501(c)3 corporation and W9 form.

I am trying to figure out what is the correct way to fill out a W9 form for a nonprofit, tax exempt, 501(c)3 corporation. Our organization was first incorporated as a nonprofit corporation under the nonprofit corporation statutes for the State of New Jersey, and then applied for exempt organization status through the IRS and was granted the exemption under

501(c)3.

The specific question is, "Do we check off 'C Corporation' on the W9 form, and also check "Other" and write in "nonprofit, tax exempt, 501(c)3 corporation"?

Or, do we NOT check off 'C Corporation' on the W9 form, and JUST check "Other" and write in "nonprofit, tax exempt, 501(c)3 corporation"?

This came up because our nonprofit has a mutual fund investment account at Vanguard and they said that new regulations as of 01/01/2012 require that we do a W9 form to clarify whether we are a C corporation or an S corporation.

Reply to
Ron
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I would do that. As I recall, when I had an account for a 501(c)(6), that's what we did.

In my experience, the people at Vanguard are generally quite on the ball. When you called them and asked what they'd prefer to see on the form, what did they say?

R's, John

Reply to
John Levine

I agree -- the Vanguard people always seem to be right on the ball whenever I call them, and I think that their overall customer service, website, and systems in general are the absolute best. If there are any awards that go out for these things, they should win first prize every year.

When I did call Vanguard, as is always the case, I got someone on the line right away and he was very helpful. At first, he wasn't completely sure; then he did some more checking and put me on hold. After a while, got back on the line and he said that a nonprofit can in fact sometimes be a C-corp and an "Other" 501(c)3 nonprofit corporation. He said we should look at our Certificate of Incorporation to be sure, but that probably checking off both options would work in our case. Then I mentioned this to someone else at our 501(c)3 who it turns out had also called Vanguard before filling out the form for me to sign (which I didn't know earlier). She said they told her that just checking "Other" would be okay -- without checking the C-corporation option.

That started me wondering exactly what is correct so I did some Google searching, and I tried looking at the IRS site and downloading and reading the IRS W9 form and instructions. I couldn't find a clear answer anywhere. Many of the examples from foundations etc. that came up in the online Google search showed the "Other" box checked and not the C-corporation option checked.

But the main reason that Vanguard sent the form out was because they said that there is a new rule going into effect and that they need to know if a corporation account holder is "either a C-corp or an S-corp" -- and that if they can't determine that, the automatic default is to treat all corporations as a S-corp regarding backup withholding etc. We know, of course, that we are not an S-corp.

In short, there seems to be a slight ambiguity or vagueness in terms of what should be put on a W9 by a 501(c)3 tax exempt nonprofit corporation. I would have at least expected the IRS instructions to specifically address this question in the W9 form instructions, but they do not.

Reply to
Ron
501(c)(3) corporations are incorporated as C corporations under the state laws for non-profits (the biggest difference at the state level is there are not "shareholders"). The IRS is the determining factor on whether the entity pays tax or not (tax exempt or taxable). If the entity loses it's IRS granted tax exempt status it's taxed as a C corporation.

There would be no feasable way for a non-profit to be an "S" corporation, which is a tax status granted by (again) the IRS.

Reply to
paulthomascpa

I'm not sure this is correct. Under federal tax law, there are basically

3 types of corporations. Those that are taxed are C Corps. and those that are not taxed are either S Corps. or Tax-Exempt Corps. Most states that I am familiar with have a statute and corresponding regulations for incorporating as a "C" corp. and a separate statute and regs for incorporating as a tax-exempt corporation (usually referred to as a Nonprofit Corp. in the regs). In the states I am familiar with, there is no way to incorporate as an S corp. However, upon obtaining Subchapter S status with the IRS, the state recognizes the organization as a passthru entity. E.g., here in New Mexico all profit corporations get organized as C Corporations under our Business Corporation Act. Those obtaining "S" status from the IRS become passthru entities in NM. There is no way to incorporate as an S Corp. Organizations that incorporate under our Nonprofit Corporation Act are tax-exempt organizations. When I was working with non-profits, we checked "Other" on the W-9, entered the name of the Corp. followed by "A 501(c)(3) Corporation".

Personally, I don't think it matters to the receiving business entity whether you check "C" or "Other" on the W-9.

Reply to
Alan

Thanks Alan, Paul, and John.

We decided to submit the W9 form by just checking off "Other" and writing in "Nonprofit tax exempt 501(c)3 corp". We decided to do that because our nonprofit corporation does not have any shareholders.

Our state (New Jersey) has 4 types of corporation laws:

TITLE 14A CORPORATIONS, GENERAL TITLE 15A CORPORATIONS, NONPROFIT TITLE 16 CORPORATIONS AND ASSOCIATIONS, RELIGIOUS TITLE 17 CORPORATIONS AND INSTITUTIONS FOR FINANCE AND INSURANCE

We are incorporated under Title 14A Corporations, Nonprofit. In New Jersey, nonprofit does not necessarily mean tax exempt. The tax exemption status of a New Jersey nonprofit corporation is determined by the IRS for federal tax purposes and I think by the state for certain other taxes such as real estate taxes.

Reply to
Ron

This is incorrect. Both S corps and C corps have owners; not-for-profit corporations do not.

Federal tax law doesn't determine ownership status. That's a matter of state incorporation law.

But that doesn't create a concept of ownership under state law.

They cannot be any kind of business corporation, period.

Reply to
Adam H. Kerman

CORRECTION: Oops, that last paragraph should say "We are incorporated under Title 15A (not 14A) ...."

Reply to
Ron

Subchapter C talks about owners of a corporation, but it does not require the corporation to have owners.

Whether or not a corporation has owners is irrelevant in this situation.

When someone wants to set up a nonprofit corporation, he may file articles of incorporation defining it as such. However it does not normally qualify as a nonprofit until approved by the IRS. If the IRS will not agree, the incorporator can amend the articles of incorporation so that it will be structured as a for-profit organization.

In addition, even a qualified nonprofit that engages in business activities that are unrelated to its exempt purpose are tax as C- corporations. The law does not prohibit them from transacting unrelated business - they just pay tax if they do.

___ Stu

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Reply to
Stuart A. Bronstein

We are a 501 c 3 NFP. On form W-9, what do I enter under "exemptions"?

Reply to
jhzolitor

By the Other box write 501(c)(3) and you can also write it by the exempt box.

Reply to
Arthur Kamlet

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