Obtaining 501(c)(3) Non-Profit Status

Complete Form 1023 To Apply for Non-Profit Status

A Brief Overview of Form 1023, "Application for Recognition of Exemption"

Have you been thinking about applying for your 501(c)(3) but haven't jumped in to really look at the application? Here's a brief overview to warm you up!

To apply for tax-exempt status with the Internal Revenue Service, your organization will need to complete Form 1023 Application for Recognition of Exemption. This form is available online at http://www.irs.gov/charities/article/0,,id=139465,00.html. The form will ask many straightforward questions that you can easily answer (name of organization, address, Web site address, etc.). It will also ask questions that are more involved and will require some work (your organization's specific activities, Articles of Incorporation, financial data, etc.).

Don't panic at the size of Form 1023 when you view it online. Download it, print it out and make copies for your fellow board members, so you can all review it comfortably.

Compared to your personal or business income tax form, the questions on Form 1023 are surprisingly clear! One reason the form is so long is because it includes some instruction on the form itself. There are also line-by-line instructions at http://www.irs.gov/instructions/i1023/index.html

You will discover that there are pages of the form that may not apply to your organization. You can remove them from the packet. However, hang onto any pages you ultimately plan to discard. If you misplace a needed page while you are working, you can then assure yourself you did not toss it in the recycling bin.

Don't panic at the wording on Form 1023! If you are a small, newer organization, you may find that many of the questions do not apply to your group. Don't jump into the middle of the document and tell yourself "I can't do this" because the language in a certain paragraph is foreign to you. It may be unfamiliar because it is not applicable to your shelter or animal adoption group. You may simply need to check "no" for that question.

Read the document from beginning to end with your board before attempting to complete it. Refer to the instructions when you have questions.

Mark any questions that use language you do not understand or that require information that you have not yet prepared. For example, Part III asks for questions about your "Organizing Document" and "state filing certification." If you have not incorporated with your state or prepared an organizing document, flag this question. When you are done reviewing the form, you'll have a better idea of the steps your group still needs to take to apply for federal tax-exempt status. This will make the form seem far more manageable, with tasks that can be taken step by step or assigned to different board members.

Narrative Description of Your Activities

You will be asked to include an attachment listing your organization's past, present and planned activities. If you have incorporated with your state and have completed a mission statement, goals and bylaws, these completed documents will aid you in completing this section.

If you are looking into state incorporation and the federal 501(c)(3) process at the same time, completion of your state's incorporation process first will make your 501(c)(3) process more straightforward. Please visit our page on Articles of Incorporation.

Form 1023 mentions that you may include representative copies of newsletters, brochures or similar documents. Include only clean, professional documents that provide evidence of your organization's activity. A thicker packet is not necessarily better if what results is a confusing, hard-to-handle collection of materials.

Financial Data

Form 1023 provides you with a table for financial data. The questions are already provided, so you do not necessarily need to create a template for a financial report of your own.

If your organization has been in existence for four or more years, you will be expected to provide accurate data. If you have been in existence for less than four years, you will be asked for good faith estimates for current and future years.

Completing and sending Form 1023 to the IRS

The IRS Form 1023 includes a checklist--aptly named "Form 1023 Checklist"-- to help you assemble your final packet and ensure that you have included all the requested forms and information.

If the required information and documents are not submitted with payment of the appropriate fee, the application may be returned to you. Hang onto that checklist! It tells you exactly what you need to know.

After You Submit Form 1023

The IRS will acknowledge receiving your application in writing within 21 days of the postmark date of Form 1023. After the IRS receives and reviews your Form 1023 application, they will respond in one of three ways: A) They will grant your request for tax exemption, or B) they will ask you for additional information, or C) they will refuse to issue a determination letter. This refusal is called an "adverse determination." Your organization can appeal this decision.

Please be certain you are using a current Form 1023, and send it to the correct address (as of 11/01/10):
Internal Revenue Service
P.O. Box 12192
Covington, KY 41012-0192

In general, approval takes from two months to a year, depending on whether or not the IRS has questions after submission of your application.

If the IRS determines that they need additional information or changes, an IRS specialist will contact you. If the IRS concludes that you do not qualify for exemption, you will be sent a letter that explains their position and your right to appeal.

Resources from the IRS

For a brief overview direct from the IRS, download their two new brochures:

• Publication 4220, Applying for 501(c)(3) Tax-Exempt Status (PDF 285K)
• Publication 4221, Compliance Guide for 501(c)(3) Tax-Exempt Organizations (PDF 298K)

For a thorough overview of the application process, visit the IRS Web page on the Life Cycle of a Public Charity at http://www.irs.gov/charities/charitable/article/0,,id=122670,00.html.