A wise person once said, “There are only two certain things in this world: death and taxes.” That is, of course, unless you are starting a non-profit organization. Many non-profit organizations may be eligible to qualify for tax-exemption status. However, it is important to note that the specific requirements and procedures relevant to a non-profit may vary depending on the type and purpose of the organization, as well as other factors.
- Determine eligibility. The first step is to determine whether the organization is eligible for tax exemption status under section 501(c)(3) of the Internal Revenue Code. To qualify, the organization must be organized and operated exclusively for charitable, religious, educational, scientific, literary, or other purposes specified by the IRS.
- Form and file the appropriate documents. To apply for tax exemption, the organization must file Form 1023 or Form 1023-EZ with the IRS. These forms require detailed information about the organization's structure, activities, finances, and governance. The application must also include copies of the organization's articles of incorporation, bylaws, and other relevant documents.
- Wait for a determination letter. After the application is submitted, the applicant must wait for a determination letter from the IRS. This letter will either grant or deny tax exemption status. Waiting for this letter can take several months or even up to a year.
- Maintain compliance. Once the organization has been granted tax exemption status, it must maintain compliance with IRS regulations. This includes filing annual tax returns, maintaining accurate records, and adhering to certain restrictions on lobbying and political activities.
It's important to note that the process of obtaining tax exemption status can be complex and time-consuming. Here at Sumsion Business Law, we have experienced and well-trained lawyers and other tax-professionals with whom you can consult with. This will better ensure that your organization meets all requirements and submits a complete and accurate application.