Becoming a 501C3 Organization
Who can do this?
All organizations who do the following are eligible:
1. Formed as a legal organization (i.e. Non-Profit Corporation); and
2. Operated exclusively for exempt purposes (as described in Section 501(c)(3); and
3. None of the earnings may benefit a private individual or shareholder; and
4. Are not “Action Organizations” like political action groups.
If your organization is eligible, it can apply to be formally recognized by the IRS.
Do you need to be formally recognized?
Most organizations must submit an application. However the following types of organizations may be considered tax exempt under section 501(c)(3) even if they do not file Form 1023 or Form 1023-EZ:
• Churches, including synagogues, temples, and mosques.
• Integrated auxiliaries of churches and conventions or associations of churches.
• Any organization that has gross receipts in each taxable year of normally not more than $5000
How to apply?
If your organization is eligible, it must complete an application (Form 1023) and submit to the IRS, with a fee of either $400 or $850, and a copy of its organizing documents.
What happens then?
Upon acceptance, the IRS will issue a qualification letter stating that your organization has been recognized for exemption under §501(c)(3) of the Internal Revenue Code.
How long will this take?
This process usually takes 4 to 6 months.
How are the fees determined?
The fees an organization would pay are determined by the organization’s expected gross receipts for the first (or preceding) four (4) years.
If > $10,000 gross receipts = $850 fee
If > $10,000 gross receipts = $400 plus must file 1023-EZ, plus much attach Form 8718 User Fee for Exempt Organization Determination Letter Request
How to submit an application?
The IRS provides some details about the process through Form 4220. More discussion about the Tax Exempt Status is offer through Form 557 as well as Private Foundations.
Form 1023 – Application for Recognition of Exemption
Form 1023-EZ – This is the IRS new streamlined process for those organizations that are eligible (see IRS Eligibility Worksheet). Here is the IRS’ process for 1023-EZ:
Step 1: Read Instructions for Form 1023-EZ and answer the 1023-EZ Prerequisites Q&A.
Step 2: Register for an Account on Pay.gov
Step 3: Enter “1023-EZ” in the search box.
Step 4: Complete the form
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IRS 501(c)(3) Qualification Filing
Other Useful Information
All Form 1023-EZ Revisions
Publication 517 – Social Security and Other Information for Members of the Clergy and Religious Workers
Publication 526 – Charitable Contributions