IRS Publication 4220 provides the answer. Generally, if the non-profit organization files Form 1023 (an application to be recognized as a tax-exempt entity) within 15 months from the date the non-profit was created will be considered to be a tax exempt organization as of the date of creation.
The practical impact of this is as follows:
- An organization may have fundraisers prior to receiving proof that it has been declared tax-exempt by the IRS;
- The non-profit MUST advise potential donors that the 501(c)(3) status is pending.
- If the tax-exempt status is granted by the IRS, contributions by donors will be tax deductible.
- If tax-exempt status is denied, contributions made by donors will NOT be tax deductible. Additionally, the organization may be liable for paying taxes on money it has received.