Difference between revisions of "How to obtain tax-exempt status"
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=====Form 1023 Application for Recognition of Exemption===== | =====Form 1023 Application for Recognition of Exemption===== | ||
| − | IRS Form 1023, which consists of eleven parts, is the application for obtaining a federal tax exemption under section 501(c)(3). In Part I the applicant NGO must provide its administrative information, such as the NGO’s address. In Parts II and III the applicant must check the required boxes concerning the organizational structure of the NGO and verify the inclusion of certain provisions in the NGO’s organizing documents. Part IV requires the NGO to provide a narrative description of the organization’s activities in detail on a separate attachment. The description must include the standards, criteria, procedures or other means for carrying out the NGO’s activities.<ref>Internal Revenue Service, Tax-Exempt Status for Your Organization, at 3.</ref> The description must also specify that the NGO is not “financially accountable to another organization or involved in politics” or lobbying.<ref>Rural Community Empowerment Program, “501(c)(3) Fact Sheet.”</ref> Parts V and VI request compensation and beneficiary information. Part VII requests information about the history of the NGO. Part VIII requires the NGO to answer questions about the organization’s specific activities, such as its methods of fundraising. In Part IX the NGO applicant must provide its financial data. Part X requires the NGO to classify itself as either a private foundation or public charity.<ref>See [[#Classes of section 501(c)(3) organizations|Classes of section 501(c)(3) organizations]] below.</ref> Part XI requires the applicant to include the appropriate fee. The application also includes Schedules A-H, which need to be completed if they apply to the applicant NGO’s specific type of organization.<ref>See [[#Additional requirements for particular types of 501(c)(3) NGOs|Additional requirements for particular types of 501(c)(3) NGOs]] below.</ref> | + | IRS Form 1023, which consists of eleven parts, is the application for obtaining a federal tax exemption under section 501(c)(3). In Part I the applicant NGO must provide its administrative information, such as the NGO’s address. In Parts II and III the applicant must check the required boxes concerning the organizational structure of the NGO and verify the inclusion of certain provisions in the NGO’s organizing documents. Part IV requires the NGO to provide a narrative description of the organization’s activities in detail on a separate attachment. The description must include the standards, criteria, procedures or other means for carrying out the NGO’s activities.<ref>Internal Revenue Service, Tax-Exempt Status for Your Organization, at 3.</ref> The description must also specify that the NGO is not “financially [[Methods of Enhancing Accountability|accountable]] to another organization or involved in politics” or lobbying.<ref>Rural Community Empowerment Program, “501(c)(3) Fact Sheet.”</ref> Parts V and VI request compensation and beneficiary information. Part VII requests information about the history of the NGO. Part VIII requires the NGO to answer questions about the organization’s specific activities, such as its methods of fundraising. In Part IX the NGO applicant must provide its financial data. Part X requires the NGO to classify itself as either a private foundation or public charity.<ref>See [[#Classes of section 501(c)(3) organizations|Classes of section 501(c)(3) organizations]] below.</ref> Part XI requires the applicant to include the appropriate fee. The application also includes Schedules A-H, which need to be completed if they apply to the applicant NGO’s specific type of organization.<ref>See [[#Additional requirements for particular types of 501(c)(3) NGOs|Additional requirements for particular types of 501(c)(3) NGOs]] below.</ref> |
===Accompanying documents=== | ===Accompanying documents=== | ||
Revision as of 09:33, 11 August 2008
This article is intended to provide a general description of the process for obtaining 501(c)(3) status under the U.S. Internal Revenue Code and is not intended to substitute for the advice of private counsel on specific issues related to the IRC or the 501(c)(3) application process. Original draft by Bobby C. Neal.
In the United States, a non-governmental organization (NGO) is generally subject to federal, state, and local taxes unless and until the organization qualifies for tax-exempt status. This article focuses on the process for obtaining a federal income tax exemption for NGOs.[1] NGOs that meet the criteria set forth in 26 U.S.C. § 501 of the Internal Revenue Code (section 501) are eligible for a federal tax exemption.[2] The benefits to obtaining tax exempt recognition by the Internal Revenue Service (IRS) include: income tax exemption, eligibility to receive tax-deductible contributions, possible exemption from certain employment taxes, and reduced postal rates. Section 501 describes the organizations that are eligible for tax-exempt status. The most significant category of tax-exempt organizations is section 501(c)(3).
