Whether you are an old supporter or a new donor, it is important to know that your charitable contributions will go to a legitimate organization. One way to do this is to check the status of the nonprofit you are donating to. By verifying a charity's nonprofit status, you are also assuring yourself that not only is the organization operating according to federal laws, but that your donation can be used as a deduction on your next tax return. In this post, we will explain what nonprofit status means, why this status matters, and will provide you with an informative guide that will walk you through the process of how to check the status of any nonprofit yourself.

How to Check Nonprofit Status: A Comprehensive Guide 

Nonprofit organizations do important work. Charities all over the world offer their support and resources during times of humanitarian crisis. Some charities are leading the battle against climate change, while others are supporting medical research that saves millions of lives every year. The list of the charities and the work they do on a global scale could go on endlessly.

Nonprofits are also operating at both national and local levels, leading literacy programs for youth, advocating for food security, and planting trees in communities all across the country. No matter how big or small, charities everywhere are making positive change. On a national level, the Internal Revenue Service (IRS) estimates that in 2023 alone, almost 2 million charities were operating in the United States, with 1.5 million of those charities operating as 501(c)(3) tax exempt organizations. Each and every one of these nonprofits has their own mission statement, and each and every one is looking for financial support. If you are currently running a nonprofit and ever need any help maneuvering the charity fundraising world feel free to contact the knowledgeable team at Paybee. Our experts can guide you through the process and answer any questions you may have.

With so many charities looking for financial assistance, it is so important to feel comfortable that the charity you are supporting is acting legitimately, transparently, and according to the law. One of the best ways to go about this is to verify a nonprofit's status, in particular whether or not they are registered and in compliance with the IRS as a 501(c)(3) nonprofit organization. 

Whether or not a nonprofit has a 501(c)(3) designation is also the deciding factor as to whether or not you will be able to claim your donation as a deduction when it comes time to file your next tax return, so for donors, there is also a  financial incentive in knowing an organization's nonprofit status. For many people, this is the deciding factor in choosing which charities will receive their financial support and also plays a factor in deciding just how much they are willing to give. No matter how you look at it, checking the nonprofit status of a charity is critical in regards to legal compliance and tax exemption purposes. Let's have a look at what exactly non-profit status means and explore a bit further into why it's so important to have.

Understanding Nonprofit Status: What Is It And Why Does It Matter?

In the United States, non-profit status refers to the legal designation given to organizations that work towards public or social benefit and operate, as the name implies, without the incentive of generating a profit for its owners or shareholders. Basically, with the exception of necessary operational costs, any money that comes in to the charity stays within the charity, with the sole purpose of advancing their mission and their projects.

Charities and other organizations that seek this designation may apply to the Internal Revenue Service for special tax status as a 501(c)(3) nonprofit. This label comes with a some major benefits, not just for the organization itself but for the donors who give to these organizations as well.

When an organization has its application for nonprofit status approved, it automatically receives an exemption from paying federal taxes and sometimes provides for an exemption from state and local taxes as well. This exemption allows nonprofits to keep the funds that would otherwise be spent on taxes and apply them to their mission so they can advance their cause and continue their work.

Besides granting tax-exempt status, nonprofit status gives a charity the opportunity to receive grants and funding. Most public and private grantmakers, which include government agencies, foundations, and corporations, require nonprofit organizations to obtain tax exemption status to be considered for grants. With nonprofit status, the charity opens itself up to these funding opportunities, which are often vital in the development of programs, operations, community initiatives, and keeping the nonprofit sustainable.

Obviously, nonprofit status has impressive financial benefits, but it also creates a certain level of legitimacy and transparency for a nonprofit. Being a recognized 501(c)(3) nonprofit means the organization is legally in compliance with federal codes and regulations and is being transparent and accountable, not only in how the funding is received but also in how it is spent. Donors who are looking to support a charity can rest assured that when they donate to a designated nonprofit charity, they are donating to a credible organization that has the paperwork to prove it. 

