Group Exemption Program

Our Group Exemption program allows member organizations to get their 501(c)(3) status through this program as an alternative to processing directly with the IRS.

The following guidelines have been established for members who are interested in coverage by our federal group tax exemption ruling. Groups that are recognized by the Internal Revenue Service (IRS) as exempt under section 501(c)(3) of the Internal Revenue Code enjoy the following benefits, among others:

  1. No federal tax on income earned by or contributed to the group in furtherance of its exempt purposes (although taxes may be due on Unrelated Business Income);
  2. In some states, exemption from state income and sales taxes is automatically granted to groups that have been recognized as exempt by the IRS (however, in most states this requires organizations to apply for this exemption);
  3. Eligibility to receive donations that are tax-deductible by their donors as charitable contributions;
  4. Special reduced postal rates for bulk mailings (requires an application to the US Postal Service);
  5. Eligibility for grants by public agencies and private charitable foundations;
  6. In some facilities, eligibility to rent space at below-market rates; and
  7. Eligibility for services of arts councils and other service organizations.
A group affiliate seeking recognition of exemption may apply to the IRS for its own ruling independently of FAI by filing IRS form 1023. The organizational requirements are essentially the same, but joining the FAI group exemption is easier, quicker, and cheaper. It is, however, a serious undertaking. In this process you will warrant that your organization qualifies as a charitable organization and you undertake to complete annual reporting requirements to maintain this status.

 

Being part of FAI’s Group Exemption Program does not exempt your organization from the requirements of any applicable agencies, including the IRS, INS, Department of Labor, or other federal or state entities with jurisdiction over non-profit organizations and operations.

You will have requirements to your state offices and the federal government (such as income tax filings) because you are considered to be your own freestanding organization for all of these purposes.

 

If you are interested in learning more about the Group Exemption Program, required paperwork, fees and eligibility, please contact FAI headquarters at 816-221-FOLK (3655) or email membership@folk.org.