IRS Provides Tips to Help Understand the Tax-Exempt Application Process
The IRS continues to provide resources to those interested in forming nonprofit organizations.
Organizations that want to apply for tax-exempt status under Section 501(c)(3) of the Internal Revenue Code use a Form 1023-series application. Some of the things organizations should familiarize themselves with to help them understand the process are as follows:
The application must be complete. It must also include the appropriate user fee.
The application process on IRS.gov includes a step-by-step review of what an organization needs to know and what to do in order to apply for tax-exempt status.
There are a few types of organizations that do not need to apply for 501(c)(3) status to be tax-exempt. These are churches and their integrated auxiliaries, and also public charities whose annual gross receipts are normally less than $5,000.
An employer identification number (“EIN”) is an organization's account number with the IRS and is required for the organization to apply for tax exempt status. Every tax-exempt organization, including a church, should have an EIN regardless of whether the organization has employees. After obtaining an EIN, the organization must include it on their exemption application. Organizations may obtain an EIN by calling 1-800-829-4933 or by applying online.
Generally, an organization that is required to apply for recognition of exemption must notify the IRS within 27 months from the date the organization was formed.
When the IRS determines an organization qualifies for exemption under Section 501(c)(3), it will also be classified as a foundation, unless the organization meets the requirements to be treated as a public charity.
A charitable organization must make certain documents available to the public. These include its approved application for recognition of exemption with all supporting documents, its IRS determination letter, and its three most recent annual information returns. The organization must provide copies of these documents upon request. The organization may charge a reasonable fee for reproduction and copying costs. Organizations that fail to comply may face penalties.
You may find the following resources of value to your nonprofit organization:
Applying for exemption frequently asked questions
Form 1023 Frequently asked questions
Stay Exempt Tax basics for exempt organizations
Exempt organization public disclosure and availability requirements frequently asked questions
If you need assistance in applying for exempt status for your organization, please contact Jonathan Grissom, an attorney dedicated to the representation of nonprofits.