Can a Nonprofit Accept Donations Before Its 501(c)(3) Is Approved?

You've incorporated your nonprofit, received your EIN, opened a bank account, and submitted Form 1023 to the IRS. Your first program is already taking shape, and people are asking how they can help fund it. So you're considering putting a donation button on your website.

Then a prospective donor asks for your 501(c)(3) determination letter.

Well, you don't have that yet. The IRS is still reviewing your application, and while you've explained that you've already submitted everything, the donor wants to know whether their contribution will be tax-deductible. Fair question. You'd probably ask the same thing if you were donating a significant amount to an organization you'd only recently heard about.

Now you're thinking about the donations you've already received. Were you allowed to accept them? Should you have waited for approval? And if the IRS recognizes your nonprofit next year, what happens to the people who donated this year?

Yes, a newly formed nonprofit can generally accept donations before receiving its 501(c)(3) determination letter. But there are conditions worth understanding, particularly around tax deductibility, state fundraising requirements, and what you're allowed to tell donors while your application is pending.

Your Nonprofit Is Registered, but What Has Actually Been Approved?

People often say their nonprofit is registered without specifying which registration they're talking about. Understandably, after filing incorporation documents, getting an EIN, opening a bank account, and completing Form 1023, you might think you've already done everything required.

Then a foundation asks for proof of 501(c)(3) recognition, and you're staring at your documents folder wondering which file to send.

Your incorporation certificate? Your EIN confirmation? Perhaps the email confirming that the IRS received your application?

The IRS explains:

"State law governs nonprofit status, which is determined by an organization's articles of incorporation or trust documents. Federal law governs tax-exempt status."

Let's say you established Community Reading Project, a nonprofit providing literacy classes for children. Your state accepted the articles of incorporation, and the IRS issued an EIN. Those documents establish the organization's formation and federal identification number.

But has the IRS recognized Community Reading Project as a 501(c)(3) charity? If your application is still pending, you don't have that determination yet.

An EIN is useful, of course, but businesses have EINs, too. Having one doesn't tell donors whether their gifts qualify for charitable deductions.

So when someone requests your determination letter, don't send an EIN confirmation and hope it satisfies the requirement. Explain that your application is pending and provide proof of submission if requested. Whether the donor or grantmaker can proceed without the determination is ultimately their decision.

Are Donations Tax-Deductible While Your Application Is Pending?

Suppose Andrea contributes $500 to Community Reading Project in October 2026. She knows you're still waiting for IRS approval, but she believes in the program and wants to help purchase books for the children.

Later, she asks whether she can claim the contribution as a charitable deduction.

You might be confident that the IRS will approve your application. Perhaps you've met all the requirements, submitted the necessary documents, and haven't received any indication that something is wrong. But would you be comfortable promising Andrea a deduction when the approval hasn't actually been issued?

The IRS says:

"Contributors to the organization do not have advance assurance of deductibility while the organization's application is pending."

That doesn't mean Andrea's contribution can never be deductible. The IRS may recognize your nonprofit's exemption retroactively, meaning the effective date can be earlier than the date your determination letter arrives.

Consider what could happen:

Andrea would still need to satisfy the tax rules applicable to her. Recognition makes an organization eligible to receive qualifying deductible contributions; it doesn't guarantee that every donor can claim every gift.

If Andrea wants to donate now, you can explain that approval may cover earlier contributions. If she needs confirmed deductibility before giving, she may prefer to wait. Both are reasonable decisions, and neither requires your organization to pretend it knows what the IRS will decide.

The 27-Month Rule and Why Your Formation Date Counts

This is probably one of the more useful things for a new nonprofit founder to know.

For most organizations required to apply for 501(c)(3) recognition, filing Form 1023 or 1023-EZ within 27 months after the end of the month in which the organization was legally formed generally allows the IRS to recognize exemption from the formation date, assuming the application is approved and the relevant requirements are satisfied.

Suppose Community Reading Project was incorporated on October 10, 2026. Its ordinary filing deadline under that rule would be January 31, 2029.

If the nonprofit applies within that period and receives recognition effective October 10, 2026, qualifying donations received from that effective date onward may be deductible, even if the determination letter arrives considerably later.

But suppose the founders become occupied with running programs and don't submit the application until 2030. Recognition would generally begin on the filing date unless an exception or approved relief allows an earlier effective date.

There are circumstances where the IRS may grant relief for late applications, and those procedures are explained in the Form 1023 instructions.

When your determination letter arrives, look at the effective date, especially if your organization accepted donations while waiting. You'll need that information when earlier donors ask whether their contributions fall within the period recognized by the IRS.

What Is Publication 78, and Why Can't Donors Find Your Nonprofit?

Now suppose Andrea decides to verify Community Reading Project before contributing again. She searches the IRS website and can't find it.

