Q: What is the difference between a nonprofit organization and a 501(c)(3)?

Full question: When I was applying for a grant, the foundation asked me for proof that I was a 501(c)(3) organization, and when I gave them my Organization papers they said that wasn’t enough. I thought I already was a 501(c)(3). What’s the difference?

Answer: In order to form a nonprofit organization, you must complete paperwork (i.e. Articles of Organization) and register it with your state’s appropriate office. In Massachusetts, you do this through the Secretary of the Commonwealth. These steps simply create the entity that is your nonprofit organization.

When people refer to 501(c)(3) organizations, they are referring to a nonprofit organization that has obtained federal tax exemption status from the IRS. You do not automatically become a 501(c)(3) organization when you file your Articles of Organization. There is a separate application process to obtain federal tax exemption status.

Being a 501(c)(3) organization has a variety of benefits to nonprofit organizations, one of which is greater access to funding through grants and fund raising. Having your federal tax exemption status means that people who donate to your organization can deduct their contribution as a charitable deduction when they annually file their taxes.

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