Q&A: Can we help fund a food bank before the 501(c)(3) paperwork is finalized?

Yes, but make sure you have documentation showing it’s a not-for-profit corporation.

We have a long relationship with a local food bank that was formerly run by another congregation and was under that church’s 501(c)(3). The food bank is now operating on its own—without the church—and its 501(c)(3) letter is pending.

Our church agreed to fund the food bank’s refrigeration equipment at its new location, but do we need to wait on the 501(c)(3) letter? This is the largest food bank in our county and has long-standing, good leadership, so it is not a question of viability.
We are simply concerned that we might be violating our trust of funds by giving before the paperwork is finalized.
This is a very good question about a common scenario. And, yes, your church may proceed with your plans. The church should simply obtain documentation supporting the fact that the food bank is organized as a not-for-profit corporation (articles of incorporation filed with the state should be adequate for this purpose). If the food bank has already submitted its application for recognition of exempt status with the IRS (Form 1023), it would be helpful to have a copy of that as well.
The church should execute a grant agreement with the food bank that stipulates how the grant funds will be used and requires accountability reports from the food bank regarding the use of the funds. Once the food bank receives its IRS exemption determination letter, the church can relax its documentation requirements—if it chooses to do so. A grant recipient’s IRS 501(c)(3) exemption determination letter supports the position that grants are used for 501(c)(3) purposes.
One important point about grants: a church can make grants to non-501(c)(3) organizations, so long as the church documents that the grants are used to carry out the church’s exempt purposes.
Michael (Mike) E. Batts is a CPA and the managing partner of Batts Morrison Wales & Lee, P.A., an accounting firm dedicated exclusively to serving nonprofit organizations across the United States.

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