She emails:

"Hi, I looked up your nonprofit on the IRS website, but nothing came up. Do you have your 501(c)(3) letter?"

You've submitted Form 1023, received a filing confirmation, and kept your organizational records. So why isn't your nonprofit showing up?

Publication 78, commonly called Pub. 78, is the IRS's listing of organizations eligible to receive tax-deductible charitable contributions. Donors can access it through the IRS Tax Exempt Organization Search, or TEOS.

An organization with a pending application generally won't appear in Publication 78 simply because it submitted Form 1023. Federal recognition hasn't been issued yet.

There's also some confusion about the search tool itself because the IRS maintains several databases under the same search service.

How to Check Your Organization

Visit the IRS Tax Exempt Organization Search, select Pub. 78 Data, and enter your nonprofit's EIN or legal name.

I recommend starting with the EIN. Your organization might publicly call itself Read Together, while its registered legal name is Community Reading Project Inc. Searching only for the name on your website may not return the correct record.

Before assuming a missing listing means an organization is illegitimate, remember that Publication 78 doesn't include every organization eligible to receive deductible contributions.

Certain churches, qualifying small public charities whose annual gross receipts are normally no more than $5,000, and subordinate organizations covered by group exemptions may qualify without individual Publication 78 listings.

The IRS explains these exceptions in its guidance on other eligible donees.

For a newly formed nonprofit with a pending Form 1023, however, the missing listing may simply reflect that the IRS hasn't issued its determination.

If a donor asks, explain your status rather than trying to prove approval with documents that don't establish it.

Can You Start Fundraising While Waiting for Approval?

We've talked about receiving donations, but what happens when your nonprofit starts asking the public for them?

Suppose Community Reading Project is incorporated in Maryland. Your website is ready, you've written a fundraising email, and your team wants to launch a campaign. Your federal application is pending, but is there anything else you need to register?

Possibly. States have their own charitable solicitation requirements, and those rules can apply before the IRS issues your determination letter.

In Maryland, charitable organizations generally must register or make an applicable filing before soliciting contributions. Qualifying organizations that received less than $25,000 in charitable contributions during their most recently completed fiscal year and don't use a professional solicitor generally submit an Exempt Organization Fund-Raising Notice instead of full registration. That notice must still be filed before solicitation.

Maryland's notice even includes an option for organizations whose federal exemption applications are pending, so you don't necessarily have to wait for the IRS to finish its review before addressing your state registration.

Now compare that with California, where organizations subject to charitable registration generally must register with the Attorney General within 30 days after first receiving charitable assets, including qualifying donations and grants.

The deadlines and requirements differ because each state administers its own rules. You can verify these examples with the Maryland Secretary of State and the California Attorney General.

What If Your Donation Page Is Available Nationwide?

You may be wondering whether simply having a public donation page means you need to register in every state. Not automatically.

The relevant questions include where your organization operates, which residents you're actively soliciting, and how the applicable state regulates online fundraising.

Connecticut, for example, explains that an out-of-state nonprofit generally doesn't need Connecticut registration simply because a resident independently finds its website and donates. But if that organization subsequently solicits the resident for another contribution, registration may be required.

Connecticut's online solicitation guidance explains that scenario.

Consider what that means for your fundraising emails. Someone from another state donates through your website, you add them to your donor list, and a few months later they receive your next appeal. It's worth checking whether that follow-up creates a registration obligation.

Other fundraising methods can introduce additional rules. Raffles, charitable gaming, professional fundraising arrangements, and certain events may require separate registrations or local permits.

Before launching a campaign, identify where you're soliciting donations and what activities you're planning. Check the relevant state agency's registration requirements, exemptions, and any activity-specific permits. A pending 501(c)(3) application doesn't resolve those questions.

What Should You Tell Donors While Waiting for Approval?

Let's return to Andrea. She wants to contribute $500, but she also wants to know what to expect when she files her taxes.

You don't need to make an elaborate explanation out of it. Tell her where the application stands and what the IRS may decide.

If your nonprofit has already submitted Form 1023 or 1023-EZ, you could include this on your donation page:

Our application for recognition of tax-exempt status under Section 501(c)(3) is currently pending with the IRS. If approved with an effective date covering your contribution, your donation may qualify for a federal charitable deduction. We cannot guarantee deductibility while the application is pending.

If you haven't actually submitted the application, change the wording. You're preparing to apply, rather than waiting on a submitted application.

And yes, your nonprofit can still issue donation acknowledgments. A receipt documents the contribution, even though your organization's eligibility for deductible gifts hasn't yet been established.

For Andrea's donation, an acknowledgment could read:

Thank you for your $500 contribution to Community Reading Project, received on October 20, 2026. No goods or services were provided in exchange for this contribution.

