The Many Advantages of 501c3 Status
- Tax-deductibility of donations to the organization—you can give tax-deductible receipts for all cash and non-cash donations.
- Lower nonprofit postage rates for mailing over 250 identical pieces of mail.
- Public service announcements on radio and TV (free but limited availability).
- Limited liability for directors and officers for operations of the organization.
- Perpetual existence. The corporation continues on after the death of the founder(s).
- Government and private grants are available for tax-exempt organizations.
- Miscellaneous—employee fringe benefits not generally available to the self-employed person or business owner, e.g., group life insurance, health insurance, payments of medical expenses and approved corporate pension and retirement plans. Some stores and businesses give a discount to nonprofit corporations and employees of nonprofits. Some publications give an advertising discount to nonprofit organizations.
- For churches and congregations only: Pastors can receive certain tax benefits. If you want to issue a call to a pastor from a foreign country—to come here and preach or pastor—it is much more costly and much more time-consuming if your church or congregation doesn’t have its 501(c)(3) tax-exempt status. A church needs to be incorporated to hold property in the name of the church (the property should normally be held in the name of the church, not in the name of the pastor or other individual).
- A nonprofit organization (even a church) needs 501(c)(3) status to obtain food from a government food bank.
- Once your organization secures tax-exempt status, it is permanent. You don’t have to go back and renew it, ever.
- A church must have 501(c)(3) status if it wishes to have a group exemption for its “daughters” or subordinate churches under it.
- A nonprofit organization (even a church) needs 501(c)(3) status in order to benefit from the Bill Emerson Good Samaritan Act. This act of Congress releases restaurants and other food organizations from civil and criminal liability associated with the donation of food to nonprofits assisting individuals in need. The act protects donors in all 50 states from civil and criminal liability for good faith donations of “apparently wholesome food,” defined as meeting “all quality and labeling standards imposed by federal, state and local laws and regulations even though the food may not be readily marketable due to appearance, age, freshness, grade, size, surplus or other condition.” Nonprofits can obtain food from food rescue programs as well as food banks (mentioned at 9. above). Food rescue programs typically obtain perishable and prepared foods (such as from restaurants and grocery stores) and distribute it to agencies that feed hungry people, usually later that same day.