Congress wants to encourage the development of philanthropic, charitable and educational institutions in the United States. It has therefore directed the Internal Revenue Service to grant tax-exempt status to these organizations, under Section 501(c)(3) of the Internal Revenue Code. These organizations must comply with certain restrictions on their activities however.
Employer Identification Number
You must request a federal employer identification number, or EIN, from the Internal Revenue Service. You will need to know the Social Security numbers of all the principal leaders of the the nonprofit organization, and appoint one person as the agent, who will be responsible for correspondence with the IRS and serve as their primary point of contact.
State Articles of Incorporation
You must register as a corporation with your state's office of the Secretary of State or Division of Corporations. There is generally a fee to file these articles of incorporation, and the fee varies by state. This establishes your corporation as a separate legal entity from its founders, and generally prohibits creditors from going after the personal assets of the corporation's owners or founders for debts incurred by the company.
IRS Application for Recognition as a Tax-Exempt Organization
You must file a Form 1023 with the Internal Revenue Service. This is a formal request for recognition as a tax-exempt entity under Section 501(c)(3) of the Internal Revenue Code. You will need to disclose the compensation of all your organization's directors, sources of revenue, and provide a statement describing your organization's mission and the services you will provide.
Restrictions on Activities
In order to maintain eligibility for tax-exempt status, the organization must not be operated primarily for the benefit of its owners, managers, trustees or employees, but must have a legitimate external purpose. You also may not engage in political lobbying campaigns designed to effect changes in the law. Your organization may also not directly engage in advocating for specific electoral candidates, however paragraphs 4, 5 and 6 of Section 501(c) outline certain limited exceptions.