501(c)(3) vs. 7871

Most non-profits file for 501(c)(3) status through a state. Some tribal non-profits file for 501(c)(3) status through a tribe. In this case, the tribe takes the role of the state. Sometimes tribes choose to create a 501(c)(3) organization for programs that need to be a separate entity from the tribe. Otherwise, a tribe can set up a restricted fund, which can be reported upon in full, without reporting all aspects of the tribe’s finances.

The maintenance of a 501(c)(3) organization includes specific supervision by the IRS through applications (Form 1023, initially) and reporting (Form 990, on an annual basis). By contrast, a 7871 organization is primarily accountable to its tribal council or governing board of the tribe. A restricted fund is generally created through a resolution of the governing entity. And as previously stated, it is the responsibility of that governing entity to establish procedures to manage these funds.

Whereas the term 501(c)(3) is currently better known in philanthropy, this brochure is an extension of a movement in Native American philanthropy to elevate the awareness of IRC 7871. The specific goal will be to incorporate "7871" into standard granting guidelines among foundations, corporations and financial planning institutions.