Q&A #111 – How should nonprofits fill out the Form W-9?
Question: My nonprofit was recently asked to provide a Form W-9 by one of our corporate sponsors. I am not sure which box to check for the “appropriate tax classification.” I see options for “C Corporation,” “S Corporation,” and “Trust/estate,” but no option for a nonprofit organization. How should a nonprofit organization fill out the Form W-9?
Answer: The Form W-9 does not provide an option that clearly describes the tax classification applicable to most nonprofit organizations. I recommend checking the box for “Other” and writing in “tax-exempt nonprofit corporation” or something similar, except in the relatively rare cases in which an organization is structured as a trust or does not have a federal income tax exemption.
Nonprofits are sometimes advised to check the box for “C Corporation,” but this is not an accurate description of a tax-exempt organization’s tax classification. A “C Corporation” refers to a taxable corporation (or an LLC that has elected to be treated as a C Corporation for tax purposes) that is taxed separately from its owners under Subchapter C of the Internal Revenue Code, and which therefore is required to file Form 1120. This is not true of tax-exempt organizations, which file Form 990 and are generally exempt from corporate income tax.
Checking the box for “C Corporation” is not likely to have meaningful negative consequences, since this would give the payor the information that it needs to know whether to provide a Form 1099 to the organization (a Form 1099 is generally not required when making a payment to a corporation, taxable or not, as discussed in Q&A #96). Nonetheless, it is better to be accurate because this will avoid the possibility of confusing the payor, your organization’s staff, and others about the organization’s tax classification.
Planning Tip – There is no need to wait for your organization’s payor to request a Form W-9. Fill out and sign a Form W-9 at the beginning of each calendar year and when any of the organization’s relevant details have changed (such as the organization’s address) and keep a scan of this document on file. Provide this signed copy upon commencing a relationship with an entity that will be making payments to the organization, such as a grantor or a corporate sponsor. This practice could accelerate the receiving of funds, as some payors will not process payments until a current Form W-9 is on file, and your payors will likely appreciate that your organization was proactive and responsible about providing this required document.
Lastly, the “Exempt payee code” and “Exemption from FATCA reporting code” described in Line 4 are a common point of confusion. Line 4 is unlikely to be relevant with respect to a tax-exempt organization based in the United States and can typically be left blank. However, in the event you are asked to provide a response to Line 4, note that a nonprofit organization that is recognized as tax-exempt under section 501(c)(3), 501(c)(4), 501(c)(6) or one of the other common exemption classifications would be accurately described as “[a]n organization exempt from tax under section 501(a)” in accordance with the Form W-9 instructions. Therefore, the “Exempt payee code” for such tax-exempt organizations would generally be “1,” and the “Exemption from FATCA reporting code” would generally be “A.”
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