Educational nonprofits are tax-exempt charities that have a mission dedicated to informing and educating the general public or individuals. Nonprofits within this classification may include (but not be limited to) kindergartens, colleges and universities, vocational schools, religious schools, and more.
A nonprofit organization, as classified by the IRS as a 501(c)(3), is operated for charitable purposes and provides a service to its community. This article answers many of the questions we at BryteBridge Nonprofit Solutions receive about schools and educational nonprofits and how nonprofit entrepreneurs can start one of their own.
What are the 501c3 requirements for a nonprofit?
To qualify for 501(c)(3) tax-exempt status, an organization must be in at least one of the following categories:
- Public charity
- Education or literacy
- Animal and/or children’s services or protection
- Public health or safety
- Amateur sports
- Scientific activities
While the categories for a 501(c)(3) are relatively broad, a few explicit rules apply to all organizations with the classification. Those rules are:
- Supplying funds to political campaigns or a political candidate.
- Restrictions exist on the dollar amount of funds a 501(c)(3) can spend on lobbying efforts.
- Remaining faithful to their mission in all activities and outreach.
- Funds raised from supporters, corporate sponsorships, or grants cannot be allocated to a different project than the one the donor intended the funds to be for.
Are educational nonprofits private or public charities?
The IRS classifies educational organizations as public charities due to their structured and defined educational offerings. While many nonprofits can engage in educational activities, not all organizations can be classified as specifically educational in intent.
What are the rules for starting an educational nonprofit or a 501c3 school (public, private, religious/specialty)?
If you’re interested in launching a nonprofit startup, it’s essential to take some time and investigate the federal and state paperwork you’ll need to submit. Before submitting your 501c3 status, you must first file incorporation paperwork with the IRS and the state or states where you’ll be operating. While the federal IRS requirements are the same for all 501c3 applications, state regulations will vary. For example, some states require fundraising permits and background checks for all personnel interacting with children or students under the age of 18. If you’re having difficulty locating the requirements for your area, or if you’re trying to launch a multi-state organization, BryteBridge can provide you with the information you’ll need and assist you in getting it completed and submitted for approval.
Are 501c3 public schools different from other nonprofit organizations?
The IRS classifies tax-exempt schools as one that provides the following:
- a primary function on formal instruction,
- taught by a regular faculty with a specific curriculum, and
- maintains enrolled pupils at a designed place where educational activities take place.
Are public schools 501c3 organizations?
Public schools are exempt from federal and state taxes, which is considered “tax exempt.” Under section 170(c)(1), the IRS treats them as a government entity. However, specialized charter schools can be considered public schools. A charter school may be considered a 501(c)3 organization depending on the state regulations of where it’s located. If you’re looking to establish a school that isn’t affiliated with a local government (religious schools, specialty schools, private schools), you’ll need to establish yourself as a 501c3 charity to be tax-exempt.
Are 501c3 schools (public, private, religious/specialty) required to operate during the typical school day?
No. It is possible to create an education-based nonprofit organization or a school that meets during times that are most appropriate to the student population. For example, a school’s schedule could be evenings, weekends, or only during certain times of the year. The only regulations for the school classifications are those pertaining to having a regular faculty and curriculum, in an established location, with a body of enrolled students. The classes are not required to be offered throughout the year or align with other schools in the geographical area.
Are educational nonprofits always considered schools?
Not necessarily. To be classified as a tax-exempt school, an organization must provide formal instruction, have a designated faculty, and enroll students in an established location. Organizations that are not considered a 501c3 public school, private school, or religious/specialty school can still qualify as a nonprofit.
What is required to start an educational nonprofit that isn’t a school?
While the definition of a school is narrowly tailored (regular faculty, location, and students), educational nonprofits can have a much broader range in how they operate and the services they deliver. For example, nonprofits can offer optional courses for anyone. In addition, they can provide classes or educational assistance in various settings or offer specialized services to schools.
Ready to start your education nonprofit or 501c3 school?
Contact BryteBridge to learn about our services and connect with our experienced consultants and advisors. In no time, you’ll be making your nonprofit dreams become a reality!