Soliciting funds, donations and fund raising

Ms. Carol,

I was wondering if you would be able to answer this question: Nationally, regardless of the state, do you first have to become a 501c3 tax exempt organization in order to solicit funds on behalf of a homeschool group?

I am in the process of weighing the pros and cons of becoming a 501c3 and just gathering as much information as I can to make the most accurate decision.  Has it stands right now, I am a sole proprietor, starting a small homeschool group, looking to fund raise, but understanding that I might have to become a 501c3 to solicit funds for the group.

Do you have any thoughts on this matter?  Thank you again for you time and consideration, I appreciate your assistance!

Much Thanks,

Sunny

 

Sunny,

To answer your question, I have to differentiate between fund raising and soliciting donations. Fund raising is not regulated nationally; it is regulated by each state’s Attorney General’s office. Typically the AG wants a charity that uses a professional fundraiser to “register” with the state AG office. Some states require annual filings on fund raising activities. Usually the reporting is if an organization raises over certain dollar amounts. I’ve seen $25,000 and $100,000 thresholds.

This website is helpful in determining what your state requires. http://www.hurwitassociates.com/areas.php#tax-exempt. Find your state on the left sidebar under State-by-State Filings.

501c3 tax exempt status allow donations to be tax deductible. “Fund raising” is not the same as accepting tax deductible donations. When you say “solicit funds” it could mean either holding a fund raiser or asking for a donation. If by “solicit funds” you mean asking for a donation, then your organization must have 501c3 tax exempt status in order to provide a tax deduction to the donor.

Naturally, a donor can make a non-deductible donation to a group that is not 501c3, but few donors do that. They prefer the organization become 501c3 tax exempt, so that their donations are a tax deduction.

Long answer to your question. I hope that helps.
Carol Topp, CPA

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