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Old 07-14-2009, 10:57 AM
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Does an organization need the 501(c)(3) status if it is incorporated as a nonprofit?

If the organization wants to be recognized by the IRS as being exempt from paying federal income tax and be able to accept tax-deductible contributions the Organization must register to obtain a 501(c)(3) tax-exempt status.

It is imperative for an organization to have the 501(c)(3) status as the donors, (both individual and corporate donors) would usually require proof of this status prior to contributing to a nonprofit organization. This is to enable the donors to be able take a tax-deduction for the contributions/dontations to a qualified non-profit organization.

People often confuse being incorporated as a "nonprofit" with having 501(c)(3) tax exemption as most people use these terms interchangeably. However, they are not the same thing.

It is quite common today for recently incorporated "Nonprofits" to organize their legal structure as Nonprofit corporations at the state-level. This conveys to the State that the Non-Profit has been organized as a legal entity with a not-for-profit purpose.

But to be recognized as a charitable or foundation status at a Federal level, an organization must acquire the IRS 501(c)(3) status.

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