Why Do We Need to be a 501(c)(3)?

In order to apply for most grants from foundations and corporations, and often from the government as well, an organization needs to have what is known as "501(c)(3) Non-Profit Status." Most foundations are required by Federal regulations to give only to organizations described in Section 501(c)(3) of the Internal Revenue Code for tax purposes. There are a few local grants that do not require a 501(c)(3) status. However, if your organization is going to be soliciting grant help from many sources, or plans to seek grants on an on-going basis, you will most likely be required to obtain 501(c)(3) certification.

The exception to this rule is that many foundations can also give to local government entities (counties, cities, and smaller units of local government). This type of organization is typically described as a 170(c)(1). However, some foundations specifically state that they will NOT give to tax-supported organizations, which is what most local governments are. Researching each grant-maker's eligibility requirements is therefore a very important step in applying for grants.

How to Get Certified

So, now that you know why your organization needs to be 501(c)(3) certified, how do you go about getting certified? The answer to this question varies somewhat by state, but the process basically involves two steps:

1. Create a not-for-profit corporation under the laws of your state. 

In most states, this is done through the Secretary of State's office. You can reach Montana's Secretary of State's office at:

Montana Secretary of State
P.O. Box 202801
Helena, MT 59620-2801
406-444-2034
Fax: 406-444-3976
E-mail: sosinfo@mt.gov
Web: http://sos.mt.gov

By visiting the Secretary of State's web site, you can find more information about Non-Profit Corporations in Montana and download the necessary forms for filing as a Non-Profit Corporation.

In some instances, a lawyer must be used to create and file the appropriate paperwork, though in others an individual may file all the paperwork without the assistance of a lawyer. If you do require a lawyer's assistance, the time they spend establishing your non-profit corporation may become a tax-exempt donation once your 501(c)(3) status is received.

2. Apply for 501(c)(3) tax-exempt status from the IRS.

Application to the IRS for 501(c)(3) tax-exempt status is done using IRS Form 1023. This Form contains instructions and checklists to help you provide the necessary information. The IRS also publishes a pamphlet entitled "Tax-Exempt Status for Your Organization (Publication 557)". Both the Form 1023 with instructions and this publication are available on the IRS web site under "Forms and Publications." You can also call the IRS toll-free at 1-800-829-1040.

When you finally receive your state and federal certifications, remember to file your certification letters in a safe place and keep copies of them on hand to send with grant applications. The process of becoming a certified non-profit may seem complicated and time-consuming, but when completed it will open the door to numerous new grant opportunities for your organization.

Other Non-Profit Resources

Action Without Borders (FAQ's about Non-profits since 1994)
Management Assistance Program for Non-Profits
Non-Profit Resource Center
Tax-Exempt Organization Reference Chart