Can anyone comment on the advantage and/or disadvantages of a fire department applying for 501 (c) (3)? I am told that it is necessary to receive some grant funding however we have limited information. We have been told that it involves "too much paperwork and too much reporting to the government". Any comments??
The main advantage to becoming a 501(c)(3) is that you achieve NON-PROFIT status. This is important for two reasons, 1) everyone who contributes money to your organization reaps a tax deduction benefit 2) It reduces your tax consequence/burden across many areas (Local, State & Federal).
As far as making your organization eligible for grants, it may help, but isn't entirely necessary. But it is my beleif that a Tax Exempt organization does receive priority over for-profit organizations. Note the word FOR-PROFIT. You are either non-profit or your not. A 501(c)(3) is a NON PROFIT organization.
Depending on your situation, I would seek 501(c)(3). Most forms can be obtained from your State easily or on the IRS website. You do want to have an attorney and/or tax accountant assist you with your application. If you are already a Fire Department "Corporation" within your State, you are over halfway there. If you have not yet acheived Corporate Status, then you must do this first.
Exception: If you are a "County" or "Municipal" based organization, you are not eligible for 501(c)(3) Status, in most states.
I hope this helps.
Tax exempt status
Our FD became 501(c)(3) tax exempt status about 15 years ago. It has made a difference in obtaining much needed funding for equipment over the years.
Most likely, you will need an attorney to do some of the paperwork, like updating your bylaws with IRS required wording. The wording spells out what will be done with your FD's assets if the FD disbands. The FD may never disband, but since you may obtain funding tax free the IRS wants this spelled out anyway.
Is there an attorney in your area that may assist you with this process for no or low cost? Also, are you part of a city, township or fire district that already has an attorney that could assist you with the paperwork?
Good luck in your endeavors!
A 501C3 is a non profit, but there are many other forms of non profit agencies, most in the fire service that are not municipal or tax based are 501C3 or 501C4
The only draw back that we have discovered being a 501C3 was the inurement clause.
It prevented us from helping one of our own when he was injuried in the "Line of duty".