Benefits of Being a 501(c)(3)
501(c)(3) status is a crucial designation for neighborhood associations looking to receive tax-exempt status from the Internal Revenue Service (IRS). This status allows associations to operate as charitable entities, exempt from federal income tax. Not only does obtaining 501(c)(3) status provide financial benefits, but it also lends credibility and legitimacy to your association, making it more attractive to potential donors and grant-making organizations. Additionally, having 501(c)(3) status can open up opportunities for partnerships and collaborations with other nonprofit organizations, allowing you to expand your reach and impact within the community.
Key Benefits1:
- No income tax
- Your Neighborhood Association will not have to pay federal income tax.
- Donations are tax deductible
- Any donation made to your Neighborhood Association can be deducted on the donor's taxes.
- Sales tax exemption
- Your Neighborhood Association will be exempt from paying sales tax.
- Eligibility for grants
- Your Neighborhood Association will be eligible to apply for grants, such as the Neighborhood Assistance Program.
1. Internal Revenue Service, “Federal Tax Obligations of Nonprofit Corporations,” IRS, November 25, 2024, https://www.irs.gov/charities-non-profits/federal-tax-obligations-of-nonprofit-corporations, 1.