When it comes to those who support charities, as mentioned before, choosing to back a 501(c)(3) nonprofit means that donations can be considered tax deductible and claimed on returns when tax time rolls around. This can be an important incentive for both individual and corporate donors alike, and considering nonprofits rely so heavily on donations, being a designated nonprofit has a huge financial benefit to the nonprofit itself as this kind of status encourages donors to give.

So, overall, having 501(c)(3) tax exemption status is a win-win situation for all parties concerned. Charities get the tax breaks and the chance to receive grants and funding (which often make quite a difference when it comes to realizing their goals), and donors can be sure that their donation is going to causes that are legitimate and credible, all the while getting a tax break of their own. That's why it's so important to understand what a charity's nonprofit status is. But how does one go about verifying such a thing? Let's dive into that now.

Step-by-Step: How to Check Nonprofit Status

If you would like to know how to check a nonprofit's status, the process is relatively easy. Here we've provided three different ways that you can verify the status of a particular charity from the comfort of your own home. 

How to Confirm a Nonprofits Status Using the IRS Tax-Exempt Organization Search Tool 

Before beginning your search, it's best to have some important information to make your search as easy as possible. Remember that this is a database of every nonprofit in the country, so having the right information before getting started can save you time and frustration and help you find exactly what you're looking for.

The most important piece of information you will need to get started is the Employer Identification Number (EIN), although sometimes it can be listed as a "nonprofit tax ID." This number is unique to each and every nonprofit and should be displayed on their website and easy to find, particularly in the "About Us" section.

You can also search according to charity name but keep in mind that there are many charities with very similar names or that have charters in different states, so tread with caution here and make sure you've found the exact charity you're looking for Log onto the IRS Tax-Exemption Search website by clicking here. Towards the upper left corner there is a drop-down menu of databases where you can select the information you are searching for. 

• Pub 78 Data: This is the database that will tell you if a nonprofit has 501(c)(3) status and if donations qualify as tax-deductible. If you can't find the name of the organization you are looking for, try checking the auto-revocations list just below, as sometimes a nonprofit may have their status revoked if they haven't complied to IRS filing standards.
• Auto-Revocation List:  This database contains the names of the charities that have had their tax-exempt status revoked. All charities granted nonprofit status, no matter the size, are required to file a return to the IRS. Should an organization fail to file their return for three consecutive years, they will have their nonprofit status revoked and will lose all the benefits that come with it.
• Determination Letters:  Determination letters are official government documents that an organization receives after they have filed the correct paperwork and have been approved as a 501(c)(3) nonprofit. As soon as they receive the stamp of approval and receive their tax-exempt status, their nonprofit will be listed in this database along with a copy of the document they received.
• Copies of Returns: As mentioned before, in order to receive (and retain) tax-exempt status, nonprofits must file with the IRS on a yearly basis. This database is where you will find copies of these returns, which are made available for public inspection. 
• Form 990-N (e-Postcard): Here you will find the tax filings of nonprofits who operate on a bit of a smaller scale, with annual gross receipts totaling less than $50,000. Because of their smaller size, they don't need to file the same paperwork as larger nonprofits and have a simpler, more streamlined way to file and can usually do so online. 

Confirming Status with State and Local Authorities 

As important as it is to verify an organization's status at a federal level with the IRS, it can be equally important to check on a nonprofit with your state and local governments. The reason for this being that many organizations must register with the local authorities of the state where they are based, and requirements regarding tax-exempt status can vary from state to state.

If you wish to confirm nonprofit status on a state level, search the Secretary of State website, or in some cases, the Attorney General website where the organization is registered. As is the case with the IRS, there is usually a database that offers information about the status of all nonprofits that have registered and includes information relating to whether they are operating in good standing or if their status has lapsed. Again, have the EIN number on hand to make the process easier.

If you are trying to check on the status of a nonprofit at the local level, this is best done by contacting the county clerk's office, as some counties require nonprofits to be registered within their county, specifically if they are soliciting or providing in-person services.

Any point in this process that you are having difficulty finding what you are looking for, simply contact the charity in question directly, requesting their EIN number or a copy of their "Letter of Determination". Any organization which is competent, transparent, and has nothing to hide will be more than willing to share this information. Any case of inability or reluctance to do so must be looked upon as a red flag.

