When you think of 501c3 approval, you never really consider it in plural terms. After all, you can only have one 501c3 per nonprofit organization, right? The actual answer to that question might come across as shocking to some, because it is very possible to have more than one 501c3 per nonprofit organization. Depending on the nature of your organization and how large it is, it is possible to have more than just one 501c3.
You can think of it in terms of a department store. A good and easily visualized example of this is Walmart. There is one technically one large building, but there can be multiple departments located in the building itself. You can have a section for women’s clothing, men’s clothing, sports equipment and office supplies. None of the listed departments are exactly the same in the way they are constructed, but they are still a part of Walmart as a whole. The same process applies to a nonprofit organization who qualifies for more than one 501c3s. There is one institution or organization in the form of a tree, and the different 501c3s in the form of branches.
Different Programs Under One Roof
The biggest and best example of an entity that can house multiple 501c3s is none other than a church. You might wonder why an organization that is already tax exempt would want to have a few 501c3s under its belt, and no, it is not because they are greedy or intent on slowly conquering the world. It is quite the opposite, in fact. The reason why churches can have multiple 501c3s in their arsenal is because a church can run several different programs under its one roof. It is not just about worship and prayer services, really. It is about a potential private school that operates through the church, or some kind of outreach ministry that the church has put together. Sure, private schools and outreach ministries are still technically part of the same church, but they are individual pieces rather than one giant puzzle.
To understand this all a little better, let us dissect the two examples that were given. A small private school operating through the church could apply for its own 501c3. This would ensure that the school is tax-exempt and that they can make money and receive contributions (which, to the extent provided by the law, are tax-deductible). The majority of private schools start filling out their 501c3 paperwork shortly after they have been officially incorporated in the state they are operating in. Parties who are interested in donating are more likely to give their money to a 501c3 approved private school than the church the school is working through. It is a sad truth, but it is generally the way things work.
Moving on, let us look at the other example: outreach ministries. Churches are notorious for reaching beyond their borders and helping as many people as they can. They do not focus on just one service or mission, but a handful of them This can be seen in churches who collect clothes for the poor and homeless, go on mission trips to other countries and evangelize, or open food pantries for those who cannot afford to eat. Again, while these are being operated directly through the church, they are their own separate thing and require their own 501c3 approval.
A lot of the time there is overlap, which leads people to think that a ministry does not need its own 501c3, as they can use the one the church might already have. This is an incorrect assumption and can lead to some major bumps on the road, so it is best to separate the outreach ministry from the get-go.
Who Is Running the Show
What makes or breaks the decision to ultimately have more than one 501c3 under a church? It all falls back to those who are running the church themselves. Following the creation of a nonprofit ministry, the board members make the decision on whether the church will control the ministry or if it will be independent. It can be a heavy choice to consider, which is why it is best to weigh the pros and cons of either option. If the nonprofit ends up working under the support of the church, the board members should be the same people who are on the board of the church itself. Alternatively, if the organization decides to become its own thing, it will have a board that does not necessarily have to include church board members. These board members can be friends or family members of church goers, or trusted colleagues who have no affiliation with the church whatsoever.
As previously mentioned, interested donors lean towards nonprofit organizations that are separated from the church rather than the nonprofit church itself a good majority of the time. Also, growth opportunities seem like a more reachable target for a nonprofit ministry that conducts activity as its own entity.
To 501c3 or Not?
Something you might wonder after realizing that a church can have more than one 501c3 is does a church have to have a 501c3 at all, let alone multiple? Most churches are established as nonprofit organizations, but there is no mandatory decree that says it is absolutely, undeniably necessary that they apply for 501c3 approval. In fact, there are some churches who boycott 501c3 status, if only because they are already tax exempt. If people regain donations as deducted taxes, it defeats the purpose of the original offering, does it not? Nevertheless, not all churches think this way, and it is evident when they apply for 501c3 status. Besides, receiving donations can be important when a church is really putting itself out there in the form of different missions, ministries and evangelism.
If you are interested in finding out more about 501c3 status in regards to a church, or how you can have multiple 501c3s for different church operations, please contact our nonprofit experts at 407-857-9002. Likewise, you can email us at firstname.lastname@example.org. We look forward to answering your questions and starting you down a path that suits all of your nonprofit needs.