How to Verify 501(c)(3) Status Before You Make a Grant

A nonprofit that fails to file a required annual return for three consecutive years loses its tax-exempt status automatically. No hearing, no warning letter, no discretion — the exemption simply ends by operation of law.

This happens constantly, and it happens disproportionately to exactly the organizations foundations most want to support: small, under-resourced, volunteer-run groups where the person who handled filings left. The organization usually carries on doing good work, entirely unaware, and often keeps describing itself as a 501(c)(3) because as far as anyone there knows, it still is.

For the foundation, the consequence is concrete. A grant to an organization whose exemption has been revoked may not count as a qualifying distribution toward the annual payout requirement, and depending on the circumstances may constitute a taxable expenditure. The grantee's administrative failure becomes the funder's compliance problem.

Verification is quick, free, and mostly automatable. This is the process.

The one tool that does most of the work

The IRS Tax Exempt Organization Search (TEOS) is the authoritative starting point. It is free, requires no account, and covers several distinct datasets that answer different questions:

• Pub. 78 Data — organizations eligible to receive tax-deductible charitable contributions under §170. This is the "can our donors deduct, and is this a qualified charity?" list.
• Auto-Revocation List — organizations whose exemption was automatically revoked for three consecutive years of non-filing, with the revocation date.
• Determination Letters — the IRS letter recognizing exemption.
• Form 990 series returns — the filings themselves.
• Business Master File extract — the bulk dataset, including subsection and foundation classification codes.

Searching by EIN rather than name is strongly preferable. Nonprofit names are inconsistent, frequently duplicated across states, and often differ between the legal name and the trading name. The EIN is unambiguous.

The checks, in order

1. Confirm the EIN matches the organization you think you are funding. Do not skip this. Chapter and affiliate structures are the usual trap: a local affiliate may operate under a national organization's brand while being a separate legal entity with its own EIN, or may have no separate existence at all. Funding the wrong entity in a federated structure is more common than it sounds.

2. Check Pub. 78 data. Confirms the organization is currently eligible to receive tax-deductible contributions. If it does not appear, that is a stop-and-investigate signal, not necessarily a decline — some qualified organizations, notably many churches, are not required to appear.

3. Check the Auto-Revocation List. If the organization appears, note the revocation date. Critically, appearing on this list does not mean the organization is currently revoked — many are subsequently reinstated, and the list is historical. If you find a revocation, check Pub. 78 and the BMF to see whether exemption has been reinstated, and ask the organization for its reinstatement letter.

4. Confirm the foundation classification. Public charity or private foundation? This changes what rules apply to your grant. A grant to another private foundation, or to certain supporting organizations, may require expenditure responsibility — see Expenditure Responsibility Explained.

5. Screen against sanctions lists. Check the OFAC Specially Designated Nationals list. This is a separate legal obligation from tax status and applies regardless of the grantee's charitable classification. It matters most for international grantmaking but is not limited to it.

6. Check state registration where relevant. Charitable solicitation registration is a state matter and separate from federal exemption. An organization can be federally exempt and non-compliant at state level.

What each check does and does not tell you

The pattern worth internalizing: a determination letter is evidence of the past, not the present. Organizations routinely produce a determination letter from 2011 as proof of current status. It proves the IRS recognized exemption in 2011. It says nothing about whether that exemption survived. Always check current status independently rather than accepting the letter.

Timing: check twice

Status can change between application and payment, and grant cycles are long.

Best practice is to verify at two points: at application or approval, and again immediately before releasing funds. For multi-year grants and tranched payments, verify before each payment.

This is exactly the kind of check that is trivial to automate and reliably forgotten when done manually — nobody re-runs a check in month fourteen of a three-year grant because the grant was approved long ago and feels settled.

Reading the filing itself

Once status is confirmed, the grantee's own Form 990 is the cheapest source of everything else you might want to know, and most funders under-use it. The sections that repay two minutes each:

Part I and Part IX — revenue and expenses. Total revenue, the split between contributions and program revenue, and whether expenses exceed revenue. Three consecutive deficit years is a genuine signal.

Part VII — compensation. Officer and key employee pay, plus whether there are any employees at all. An organization requesting a $300,000 grant with no paid staff is a different proposition from one with thirty.

Schedule A — public support. The actual public support percentage. This is where you check tipping risk before making a large grant: if the organization is at 35% and your grant would be substantial relative to five years of total support, that is a conversation to have before the money moves rather than after.

Schedule L — transactions with interested persons. Loans to or from officers, business dealings with board members' companies, grants to insiders. Not automatically disqualifying, but always worth understanding.

Schedule O — supplemental narrative. Where organizations explain things that did not fit elsewhere. Governance changes, restatements, unusual events. Frequently the most informative page in the return and almost never read.

Part VI — governance. Board size, independence, conflict-of-interest policy, whether the return was reviewed by the board before filing. A no to that last question is a small but real signal about internal oversight.

None of this requires financial expertise beyond reading carefully, and it will tell you more about an organization than most application forms do.

What verification does not cover

Confirming tax status is eligibility screening, not due diligence. It tells you the organization can legally receive your money. It tells you nothing about whether it should.

