501(c)(3) Catch 22 – To Start a Nonprofit, the IRS Demands $850 Filing Fee

May 18th, 2010

The Harlan Institute is about to send off our Form 1023 in order to obtain 501(c)(3) status, which will allow all donations to be tax deductible. However, the filing fee in order to obtain 501(c)(3) status is a whopping $850!

How does the IRS expect fledgling nonprofits, who are seeking 501(c)(3) status in order to receive donations, to pay $850 before receiving any donations? This seems to be a Catch 22 of sorts.

In order to receive donations, a non-profit has to obtain 501(c)(3) status. But in order to obtain 501(c)(3) status, and pay the $850, the nonprofit first needs to receive donations!

Lousy barriers to entry.