questions. Many groups hire a lawyer or a private consultant with experience to do this for them -- which costs money. And it’s not inexpensive just to apply for 501(c)(3) recognition -- in most cases, the IRS charges you either $150 or $500 just for them to consider your application.

Ben Kelly worked shifts at Dupont for more than 25 years but always dreamed of painting. Since receiving a grant from CCF's Expansion Arts Fund in 2002, his work has been appearing all over town.