how to find out if an organization is a nonprofit
How to find out if an organization is a nonprofit or not is best done online.3 min read
2. Do Your Research
3. Tips for Donors
Updated August 18, 2020:
How to find out if an organization is a nonprofit or not is best done online. There are several online tools available to help you learn if an organization is a nonprofit.
How to Verify the 501(c)(3) Status of a Nonprofit
There are times when you want to determine if an organization is a nonprofit, so you can get the tax deduction. To qualify, the IRS must give the nonprofit tax-exempt status. Within the United States, you should find the 501(c)(3) tax code.
When determining the nonprofit status of an organization, begin by using the IRS Select Check database. The IRS provides an Exempt Organization List on its website. You can also ask the nonprofit for proof of their status.
To determine the exempt status of a nonprofit, try to gather as much information as you can. This includes:
- Employer Identification Number (EIN)
The database lists organizations according to their legal name, their doing-business-as name, or both. You can also download the entire database if you click on the relevant link.
There's a separate database of automatically revoked organizations. You can look up businesses also based on name, location, and EIN. In addition, you can search by revocation posting date and download the entire database.
Another option is to ask the nonprofit for a copy of the determination letter from the IRS. The organization can always request a copy of the letter from the IRS by calling 1-877-829-5500.
Within the United States, a charity usually needs to register in its located state before it can begin fundraising. You can visit the Secretary of State's website or call it directly.
Religious groups, including churches and mosques, don't need to apply for tax-exempt status. They automatically receive it as long as they meet the IRS requirements. These requirements include the following:
- Its mission is strictly for religious purposes.
- Its net profits don't benefit any one shareholder or individual. People can receive a reasonable salary but cannot pay an excessive salary or transfer property for less than the market value.
- It cannot influence legislation.
- It cannot participate in political campaigns.
- It cannot have a purpose or activities that are illegal.
For additional information, you can learn a lot about the nonprofit by examining the financial documents. Determine if the organization has its statements audited. If not, that's a red flag. Also look to see if revenue sources change drastically each year, since that's not typical for a nonprofit.
Some common issues to investigate when determining if you're dealing with a nonprofit include:
- Having a name similar to a well-known organization. The potential nonprofit might try to confuse people into donating.
- The organization thanks you for donating even when you didn't.
- The organization asks for cash donations.
- It seeks donations quickly, particularly with an overnight delivery.
- It asks for a donation for a chance to win a sweepstakes. Federal law prohibits making eligibility based on giving a donation.
Do Your Research
Before donating to any organization, you can visit a number of websites to help you perform research.
- Better Business Bureau's Wise Giving Alliance. The BBB accredits charities that fulfill its accountability standards.
- Charity Navigator. It grades more than 8,000 tax-exempt charities based on accountability and financial health.
- CharityWatch. It analyzes financial reports to determine how well nonprofits use donations.
- GuideStar. This site provides IRS filings for three years and balance sheet data for five years.
- 990 Finder. This site discloses how an organization spends donations and where they go.
Tips for Donors
When giving money to an organization, make sure it has secure ways of donating. In addition, remember that charities have administrative costs. So, if it claims that the entire donation goes straight to its mission, you might want to reconsider the contribution.
Trust your instincts. You should feel good about donating. If you have doubts, consider making a donation of food or clothing rather than a monetary one.
Keep in mind that no law states that an organization must declare their status on a website. However, they must properly file taxes and annual report. You can ask for the IRS to make these documents publicly available.
In addition, 501(c)(3)s cannot engage in political activism. There are many 501c classifications available that can participate in political activity, and a quality lawyer can help decipher the strict IRS guidelines pertaining to this.
If you need help on how to find out if an organization is a nonprofit, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.