Utilizing Nonprofit Databases and Third-Party Services

As the saying goes, it never hurts to get a second (or even third) opinion, and while it's highly recommended to verify an organizations nonprofit status on both federal and state levels, it's never a bad idea to also check a third-party website. These "charity watchdog" websites are, generally, very user-friendly and can offer a wealth of information depending on what your looking for. Here are three of the top third-party services that can help you find whatever information you are looking for in regards to an organizations nonprofit status:

Guide Star: Guide Star is one of the largest databases of nonprofit organizations in the United States, with almost 3 million charities registered on their website. Guide Star covers all the bases, including an organization's financial reports and detailed information about their mission and the programs in which they're involved, and is awarded a rating (bronze through to platinum), depending on their level of transparency and the amount of information they provide. With Guide Star, you can review an organization on a very basic level or really dig deep. It's up to you.

Charity Navigator: Another watchdog website where organizations are awarded a 0-4 star rating depending on their financial health and transparency. Charity Navigator is ideal for those looking to know more about a nonprofit's financial status as well as get a better idea of their financial past and how efficiently they use their donations.

Better Business Bureau's Wise Giving Alliance: Under the umbrella of the Better Business Bureau, the BBB WGA focuses solely on evaluating nonprofits according to a 20-point rating system that analyzes everything from a nonprofit's financial status to how ethically they operate and use their donations. If a nonprofit meets all 20 standards, they receive the BBB Charity Seal, which they can use on their website and marketing materials to let donors know that they are operating transparently, ethically, and with integrity.

Common Issues and How to Resolve Them  

Mistakes happen, but when nonprofit charities make even the smallest error, it can have a big financial impact in terms of donations. Nonprofits have to be on top of their game to make sure that their donors (and prospective donors) feel comfortable knowing that the nonprofit they are supporting is operating as transparently as possible and can be trusted with charitable donations that merit continued support.

As mentioned before, to maintain tax-exempt status, nonprofits have to file a Form 990 form with the IRS every year, and failure to do so three consecutive years in a row results in having that status revoked. So, not only do nonprofits need to stay vigilant about making sure they file all the required paperwork with the government in order to maintain their nonprofit status, they also need to ensure that this information is relayed across all the different platforms, including their website and the aforementioned "charity watchdog" sites. 

Other challenges that can cause nonprofit issues include outdated contact information, a change in leadership among the board members, or failing to be completely transparent about staff salaries or expenses. Again, people need to feel secure and that the nonprofit they are supporting is being completely transparent if they are going to open their wallets and give. Even though it may be a simple error, any information that is out of date or simply omitted can result in a sense of distrust or skepticism by the donor base.

Another issue of importance is the issue of nonprofits not providing constant progress updates in regards to the progress of their mission and the status of the projects they are working on. Charities and nonprofits are created to make a positive impact in the world, and when people have donated, they want to know that their support is making a difference and want to see results. This can easily be done through the nonprofit's website, their social media platforms, or through newsletters, etc. Failure to keep donors informed can lead to disinterest or disappointment, neither of which is favorable for a nonprofit looking for continued support.

All of these errors can be corrected or completely avoided by means of communication and delegation. If a nonprofit has a certain person or department in charge of financials, another person or department involved in progress reports, etc., and everyone is working and communicating together, the majority of these issues don't have to be issues in the first place. The donor base is the biggest asset a nonprofit could have; openness, honesty, and transparency with supporters are paramount.

What to Do if a Nonprofit Status Is Revoked 

Should a nonprofit find itself in a situation where their status has been revoked, there are several ways in which to have it reinstated. Generally, nonprofit tax-exempt status will be pulled if a nonprofit fails to file the correct Form 990 with the IRS for three consecutive years.

If nonprofit status was revoked within the previous 15 months, an organization can streamline the process by filing the missing Form 990's as well as completing Form 1023 and paying a fee. In this situation, the nonprofit status can not only be reinstated, but reinstated retroactively back to the day that it was revoked. This ensures that donors can still claim their donation as tax deductible and that nonprofits can maintain their tax-exempt status and continue with their mission without losing any benefits. 

