Obtaining 501(c)(3) Tax-Exempt Status

Nonprofit Investor recently received tax-exempt charity status from the IRS under section 501(c)(3) of the Internal Revenue Code. Does 501(c)(3) status in itself mean that NPI is a legitimate nonprofit? No.

NPI submitted an application package to the IRS and was determined to qualify as a tax-exempt charity. Because the IRS does not audit every charity and does not perform thorough due diligence on every charity, the responsibility falls on the entire philanthropic ecosystem to bring transparency and accountability to all charities.

The IRS approves somewhere between 69% and 98% of applications for 501(c)(3) status (98% for all instances where a decision is rendered, 69% when withdrawn applications are included). Section 501(c)(3) of the Internal Revenue Code is conducive to the constitutionally protected freedom of association. However, it is important that this system is balanced with scrutiny not provided for by the IRS.

In 2012, the White House Office of Management and Budget estimates that contributions to nonprofits will result in $48 billion of foregone tax revenue. If a charity fraudulently uses its funds, it does so at the expense of taxpayers as well as potential beneficiaries. The United States is a unique environment for individuals to effectively donate their funds, time and skills to causes they care about - let's make sure we take the further step of ensuring that the best organizations thrive and that frauds are exposed.

View NPI's IRS Determination Letter

Sources:
"Anything Goes: Approval of Nonprofit Status by the IRS"
"Setting the Record Straight - Not Everything Goes"
"Analytical Perspectives: Budget of the U.S. Government Fiscal Year 2011"

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