How to Apply As a 501C3 Organization Status
If you plan to operate a business that will not be for personal gain, you will want to form a not-for-profit corporation according to the laws of your state. However, if you want your not-for-profit corporation to also be tax-exempt, sometimes called a 501c3 organization, you must apply for recognition of this status from the Internal Revenue Service. After the IRS agrees to recognize your corporation as tax-exempt, your organization will have the right to solicit donations that are tax-deductible for the donors.
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Instructions
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Determine what kind of 501c3 organization you intend to form. The types of organizations that the IRS will recognize as a 501c3 organization roughly fall into three categories: charitable (such as a community service organization), mutual benefit (such as an amateur sports league or scientific research group) or religious (such as churches or groups devoted to religious studies). Your organization must be a corporation, trust or other unincorporated association. An individual or partnership cannot qualify for 501c3 status.
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Form your organization according to your state law by submitting the necessary organizational document to the office of your secretary of state. Most states, such as California, provide specific filing information on how to form a not-for-profit corporation. You will need a copy of the organizational document, called the articles of incorporation, to submit to the IRS.
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Prepare a fundraising plan and budget for your organization. The IRS will need to determine that your organization can fund itself under the "public support" test---which means your organization expects most of its funding to come from public sources, such as private donations, or through grants or awards from government agencies.
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Obtain IRS Form 1023 and its instructions, and prepare the form for filing with the IRS. In addition to including the necessary information on the form, you will need to submit a copy of your organizational document, as well as your budget and fundraising plan. File the form and documents with the IRS and include any required user fee, the amount of which can be calculated from the instructions for Form 1023. If the IRS declines the application, the user fee will be refunded.
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Obtain the appropriate form from your state taxing authority, after you receive IRS recognition of your organization under 501c3, to apply for the same status in your state. For example, in California you need to obtain and file Form 3500A with the Franchise Tax Board.
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Tips & Warnings
The IRS website has a Charities and Nonprofits page that provides much useful information and examples on applying for 501c3 recognition for your organization. For information on how to properly form your organization as a legal entity, you should obtain this information from the secretary of state's office in your state.
Once approved for 501c3 recognition by the IRS, your organization will have to abide by strict reporting requirements to the IRS or your organization can lose its tax-exempt status. Your organization should retain the services of an attorney and accountant familiar with these requirements who can advise the organization on making the appropriate filings with the IRS and the taxing authority in your state.