If nonprofit status was revoked after 15 months and the organization was unaware of the issue that the forms were not being filed, the process is more or less the same. The difference in this situation is that the organization will also have to include a "reasonable cause statement" explaining why their Form 990's were not filed on time. Should their application be accepted, the organization's nonprofit status can also be reinstated retroactively back to the day that it lapsed.

In the last two scenarios, the process is not as "streamlined" as the previous two. In the first situation, where it has been more than 15 months, the organization must report all their filings, fill out the same forms, but must include a detailed statement reasonable cause explaining that they were unaware of the situation and made the effort to correct the situation as soon as they became aware. In the last situation, the organization cannot show they acted with reasonable cause and does not have the option of having their nonprofit status re-invoked retroactively.

In all of these situations, it's important that when an organization has their nonprofit status revoked that they act as soon as possible to have it reinstated in order to protect their donors and the charity itself. It is also important that the nonprofit keep their donors and the general public up to date on their reinstatement process through their website or through sites like Guide Star. While having nonprofit status revoked is not ideal, it's best to be as transparent as possible with supporters and assure them the issue is being addressed.

Staying Informed: Ensuring Compliance and Building Trust

As we've seen throughout this article, it's not only important for donors to verify on a regular basis that the organizations they are supporting are in compliance with IRS regulations; it's also important for nonprofits to verify that they themselves are in good standing with the IRS. 

From a donor's perspective, nonprofit supporters want to know that they are backing legitimate causes that are doing good work while acting transparently, ethically, and following all the rules. There's so many organizations looking for donations, and not all of them are acting in good faith, so taking the time to do a bit of research and periodically verify the nonprofit status or a charity you are either supporting or considering supporting is so important—not to mention the tax breaks that come along with supporting a registered nonprofit when tax season rolls around. 

From the nonprofit perspective, it's also important to verify nonprofit status from time to time, making sure that all paperwork is in order, all Form 990's are filled out, and that all your charity information is constantly being updated. Making sure that a charity's 501(c)(3) status remains in good standing allows for funding opportunities and tax exemptions that allow nonprofits to continue achieving their goals and working towards their missions, all the while fostering solid, honest, long-term relationships with their donors. 

So, check the nonprofit status, do the research, and sit back knowing that your donations are in good hands and that there will also be a nice reward coming your way during tax time. Also, don't forget that should you ever want to get involved with a nonprofit or help your favorite nonprofit raise some extra funds, check out the work we do at Paybee, as we're an all-in-one charity fundraising platform and we'd love to help you make a difference in the nonprofit charity world.

FAQ's 

Q: How do I know if a nonprofit is still active and in good standing with the IRS? 

A: The best way to know if a nonprofit is still active and in good standing is to do a bit of research. The IRS Tax-Exempt Organizational Search Tool and charity watchdog sites such as GuideStar and Charity Navigator are great online resources that can help you find the information you're looking for. If possible, have the charity's EIN (Employer Identification Number) at hand to make your search both easier and faster.

Q: What should I do if I can’t find a nonprofit in the IRS Tax-Exempt Organization Search Tool? 

A: If you're unable to find a nonprofit in the IRS Tax-Exempt Organization Search Tool, the first thing you should do is double check that you have entered the information correctly. Also be sure to check the Auto-Revocation List, as it's possible their nonprofit status has been revoked. If possible, use the EIN number as opposed to the nonprofit's name, as sometimes names change or there can be multiple nonprofits with very similar names, which can get confusing. If you don't have the EIN contact the nonprofit directly and ask for it or ask for them to send you a copy of their Letter of Determination.

Q: How often should I check a nonprofit’s status for compliance? 

A: It's a good idea to check a nonprofit's status for compliance at least once a year, ideally not too long after tax filing deadlines (usually around May 15). This allows you to be sure that a nonprofit is up-to-date in filing their Form 990s and gives you an opportunity to look at their report once it has been posted online. It's also an excellent idea to check nonprofit compliance before making a donation or awarding a grant to ensure that everything with the nonprofit is in order and that their tax exempt status is in good standing.

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