Achieving Nonprofit Status

Many arts and cultural groups operate and fulfill their missions as unincorporated nonprofits without formalized documents or procedural rules. However, if an organization generates a taxable surplus, wants to apply for public or private grant monies, needs to attract tax-deductible donations, or desires certain liability protection, then the formation of a tax-exempt nonprofit organization is a legal necessity.

Should your organization become a nonprofit?
What are some of the benefits of nonprofit status for your arts organization? Well, in addition to exemptions from federal taxes, your nonprofit status makes available to your organization all kinds of auxiliary funding from grants — "free" money from the government or from private foundations — and subsidies.

Also, as a nonprofit, your donors have the option of deducting any donation to your organization on their tax returns. This gives them one more reason to help you fund your mission.

Nonprofit status, colloquially referred to as your "501(c)(3)," from the cryptic Internal Revenue Service section of the tax code, can be quite a challenge to obtain. Without it, however, many arts organizations would never be able to survive.

Ah, the IRS. It's kind of like that old saying: can't live with it; can't live without it. But you can live through the process of getting that all-important tax-exempt status.