Nonprofit Status

The decision of whether to file for nonprofit status (generally 501c3) is important for your homeschool group. Official nonprofit recognition by the IRS opens up a variety of benefits for your group, from discounted admission for field trips to donations from different companies and more. However, it also comes with a somewhat lengthy application process and certain administrative requirements.

There are several routes you may take to gain non-profit status, so which option is best for your group?

First off: What are the benefits?

There are significant benefits to becoming a nonprofit homeschool group! With official nonprofit status, your group is considered tax-exempt by the federal government. You can accept donations for supplies, qualify for nonprofit grants, and receive nonprofit discounts from your favorite stores, events, software companies, and more.

It will also make many places more accessible for field trips: large museums, federal parks, and educational performances (symphonies, plays, etc.) are much more likely to provide you with a significant discount on admission (or even sometimes free admission!) as a nonprofit.

If these benefits sound appealing to you, here are some options for becoming a nonprofit:

Option 1: Filing for IRS Tax Exempt Status

Your group can always file as an independent nonprofit organization. However, there are several administrative and financial responsibilities that are important to consider about this option:

1. You must have a board of directors with at least three people (usually President, Vice President, and Treasurer/Secretary at a minimum), all of whom have specific roles in your group. A vital part of these roles is ensuring the group is maintained properly and holds to its mission.
2. You must provide a significant amount of documentation to the IRS and be prepared for a somewhat lengthy application process.
3. You must be prepared to continue complying with all legal requirements. This includes, but is not limited to, filing taxes annually using form 990 as well as maintaining any state-level registrations required (most commonly Charitable Solicitation Registration if you will be doing any fundraising).

For a more detailed explanation about filing as a nonprofit, Charitable Allies can help provide further clarity about whether you should apply for tax exempt status, and dives further into how to apply with the IRS.

Requirements to Maintain 501c3 Status

If you choose to apply for independent nonprofit status, it is important to know the IRS requirements to operate a nonprofit. Compliance with these is essential to maintaining your status and protecting the integrity of your group.

• You must follow all the guidelines laid down by the IRS for what activities you may participate in as a nonprofit. It is important to pay attention to the guidelines on legislative lobbying, political campaign activity, and providing private benefits. For more information on these limitations, visit the IRS website.
• As part of your ability to accept tax-deductible donations for your organization, you must send out tax letters to all donors—individual and organization alike—by January 31 following the end of each calendar year.
• You are also required to file Form 990 with the IRS each year, following the end of your organization’s fiscal year. Depending on how much money your group has brought in, this process may be as quick as 5–10 minutes or may take several weeks. (You can research which version of the form your group may be required to use).

We recommend working with an accountant who has experience assisting 501c3s to ensure that you comply with IRS requirements. Be aware that you can have your nonprofit status revoked if you do not comply with their regulatory requirements.

Option 2: Operating Under a Larger Charity

Another option that many co-ops utilize is to operate under the umbrella of another 501c3, usually either a church or a statewide homeschool group. Creating this relationship can help relieve the administrative burden of running a tax-exempt nonprofit, while still affording many of the same benefits. However, one potential drawback is that the umbrella organization, which has IRS nonprofit status, is usually the driver and “dictator” of your agreement, and you will have to be willing to operate under their terms.

If your group chooses to operate under this option, it is important to work with the larger organization to lay out the expectations and requirements of this relationship. Here are some of the questions you may need to ask:

• How will donations be accepted on your behalf?
• Will there be any sharing of space or resources as part of the agreement (i.e., will the church that accepts donations for you also be hosting your co-op)?
• What requirements will the larger charity expect from your group in return for letting you use their nonprofit status? This could range from submitting information about your donors to paying an administrative fee set by the larger charity.
• Are you familiar with this organization’s leadership, and will it be easy to work with them?
• How will employees of your group (if there are any) be paid?

For more information on operating under a larger charity, check out this article.

Option 3: 501c7 “Social Club” Status

Some homeschool groups operate as a social club instead of as an educational or religious group. These social groups do not have to pay taxes, but unlike a 501c3, donors to social clubs do not get tax benefits. According to law, most of your support should come from membership fees and dues, not donations.

If your group’s purpose is to get together for recreation or socialization, and you will raise most of your money from membership fees, you could explore this option. There is no formal recognition from the IRS, so start-up will likely be easier, but since your group is still bringing in money, there may be financial reporting obligations.

Conclusion

While we know that this is a lot to think about, nonprofit status and operations are a key component to how you operate as a group. Compliance is critical to preserving your group’s integrity!