Let's talk about 508 (c) 1a

Updated: Jul 10

Let me start this blog on 501c3 and 508c 1a with a question or two. Do you know the difference between a 508c 1a and 501c3? Are you aware that anyone can use either 501c 3 or 508c 1a to establish a non profit business? Let me explain the answers as briefly and simple as I can without boring you to no end.

Since most of you have heard of a 501c3, I am going to begin explaining what 508c 1a is. A 508c 1a is a tax exempt status. It is mostly used for churches and ministries tax exemption, however a non profit and for profit companies can qualify for 508c 1a status. When applying for 508c 1a status note that the timeframe of receiving your letter of exemption can take up to 6 months or more. Be prepared to wait for tax exemption status for your faith based organization.

How does the 508c 1a works regarding government rules and grants?

  1. Technically the United States government recognizes 508c 1a status as the organization NOT being a subsidy where there isn't an exchange of funds to the organization from the government

  2. 508c 1a is filed with the Secretary of State where your organization will operate. (Check with your state for the recognition of 508c 1a status)

  3. Donations to a 508c 1a is tax deductible

  4. As a Faith Based Organization 508c 1a are not liable to tax filings for salary requirements

  5. May use "hired contractors" instead of hired employees

  6. 508c 1a are exempt from keeping records (although we suggest you should), comply with rule governed by the IRS and exempt from making any statements under oath.

  7. May be used for tax exemption on property tax (single property)

  8. Your organization may qualify for grants

  9. May use 508c 1a to create a trust

Now that you have an ideal of what the difference of a 508c 1a vs 501c 3, you're able to make a clear decision what direction you want to go. Please be mindful the information noted above are some key element of a 508c 1a, there are more details that may need to be explained either by your own research or speaking to a professional knowledgeable about forming tax exempt entities.

If you know anyone who may benefit from this blog, please share with them and reach out to us here at C Turner Tax Services , LLC. We would be happy to assist you in becoming a tax exempt entity.

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