Working the Non-Profit Status
Taxation (despite what some may think) is a wonderful, necessary part of our society. However, when you are a small organization pursuing altruism, you may be able to minimize your taxation so you can spend more on your members. The IRS is a magnificent but complex beast, so there are things to know as you raise and spend money.
Will taxation affect my chapter?
Probably not. For most chapters, who exist as regular university or school clubs, you shouldn’t have to worry about this at all. Most universities have programs to create bank accounts for student clubs, and if your expenses are a reasonable amount you should never have to leave the confines of these programs. You should only worry about non-profit status if you are receiving large, external donations or if your organization is far bigger than a regular student club and the university programs are starting to be limiting. If you do not come under those two categories, it would probably be better to be part of the university club infrastructure since it reduces the overhead you must complete as a club.
Do Chapters Come Under SEDS USA’s Non-profit status?
SEDS USA has 501(c)-3 federal non-profit status in the US, meaning it does not have to pay federal or state taxes. However, that doesn’t mean that SEDS’ chapters also come under this status. This is because of legal liability. If chapters were to also count as non-profits under SEDS USA, then by extension SEDS USA would be liable for anything that happens within chapters too. In order to protect the national organization and compartmentalize the risk that comes with running this organization, we do not offer our non-profit status to chapters to use as they please.
However, SEDS can still utilize its non-profit status to help its chapters. Specifically, if your chapter wants to receive a large donation to its chapter, SEDS USA is here to make sure your chapter receives as much of the donation as possible. In this situation, SEDS USA can receive the donation from the donor directly. Then, we will send the same amount to the chapter in the form of a chapter grant. That way, your chapter will receive the full amount of the check without having to worry about taxation.
Applying for your own non-profit status
Applying for non-profit status is surprisingly simple. There are two types of non-profit status: state and federal. State non-profit status exempts you from state taxes, and federal tax-exempts status exempts you from federal taxes (Governments don’t mess around when naming things). Each program costs money to apply. State applications differ state by state, but for North Carolina the cost is around $60. For federal tax-exempt status, it costs around $250. Beyond this, it would be best to get help from an organization more qualified than us. There are a plethora of resources about starting your own non-profit, helping you through each step. We would recommend that you do an in depth search yourself for the state you’re in, but the link below could be a good starting point for starting a federal non-profit.