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

How Much Will It Cost?

State incorporation

State incorporation fees for nonprofit entities are generally under $100, although a few states exceed that. Many states charge a fee between $25 and $50.

Federal tax-exempt status

When filing for 501(c)(3) tax-exempt status, fees are higher. If your organization's average gross receipts have exceeded or will exceed $10,000 annually over a four-year period, the fee when submitting your Form 1023 is $850. If your average gross receipts have not exceeded or will not exceed $10,000 annually over a four-year period, the fee is $400 (as of October 2010).

Note: The IRS is planning the future release of an on-line filing tool called Cyber Assistant. Cyber Assistant is designed to help organizations prepare a complete and accurate Form 1023 application. Applicants will send their Form 1023 electronically to the IRS. The IRS planned for Cyber Assistant to be available in 2010, but it has been delayed until at least 2011.

Once Cyber assistant is available, fees will change again to:

$200 for organizations using Cyber Assistant, regardless of their size
$850 for all organizations not using Cyber Assistant, regardless of their size.

The IRS will announce the availability of Cyber Assistant and the effective date the change in user fees. You can sign up for the IRS's Exempt Organization (EO) Update newsletter at www.irs.gov/charities, and you will be notified when Cyber Assistant is up and running. Current application fees can be found at this IRS link.

If you are a small group or an individual and you're thinking, "Wow, that's a lot of money," remember that if you are currently limiting your fundraising efforts due to your lack of tax-exempt status, the cost of a few spay surgeries will open doors to greater resources for your group and the homeless pets you save. How quickly might you recover that $400 if you were able to actively solicit donations and apply for grant opportunities?

If you are thinking "Hey, it's worth it, but I never have $400 in my pocket at one time when there are so many animals to save," that should not stop you from beginning the process by seeking state incorporation and completing IRS Form 1023. Sometimes $400 does come your way. You may find a supporter who would be willing to provide the fee to help your organization grow. When you do, you can have the paperwork ready and won't have to start at square one.