The first stage in the life cycle of any organization is its creation. A nonprofit organization may be created as a corporation, a trust, or an unincorporated association. Any of these entities may qualify for exemption. Note, however, that a partnership generally may not qualify.
Applying to the IRS
Once an organization has been created under state law and begins to operate, it may want to be recognized as exempt under section 501(a) of the Internal Revenue Code. In addition to exemption from federal income taxation, organizations recognized as exempt under section 501(a) may enjoy collateral benefits under the Code, as well as under state or local income, property, sales, use or other tax provisions.
To apply for exemption, an organization should obtain and complete the required forms (exemption application) and application for employer identification number and submit them, along with the required user fee. If an organization will be represented by an attorney or other representative, it must also submit a power of attorney.
Public disclosure requirements apply to exemption applications that the IRS approves. In addition, cases in which the IRS has issued a letter denying or revoking an organization's exempt status are subject to public disclosure under Internal Revenue Code section 6110.
Organizing Documents
Each application for exemption must be accompanied by an exact copy of the organization’s organizing document: Articles of incorporation for a corporation, articles of organization for a limited liability company, articles of association or constitution for an association, or trust agreement or declaration of trust for a trust. If the organization does not have an organizing document, it will not qualify for exempt status.
If the organization’s name has been officially changed by an amendment to its organizing documents, also attach an exact copy of that amendment to the application.
State law generally determines whether an organization is properly created and establishes the requirements for organizing documents.
An
exempt organization that is required to file an annual
return must report name, address, and structural
and operational changes on its return. Regardless
of whether an organization files an annual return,
it may also report these changes to the EO
Determinations Office; however, such reporting
does not relieve the organization from reporting
the changes on its annual return.
TIP: Attach
copies of any signed or state certified articles
of incorporation, or association, constitution
or trust instrument or other organization document,
or the bylaws or other governing document showing
changes. If signed or state certified copies
of a governing document are not available, an
authorized officer may certify that the governing
document provided is a complete and accurate
copy of the original document.
An organization may
request a determination
letter regarding the effect of certain changes
on its tax exempt status or public charity status.
For example, a determination letter will be issued
to classify or reclassify an organization as a
public charity or a private foundation. A public
charity may also request a determination letter
to approve the treatment of a contribution as
an unusual grant or to determine whether
an organization is exempt
from filing annual information returns in
certain situations. However, the IRS will not
make any determination regarding any completed
transaction.
Reporting Changes to IRS
If an organization is
unsure about whether a proposed change in its
purposes or activities is consistent with its
status as an exempt organization or as a public
charity, it may want to request a private
letter ruling.
Additional Information
Frequently Asked Questions About Applying for Exemption
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