IRS Determination Letter

Click to view an example of a copy of a determination letter.

The IRS determination letter notifies a nonprofit organization that its application for federal tax exemption under Section 501(c)(3) has been approved. This is an exciting day for an emerging nonprofit!

Having your IRS determination letter in hand affords your nonprofit organization several unique advantages.

  • You are exempt from federal income tax.
  • Your donors can claim their contributions to your organization on their annual tax returns.
  • You may receive discounts on USPS postage rates and many other goods and services.
  • You may apply for grant funding typically restricted to tax exempt organizations.
  • You gain credibility for your mission.

You’ll also want to:

  • Explore exempting your organization from sales and other state taxes.
  • Register to fundraise in the 41 states that require registration before you even ask for a donation and make sure you include adequate disclosure statements.
  • Identify and be mindful of any ongoing requirements, such as filing the IRS Form 990, to keep your federal tax exemption status.
  • Be sure to carefully store your determination letter in your nonprofit’s records and scan and store an electronic copy.

Key Takeaways:

  1. Be proud—receiving your determination letter from the IRS is a huge achievement!
  2. Note any ongoing requirements for maintaining the 501(c)(3) status for which you worked so hard.
  3. Don’t lose your determination letter! You’ll need it and it can be challenging to replace.
Continue reading “What Is Fundraising Registration?”
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