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If I Have a Nonprofit, But Not the 501(c)(3) Yet, at What Point Can I Start Taking Donations?

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Bryan Fears Hi Bryan,

Once a nonprofit has the incorporated paperwork for the state (CA) and are working on the 501(c)(3) forms, at what point may they start taking donations and what information needs to be on the receipts for donors (private or corporate) to receive a tax deduction?

 Shannon Santamaria


Fearless with Attorney Bryan Fears

The best practice is to wait until you have your letter of nonprofit status from the IRS before you start accepting donations. The reason for that is if you accept donations before your status is official, you cannot tell donors that their contributions are tax-deductible. If you are granted tax-exempt status later on, the donations will be retroactively tax-deductible, but if 501(c)(3) status is never received, your donors may suffer adverse consequences.

If you have to start raising funds before you are incorporated and officially designated a nonprofit by the IRS, you might want to consider a fiscal sponsor that can receive contributions for you. A fiscal sponsor is simply another nonprofit that is willing to handle your donations for you.

Attorney Bryan Fears answers your legal questions for free on our Facebook page every Wednesday at 2 p.m. PT.


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June 23rd, 2014 at 11:36 am

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