Our application for recognition under Section 501(c)(3) remains pending with the IRS. We have not yet received a determination letter and cannot guarantee that this contribution will qualify for a federal charitable deduction.

This example assumes a monetary donation where the donor received nothing in exchange.

Under the IRS acknowledgment rules, donors claiming deductions for individual contributions of $250 or more must obtain a qualifying written acknowledgment. The acknowledgment generally includes the charity's name, the amount of a monetary gift, and information about any goods or services provided in exchange. Other contributions may require additional documentation.

I'd also make sure your nonprofit records each contribution's date, amount, donor information, and acknowledgment status. If recognition is granted retroactively, you'll already have the transaction history needed to answer questions about earlier gifts.

What About Fiscal Sponsorship?

Suppose a foundation is interested in funding Community Reading Project, but its eligibility requirements specify that applicants must already have recognized 501(c)(3) status.

Your application is pending. The foundation's deadline is next month. Waiting for the determination letter might mean missing the opportunity entirely.

Depending on the foundation's rules, fiscal sponsorship may be an option.

A fiscal sponsor is an established charitable organization that supports a charitable project through an appropriate arrangement. For example, an existing literacy nonprofit might agree to sponsor Community Reading Project while its independent recognition is pending.

Donors would contribute to the eligible sponsoring organization for the approved project. The sponsor would maintain appropriate control over the charitable funds and manage the arrangement according to its responsibilities.

Of course, you can't simply borrow another nonprofit's EIN and use it on your donation page. A legitimate sponsor must exercise discretion and control over the funds rather than acting as an automatic pass-through.

Before entering an agreement, establish who receives the contributions, who issues donor acknowledgments, which expenses are permitted, what reporting is required, whether an administrative fee applies, and what happens if the project eventually receives its own exemption.

Also, entering a fiscal sponsorship agreement now doesn't automatically make donations your organization received directly months earlier deductible. Those transactions still need to be evaluated according to the organization that actually received them and its eligibility at the time.

The IRS discusses these arrangements in its guidance on legitimate fiscal sponsorship.

Do You Need to File Form 990 While Your Application Is Pending?

Here's one administrative requirement you probably shouldn't leave until the determination letter arrives.

Organizations required to file annual IRS information returns or notices generally must continue meeting those obligations while their exemption applications are pending, unless an exception applies.

For organizations required to file Form 990 or 990-EZ, the return includes a way to indicate that the exemption application is pending.

Eligible smaller organizations may file Form 990-N instead. Generally, public charities whose gross receipts are normally $50,000 or less can qualify, although exceptions and other requirements apply.

But suppose you try to file Form 990-N and the system doesn't recognize your organization's EIN. Before spending the afternoon repeatedly entering the same information, check whether the IRS has enabled your organization for electronic filing.

An authorized officer can contact the IRS at 877-829-5500 and request that the organization be set up for Form 990-N filing. According to the IRS filing instructions, updating its records may take up to six weeks.

So even if the application review is taking longer than expected, keep track of the nonprofit's tax year, annual filing deadlines, and applicable return or notice. Three consecutive years of missed required filings can result in automatic revocation of exemption.

Before You Launch Your Fundraising Campaign

If your nonprofit is preparing to accept donations while its 501(c)(3) application is pending, I'd start by reviewing what's already in place. There's no need to create a complicated process, but a few checks will save your organization from having to explain conflicting information later.

• Check your federal records. Confirm the legal formation date, EIN, application status, and Form 1023 or 1023-EZ submission date.

• Review where you'll fundraise. Check state charitable solicitation registrations, exemptions, and any permits required for the activities you're planning.

• Read your donation page. Does it accurately describe your current IRS status? Remove any unverified claims that contributions are tax-deductible.

• Prepare your donor acknowledgments. Record contributions properly and use receipt wording appropriate to the transaction and your pending status.

• Confirm your filing obligations. Identify the applicable Form 990 series return or notice and its deadline, even while the IRS reviews your application.

• Review funding arrangements. If you use a fiscal sponsor, document the agreement and make sure donors know which organization receives their contributions.

When the determination letter eventually arrives, review the effective date before updating your website or answering questions about earlier donations. Then verify the organization's listing in the relevant IRS search records and retain the letter with your permanent organizational documents.

For now, you can tell a prospective donor that your nonprofit is legally formed, that you've applied for recognition if you have, and that the IRS hasn't issued its decision yet. If they want to wait until deductibility is confirmed, they can. If they're comfortable contributing while the application is pending, make sure they understand the uncertainty and receive an accurate acknowledgment.

And before sending your next fundraising appeal, check the state requirements where you plan to solicit. You may be ready to accept donations from an operational standpoint, but the registration requirements still deserve a look before the campaign goes out.