Becoming a Non Profit Organization With Tax-Exempt Status

Your charitable organization may qualify for nonprofit status.

The Internal Revenue Service (IRS) designates entities as nonprofit organizations if they apply for the status and meet the requirements of the tax legislation known as 501(c)(3). To become a nonprofit, your group must have a charitable purpose, which the IRS defines as religious, educational, scientific, charitable, literary, testing for public safety, fostering national or international amateur sports competition, or preventing cruelty to children or animals. The nonprofit designation gives your group exemption from paying taxes and your donors the right to deduct their gifts to your organization from their income taxes.

Things You'll Need

• Computer with Internet access
• Telephone
• Printer
• Paper

Instructions

1. Form a trust, corporation or association. In a trust, you hold title to a property that benefits another person. To create a corporation, you need to file articles of incorporation under applicable state law. An association is formed by joining in a group of at least two people (you can be one of them) who write and sign articles of association and file them with the state government. Before you can apply for nonprofit status with the IRS, you need to become one of these three entities.

2. Apply for an employer identification number (EIN). According to the IRS, your agency needs an EIN even if it doesn't hire any staff. To get a number by phone, call 800-829-4933. To apply for it online, visit irs.gov/ or see the link in Resources. Your 501(c)(3) application form (IRS Form 1023) will ask for your EIN.

3. Fill out and submit Form 1023, "Application for Recognition of Exemption," to the IRS to request nonprofit status for your organization. The application also requires you to attach a narrative that describes in detail the activities of your group. Download the application at irs.gov/ or see the link in Resources. Mail completed applications by first-class mail to:

   Internal Revenue Service
   PO Box 12192
   Covington, KY 41012-0192

Tips & Warnings

• A free 19-minute online tutorial called "Applying for Tax-Exempt Status" is available at stayexempt.org/Mini-Courses.aspx.

References

• IRS.Gov: Exempt Purposes - Internal Revenue Code Section 501(c)(3)
• IRS.Gov: Application Process
• IRS.Gov: EIN Assistant
• IRS.Gov: Application for Recognition of Exemption
• IRS.Gov: Submission of Organization's Completed Application

Resources

• IRS.Gov: EIN Assistant
• IRS.Gov: Application for Recognition of Exemption
• IRS.Gov: Exemption Requirements - Section 501(c)(3) Organizations