A fuller assessment usually also looks at:

• Financial health — reserves, deficits, going-concern language in the audit, revenue concentration
• Governance — board size and independence, related-party transactions disclosed on Schedule L, whether the same person signs and approves
• Capacity — has the organization managed grants of this size before?
• Funding concentration — is your grant about to become an outsized share of their income? This connects to sole-funder risk, covered in Co-Funder Networks, and to the tipping risk discussed in Private Foundation vs Public Charity
• Safeguarding and insurance, where the work involves vulnerable people

Proportionality matters. A $5,000 grant to an organization you have funded for a decade does not warrant the diligence of a first $500,000 grant to a new grantee. Foundations that apply the same process to both waste their own time and impose cost on grantees who can least afford it — the average grant proposal and selection process already consumes around 27 hours of nonprofit time.

Handling a revoked grantee well

If a check turns up a revocation, the useful response is not an automatic decline.

Most auto-revocations are administrative rather than substantive — a small organization missed filings, not a scandal. Reinstatement is a defined process, and retroactive reinstatement is available in many circumstances.

A constructive approach:

1. Tell them. Many organizations genuinely do not know. This alone is a service.
2. Ask whether reinstatement is underway and request documentation if so.
3. Consider a fiscal sponsor as an interim route so the work can continue while status is restored.
4. Consider funding the reinstatement itself. The cost is modest against the value of keeping a functioning organization alive.
5. Do not simply pay and hope. The compliance consequence lands on you, not them.

Foundations that handle this well end up with unusually loyal grantees, because being told about a revocation before it becomes a crisis is a genuinely significant favor.

Proportionate diligence by grant size

Applying identical checks to every grant is the most common process failure, and it fails in both directions — too much friction on small grants, too little scrutiny on large ones. A tiered approach works better.

Small grants, known grantee. Status verification only, run automatically. No forms, no financial review. The check costs you nothing and asks nothing of them.

Small grants, new grantee. Status verification plus a look at the most recent filing — revenue scale, whether there are staff, any obvious distress signals. Ten minutes.

Mid-size grants. The above plus Schedule A public support, Schedule L related-party transactions, and a specific question about what share of their income your grant would represent.

Large or multi-year grants. All of the above plus audited financials, board list, key policies relevant to the work, and — where the work involves vulnerable people — safeguarding and insurance. Re-verification before each tranche.

Grants outside the public charity universe. A different process entirely, covered in Expenditure Responsibility Explained.

The principle underneath: diligence should scale with what you would lose if you were wrong. A $5,000 grant that fails costs $5,000. A $500,000 multi-year commitment to an organization that folds in year two costs the money, the program, and the grantee's other funders who followed you in.

Foundations that get this right also impose far less on the sector as a whole. Every document you request has to be produced by someone, usually at an organization with less administrative capacity than yours.

Where software fits

The verification steps above are individually trivial and collectively tedious, which is exactly the profile of work that gets skipped under deadline pressure — particularly the second check before payment.

Tools like Plinth run the US due diligence checklist on every applicant automatically rather than relying on someone remembering: due diligence performs the checks and attaches the result to the grant record, so the evidence is captured at the point it was made rather than reconstructed later. Applications screen eligibility in real time at intake, which means an ineligible applicant learns quickly instead of after writing a full proposal.

The audit benefit is as valuable as the compliance one. When someone asks in three years what you knew and when, the answer should be in the grant record. See Audit Trails in Grant Software.

Frequently asked questions

How do I check if a nonprofit is still a 501(c)(3)?

Use the IRS Tax Exempt Organization Search, ideally by EIN. Check that it appears in Pub. 78 data and check the Auto-Revocation List. Both are free and need no account.

What is automatic revocation?

Loss of tax-exempt status by operation of law after an organization fails to file a required annual return or notice for three consecutive years. No IRS action or notice is required for it to take effect.

Is a determination letter enough proof?

No. It shows exemption was recognized at the time it was issued, not that it still stands. Always verify current status separately.

What happens if we grant to a revoked organization?

The payment may not count as a qualifying distribution toward your 5% requirement, and depending on circumstances may be a taxable expenditure. The consequence falls on the foundation.

Does appearing on the Auto-Revocation List mean an organization is revoked now?

Not necessarily. The list is historical and many organizations are reinstated. Check Pub. 78 data or the Business Master File to see whether exemption has been restored, and ask for the reinstatement letter.

Can we rely on a third-party database instead of the IRS?

For convenience, yes — most reputable platforms read the same IRS source data. But check how recently the platform refreshed, because status changes propagate on a lag. For a large grant, confirm against the IRS directly.

How often should we re-check?

At approval and again before releasing funds. For multi-year or tranched grants, before each payment.

Do we need to screen against sanctions lists?

Yes. OFAC screening is a separate legal obligation from tax status and applies to all grantees, though it matters most in international grantmaking.

Should we ask grantees to send us proof instead of checking ourselves?

Checking yourself is faster, more reliable and less burdensome. The IRS search takes under a minute; asking a grantee to find and send a determination letter takes them far longer and produces weaker evidence, since the letter proves the past rather than the present.

Does a fiscal sponsor's status cover the project?

Yes, where the sponsor is a public charity in good standing and has genuine discretion and control over the funds. Verify the sponsor's status, not the project's — the project usually has no separate status to verify.

Can we fund an organization that has lost its status?

Not straightforwardly as a normal grant. Options include waiting for reinstatement, routing through a public charity fiscal sponsor, or exercising expenditure responsibility.

Recommended next pages

• Expenditure Responsibility Explained — funding outside the 501(c)(3) universe
• Private Foundation vs Public Charity — what classification changes
• How to Automate Due Diligence — running these checks at scale
• Audit Trails in Grant Software — evidencing what you checked
• Grant Management Software for US Foundations — platforms that automate this

Last updated: August 2026