{"id":1366,"date":"2014-08-13T16:14:04","date_gmt":"2014-08-13T20:14:04","guid":{"rendered":"https:\/\/www.harborcompliance.com\/blog\/?p=1366"},"modified":"2023-09-15T15:04:01","modified_gmt":"2023-09-15T19:04:01","slug":"be-proactive-while-waiting-for-irs-determination-letter","status":"publish","type":"post","link":"https:\/\/www.harborcompliance.com\/blog\/be-proactive-while-waiting-for-irs-determination-letter\/","title":{"rendered":"What to Do While Waiting for Your Determination Letter"},"content":{"rendered":"

You’ve applied for 501(c)(3) tax exemption, and are waiting for your IRS determination letter. What can you do while you wait for it?<\/p>\n

Obtaining your IRS determination letter is a crucial step to starting your nonprofit. Unfortunately, this magical document, which grants an organization federal tax exemption, and the myriad benefits associated with it, usually arrives 9-12 months after filing Form 1023. While the IRS has taken initiative<\/a> to reduce that time for eligible organizations, a proactive nonprofit will use the waiting period to become compliant, and to help secure funding by the time the letter arrives.<\/p>\n

Here are three ways smart nonprofits use their “downtime:”<\/p>\n

1)   <\/strong>Opening a bank account<\/strong><\/p>\n

In order to raise, to save, and to grow its funds, a nonprofit must open an organizational bank account, separate from an individual\u2019s account.<\/p>\n

You have many options, so do your research. Select a bank that has experience with nonprofit clients, and that has the best offer for your organization.<\/p>\n

When you apply, the bank will ask for an EIN, as well as a number of records, ranging from the Articles of Incorporation to bylaws, to the entire records kit. Only a small handful of banks ask for a determination letter. It is important to prepare these documents correctly<\/a>, and to keep stellar records for this purpose.<\/p>\n

 <\/p>\n

\"Your<\/a>

It’s important to be proactive while you wait. Lots to do!<\/p><\/div>\n

 <\/p>\n

2)   Registering for Charitable Solicitation<\/strong><\/p>\n

Also known as fundraising registration<\/a>, this is a state-level activity that allows you to collect donations (legally). Forty-three states require this activity, and most of them don\u2019t require a determination letter to get started.<\/p>\n

For a small, local organization, registering in the home state will often suffice. As it grows, and you see where donations originate, you can register in other states as well.<\/p>\n

For organizations fundraising in multiple states, and those fundraising online, you must register in every state in which you solicit donations. It gets particularly hairy if you have a \u201cDonate Now\u201d button on your website. Since the website is \u201cnational,\u201d simply having the button on your site is enough to require a registration in some states.<\/p>\n

There are two ways to ensure full compliance: 1) register in all the states that require it, or 2) allow donations only from the states in which you\u2019ve registered.<\/p>\n

I will stress, Harbor Compliance does not provide legal advice, but there really is no legal solution other than the situation described above.<\/p>\n

Typically, the state requires the Unified Registration Statement<\/a> (URS) or a separate form, a copy of your Articles and bylaws, and a copy of the filed Form 1023. If the state requires a determination letter, you simply have to wait.<\/p>\n

There is a fee for this filing, which varies by state, and in some states, you must re-file annually.<\/p>\n

3)  Fundraising!<\/strong><\/p>\n

Many organizations think they must delay fundraising by a year or more until the determination letter arrives. Contrary to popular belief, if you\u2019ve applied for federal tax exemption, opened a bank account, and registered with the state, you can in fact begin to solicit funds.<\/p>\n

New organizations need money for startup costs, especially for government filings. At the same time, donors want you to be a tax-exempt organization so that they can write off their gift on their annual tax return. You need to mitigate that \u201cCatch 22.\u201d<\/p>\n

The key here is proving your worth and commitment as an organization. This is done in three ways:<\/p>\n

First, inform potential givers that your tax-exempt status is pending. They understand this takes time, but they want to see the process is underway.<\/p>\n

Next, stay compliant through good record keeping<\/a>. Donors, especially large ones, want to know your organization is in good standing, and more so, well organized and well run.<\/p>\n

Lastly, demonstrate the value of your mission. This is more salesmanship than anything, but by convincing suitors your nonprofit is worth its salt, you can raise funds without the determination letter.<\/p>\n

Once you receive your letter, inform your donors that you\u2019ve obtained federal tax exemption. Also, remember to thank them!<\/p>\n

While you wait for that determination letter, your organization can be proactive in getting the financial support it needs from the community. If you need help registering with your state, or becoming a compliant nonprofit, give us a call<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

You’ve applied for 501(c)(3) tax exemption, and are waiting for your IRS determination letter. What can you do while you wait for it?<\/p>\n

Obtaining your IRS determination letter is a crucial step to starting your nonprofit. Unfortunately, this magical document, which grants an organization federal tax exemption, and the myriad benefits associated with it, usually arrives 9-12 months after filing Form 1023. While the IRS has taken initiative to reduce that time for eligible organizations, a proactive nonprofit will use the waiting period to become compliant, and to help secure funding by the time the letter arrives.<\/p>\n

Here are three ways smart nonprofits use their “downtime:”<\/p>\n

1)   Opening a bank account<\/p>\n

In order to raise, to save, and to grow its funds, a nonprofit must open an organizational bank account, separate from an individual\u2019s account.<\/p>\n

You have many options, so do your research. Select a … Read More<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"content-type":"","footnotes":""},"categories":[70],"tags":[],"class_list":["post-1366","post","type-post","status-publish","format-standard","hentry","category-nonprofit-compliance"],"yoast_head":"\nWhat to Do While Waiting for Your Determination Letter | Harbor Compliance Blog<\/title>\n<meta name=\"description\" content=\"While waiting for an IRS determination letter, nonprofits can open a bank account, register for charitable solicitation, fundraise, and more.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.harborcompliance.com\/blog\/be-proactive-while-waiting-for-irs-determination-letter\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" 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