Non-Profit Checking Accounts
Question: We're having some confusion on non-profit corporations and their ability to have a NOW account. Do they have to be a 501 (c) (3) business in order to have a NOW account or can any non-profit corporation or non-profit organization have a NOW account? The more we read, the more we're confused. If they have to be a 501 (c) (3) business, then I'm assuming we need that documentation from them before we allow them to earn interest in a NOW account.
Answer: Under the now account rules, a NOW account may be held by:
A not-for-profit organization operated primarily for religious, philanthropic, charitable, educational, political, or other similar purpose.
Typically, such an organization will have sought 501(c) status from the IRS and can provide a certificate, although the rules don't expressly require one, and I suppose it would be possible for a nonprofit organization to meet the purpose test without one.
There are various "flavors" of 501(c) - different sub-numbers for political, education, fraternal organizations, so they will NOT all be 501(c)(3). Nor do they have to have a certain designation for you to honor the fact that they are "non-profit" if they have the certificate.
Copyright © 2004 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 14, No. 4, 7/05
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