Difference between revisions of "How to obtain tax-exempt status"
From NGO Handbook
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====Charitable organizations==== | ====Charitable organizations==== | ||
| − | ''Required | + | ''Required Additional Documents and Information'' |
In addition to Form 1023 and the other accompanying documents and statements, a charitable organization must include information in its application that shows that the NGO is organized and operated for a purpose “beneficial to the public interest.”<ref>Ibid., at 24.</ref> For example:<ref>Ibid. at 25.</ref> | In addition to Form 1023 and the other accompanying documents and statements, a charitable organization must include information in its application that shows that the NGO is organized and operated for a purpose “beneficial to the public interest.”<ref>Ibid., at 24.</ref> For example:<ref>Ibid. at 25.</ref> | ||
| − | # | + | # A charitable organization that supports education must submit information on its methods of operation and scholarship grants, if any. |
| − | # | + | # A hospital must submit Section 1 of Schedule C of Form 1023 and a list showing the names of its staff and doctors. |
| − | # | + | # A clinic must attach a statement which includes a description of its facilities, services, beneficiaries, and charges, who administers the clinic, and how compensation is determined. |
| − | # | + | # A home for the aged must submit Schedule F of Form 1023 describing its housing and charges if any, whether all residents pay at the same rate, and its federal mortgage financing. |
| − | # | + | # A community nursing bureau must show that the NGO is “operated as a community project” and is primarily supported by public contributions. |
| − | # | + | # An NGO that provides loans must submit an explanation of how loans are made, selection criteria, terms of repayment, and copies of its loan applications and other literature. |
| − | # | + | # A public interest law firm must submit an explanation describing the public interest the firm’s business serves, any fees charged, cases litigated and their public benefit, who is responsible for the firm’s policies, and whether the firm can be confused for a private law firm. |
=====Churches===== | =====Churches===== | ||
| − | + | ''Eligibility'' | |
The IRS follows two main guidelines to determine if an NGO qualifies as a religious organization under section 501(c)(3):<ref>Ibid.</ref> | The IRS follows two main guidelines to determine if an NGO qualifies as a religious organization under section 501(c)(3):<ref>Ibid.</ref> | ||
| − | # | + | # Whether the NGO’s religious beliefs are truly and sincerely held. |
| − | # | + | # Whether its practices and rituals are not illegal or contrary to public policy. |
Churches are not required to file Form 1023 to be considered tax-exempt or receive deductible contributions, but the NGO may find it advantageous.<ref>Ibid.</ref> The IRS does not define the concept of a church; it determines the classification on a case by case basis.<ref>Ibid.</ref> | Churches are not required to file Form 1023 to be considered tax-exempt or receive deductible contributions, but the NGO may find it advantageous.<ref>Ibid.</ref> The IRS does not define the concept of a church; it determines the classification on a case by case basis.<ref>Ibid.</ref> | ||
Revision as of 11:05, 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).
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