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How do we convince foundation we are 509(a)(2)?

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How do we convince foundation we are 509(a)(2)?

Our nonprofit has an IRS determination letter as a 501(c)(3) charity. We are applying for funds from a private foundation that says they only give to organizations that are public charities under section 509(a)(1) or 509(a)(2). We meet the requirements for 509 (a)(2). Where do we file to get this designation, the IRS? If so what form do we fill out?

Normally, the form of exemption letter that the IRS provides to a 501(c)(3) organization with the recognition of its charitable exempt status will designate its tax status as a public charity under Section 509(a)(1) (and the subsection of Section 170b(1)(A) under which it qualifies) or 509(a)(2), as a supporting organization under Section 509(a)(3) (stating the Type of supporting organization), or as a private foundation (all of which are 501(c)(3 organizations). It may be that your organization was originally recognized so long ago that your letter did not provide these distinctions, but you should check your most recent letter to see what it says.

If your letter doesn’t say anything except that you are 501(c)(3), or if you can’t find your letter, you should do a search with the Tax Exempt Organization Search Tool on the Tax Exempt Organization Search page in the Charities and Nonprofits section of the IRS website. You can search either by the name of your organization or your EIN.  The search will show your classification as a public charity, supporting organization or private foundation.  The PC (public charity) designation is all that the foundation really needs and may be acceptable to them if you show them how to do the search or give them a copy of the printed page.  The IRS site should also provide you with a copy of your exemption letter, which may have the information you need, and a copy of your filed Form 990 that was accepted as a 509(a)(2) organization.

If the IRS website doesn’t answer the problem, you should show the foundation a copy of your most recent Form 990 or 990-EZ Schedule A that shows how you qualify for 509(a)(2) status.  If none of that gives you a specific classification, you can file a Form 8940 for Miscellaneous Determination Requests to ask for a clarification of your public charity status. You will probably have to file a copy of your most recent Schedule A to satisfy the IRS that you do qualify under (a)(2). The current filing fee is $500 and it will take many months to get a determination, but at least you will get a letter that should eliminate the problem in the future.

Tuesday, May 4, 2021

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