How to Make Your Group Tax-Exempt
***Very Important Note***
Many groups make the mistake of assuming they are a non-profit simply by being a student group, and therefore entitled to tax exemption. This is not accurate! Your group is not tax exempt unless you have been legally granted 501(c)(3) status. If you are unsure if you have 501(c)(3) status, it is 99.9999% likely that you have not received it.
Now that we’ve got that covered, let’s look at how to actually obtain 501(c)(3) status. The benefit of 501(c)(3) status is mainly that you become tax exempt. There are also other benefits, depending on the focus and needs of your group. Donations to your group become tax-exempt, which is helpful for overall fundraising and attracting major donors. In-kind donations, such as food and event space, also become tax deductible for the donor. Finally, 501(c)(3) status makes your group a legal non-profit, and entitled to all the discounts and benefits that non-profits receive. That said, obtaining 501(c)(3) status is a costly and time-consuming process, and only makes sense for well-established groups. We’ve outlined your options below:
- Not apply for 501(c)(3) status. Not all groups require tax-exempt status, and that's ok. In fact, we generally only advise the most active groups to even consider obtaining 501(c)(3) status. Even if your school provides tax exemption, it may not make sense for your group. If you are a smaller group or don’t have many big-ticket events, it’s probably not worth your time and money. Also keep in mind that 501(c)(3) prevents you from political endorsement and some lobbying, and groups passionate about activist politics may want to stay away from a 501(c)(3). Invest your extra time and money in planning awesome things for your group!
- Obtain 501(c)(3) status through your school. Some schools allow you to apply for 501(c)(3) status through them (this generally applies to colleges and universities). The policies vary widely from one school to the next, so check with your Office of Student Activities for more information. If you are experiencing problems with this, let us know.
- Apply for 501(c)(3) status through the national SSA. We have acquired Group Exemption status from the IRS, which means we have the ability to extend tax-exempt status to qualifying affiliates. By applying for 501(c)(3) status through the national SSA, you will bypass the associated fees and greatly reduce your time investment. We do limit this status to our more established groups, which are have a history of positive relationships with the national SSA and a track record of sound financial management. Your group will also have to meet some additional criteria, and the national SSA will monitor your group to ensure that you are maintaining 501(c)(3) eligibility. Learn more about the group exemption and apply for your group here. Please let us know if you have any questions.
- Apply for 501(c)(3) status on your own. If you are absolutely set on applying for 501(c)(3) status and do not want to use the national SSA or your university, you may apply for independent 501(c)(3) standing. It will take about a year to obtain the 501(c)(3) status, and the IRS projects 100+ hours of work for a first-time applicant. The fees for 501(c)(3) status are $400 for an organization with incomes less than $10k/year, or $850 for organizations with higher budgets. If you wish to have the application handled professionally (with a lawyer), fees for small organizations will range from $1,500 to $3,000. Only well-organized groups with reliable income should consider applying for the 501(c)(3) status independently. Check out the IRS website for more information about this process. Contact us or your office of student activities if you have any questions.