Originally posted June 5, 2006
After nearly a year, the Internal Revenue Service has finally determined the RRGCC officially qualifies as a 501(c)(3) chartable organization since September, 2003. The RRGCC received a Letter of Recognition of Exemption dated March 31, 2006 from the IRS stating, “We are pleased to inform you that upon review of your application for tax exempt status we have determined that you are exempt from Federal Income tax under section 501(c)(3) of the Internal Revenue Code.” The letter specifies that the effective date is September 3, 2003 (the RRGCC’s date of incorporation) and that the RRGCC is determined to be a public charity, meaning all contributions are eligible as tax deduction. The entire letter is available as a downloadable pdf here Letter of Recognition of Exemption
The RRGCC has always qualified as a tax-exempt charitable organization since its inception in 1996, making all donations to the RRGCC eligible as tax deductible. The difference is, the IRS has now reviewed our records from 2003 to the present and is giving its official assurance to all potential donors that we do qualify under the Internal Revenue Code (IRC) Sec. 501(c)(3). Under Sec. 501(c)(3) organizations are qualified as charitable, tax-exempt organizations if: (1.) their annual gross receipts are under $5,000 and they operate for the public good, or; (2.) the organization applies for and is granted official recognition as a tax-exempt organization. The RRGCC started out as an all-volunteer, advocacy organization focused on stewardship projects and legal protection for climbing on Forest Service land for the first eight years of its existence. This meant annual gross income was naturally low, well under the $5,000 limit, making it easy to manage for a couple of people, meeting reporting and bookkeeping requirements. Then when the RRGCC dramatically expanded its strategy to include land acquisition as a means to ensure climbing opportunities on private land, the RRGCC’s gross receipts jumped considerable in 2003. Thus the RRGCC took the necessary precautions to ensure all donations continued to qualify as tax deductible in 2003 by incorporating, and then applying for official recognition from the IRS.
Many people have asked why the RRGCC had not applied for 501(c)(3) status before it did. Although doable, applying for official IRS recognition of tax-exempt status is not for the faint of heart. The biggest consideration is not the actual IRS filing, even though the 501(c)(3) application fee is $500 and the application is over 30 pages long, it’s really the outside legal requirements that come with incorporation—regular board meetings, official filings and fees, corporate books, minutes, taxes, etc.—which is a prerequisite to filing with the IRS. Once an organization starts down the path of incorporation and official IRS recognition it means the organization is obligated to meet a whole host of new legal requirements. The decision to apply (and therefore incorporate) is usually based upon the size and goals of the organization. Should the organization’s limited volunteers’ time be spent on operations, such as trail building, crag clean ups, climber education, Forest Service meetings, OR organizational meetings, filings, forms, etc? It is a decision about the allocation of limited resources each organization goes through as it grows and matures and when the time is right for that particular organization. Nonprofit conventional wisdom advises to avoid applying until, or unless, necessary, “Many groups accomplish their nonprofit purposes just fine as unincorporated nonprofit associations…If you continue to accomplish your nonprofit purposes and goals informally, you may be happier staying small…(a group) may decide it’s best, at least for the present, not to form a tax-exempt nonprofit corporation.” (How to Form a Nonprofit Corporation, Mancuso 5th Ed.)