Fundraising Before IRS Approval

Fundraising Before IRS Approval: Best Practices for Pre-Approved Nonprofits

Starting a nonprofit feels like planting a seed. You’ve got the vision. You’ve filed the paperwork. And now… you’re waiting for that all-important letter from the IRS confirming your 501(c)(3) status.

But what if your mission can’t wait?

Good news: You can fundraise while your IRS application is pending—as long as you do it the right way. Here’s how to stay above board, build trust, and move your mission forward.

1. Be Honest With Donors About Your Status

Transparency is everything. Don’t say you’re a 501(c)(3) if you’re not—yet. Instead, clearly communicate your pending status:

“We’ve applied for 501(c)(3) status with the IRS. Once approved, donations will be tax-deductible retroactively to our incorporation date.”

This is totally legal and supported by the IRS. According to IRS guidance, if you’ve applied properly and are eventually approved, your donors can claim deductions for contributions made while your application was pending.

2. Follow the IRS Timeline Rules

The IRS allows organizations to receive retroactive tax-exempt status as long as you file Form 1023 within 27 months of incorporation. If you meet that deadline and eventually get approved, your status will apply from day one. Here’s the source, straight from the IRS:

Publication 557 – Tax-Exempt Status for Your Organization (see pages 23–24).

The takeaway? If you haven’t already, file that application ASAP.

3. Include a Disclaimer on Every Donation Receipt

Yes, you should still send the donation receipts. But include this IRS-compliant language:

“[Your Nonprofit Name] has applied for 501(c)(3) status with the IRS. If our application is approved, your donation will be tax-deductible to the extent allowed by law.”

This helps protect your donors—and you—from any surprises later. The IRS notes that without approval, contributions are not deductible (source).

4. Consider Fiscal Sponsorship

Need to start fundraising in a bigger way, right now? You might want to partner with a fiscal sponsor—an existing 501(c)(3) that can accept tax-deductible donations on your behalf while you wait for your own approval. This is a common and IRS-acceptable approach, especially for new projects. You’ll operate as a program under their umbrella and usually pay a small fee (often 5–10%). It’s not for everyone—but it’s worth exploring. More about this model: Fiscal Sponsorship Guidance (not an IRS link, but widely respected guidance).

5. Lean Into Your Inner Circle

Early supporters—friends, family, colleagues, mission-aligned partners—are often willing to give without needing the tax deduction right away. Focus on building relationships and rallying your community. These are the people who will help you grow roots before you sprout leaves.

6. Keep Meticulous Records

This is always good practice—but it’s especially critical while your status is pending. Keep documentation of:

• Donations and receipts

• Your incorporation and IRS filings

• All fundraising communications

• Any donor disclaimers

The IRS expects nonprofits to operate in good faith and track everything just as a fully approved 501(c)(3) would. Need a guide? Start with IRS Publication 4221-PC: Compliance Guide for 501(c)(3) Public Charities.

7. Focus on Mission First, Status Second

It’s easy to get caught up in the waiting game. But remember: the IRS doesn’t define your mission—you do. Use this season to:

• Share your story

• Build your brand

• Host small events or pilot programs

• Deepen community roots

You don’t have to wait to start changing lives.

Final Word: Integrity First, Always

The way you fundraise now sets the tone for everything that follows. So be transparent. Follow the rules. And lead with your mission and your values.

Even if the IRS hasn’t sent that approval letter yet, your donors will know: this is a nonprofit worth believing in.

Got questions about fiscal sponsorship or IRS timelines? We’ve been there—and we’d be happy to help you navigate it. You’ve got this. And we’re cheering you on.