501(c)(3) a-go-go

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Here's the IRS' page on Tax Information for Charitable Organizations: http://www.irs.gov/charities/charitable/

The basic process for getting 501(c)(3) charitable tax-exempt status is to get a Tax ID # (easy), have a mission consistent with the restrictions & intent of 501(c)(3) (conceptually easy but practically tricky: with a mission of promoting the arts we're educational, with community outreach we're engaging in specific non-sectarian community service to a reasonable portion of the public - the devil's in the details), and we need to prove to the IRS' satisfaction that we have our finances, organization, management, and recordkeeping stuff in order (harder, especially if nobody involved has ever done this before.)

This is somewhat dry but important reading because it explains the restrictions and benefits of operating as a 501(c)(3.) The big upsides are much easier access to public & private funding (certain contributions are tax-deductable); the downsides are restrictions on operations, planning, recordkeeping, and reporting. They aren't insurmountable, but they aren't trivial either.

Anyway, it's good stuff to look over even if we decide to cobble onto another group's existing 501(c)(3) - for example, Austin Circle of Theaters (ACoT) or Salvage Vanguard. Often those groups will take a cut of a subordinate group's donations in exchange for making sure all the paperwork gets filed properly; the subordinate group ends up filing more extensive paperwork with the parent group which gets condensed and sent off to the IRS. The paper still needs to get filed and it's important to know what is expected, either going it alone or operating under an umbrella group like ACoT.

Speaking of which, ACoT has a an arts incubator program that may be worth exploring - see http://www.acotonline.org/Pages/Programs.html It may not be unreasonable to work with ACoT for a year or two until we've developed a professional staff and board and it makes sense to get our own 501(c)(3.)

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I have a little more info on the current state of 501(c)(3) approvals with the IRS.

I'm a member of a large, long-established technical society that has a 501(c)(3) classification which is (painfully) trying to spin off an internal subgroup as an independent organization that hopefully also gets 501(c)(3) classification.

From those familiar with the process, once you send your completed application to the IRS, they notify you within 2 weeks that they got your packet and are reviewing it. Normally, you get one of three answers from them within 120 days - a) yes, you get 501(c)(3) status, b) kinda, we'll grant you 501(c)(3) status for the moment but we'll review you over the next year or two and make a final determination later, and c) no, sorry, thanks for playing.

Now, the number of charity applications springing up in the wake of Katrina and Rita have swamped the IRS and their nominal 120 day turnaround time has extended to 200 days. That's roughly 7 excrutiating months waiting for an answer.

My advice would be to work with a local umbrella organization (SVT, ACoT, etc.) to cobble onto their 501(c)(3) status, pick their brains clean to find out how they got their 501(c)(3) status and how they have to operate in order to maintain that status, and start following their model to get our ducks in a row to eventually go it alone. We get most of the benefit of that classification and a fair bit of training and practice in the meantime.