Apply for 501(c)(3) Status
How do we obtain tax-exempt status?
You must file with the Internal Revenue Service for tax-exempt status under Section 501(c)(3). Fill out and file the multi-page form 1023. After your application is approved, you will receive a letter granting tax-exempt status to your organization.
Why should we incorporate and be tax-exempt?
Nonprofit 501(c)3 organizations:
- may be exempt from property taxes on all or part of their real property
- are exempt from federal income taxes on income related to the organization’s exempt purposes
- are exempt from federal unemployment taxes
- are often exempt from state sales taxes
- can collect tax-deductible contributions
- can receive grants from private foundation grants and government grants and contracts
- may be eligible for reduced postal rates
- often have a more elevated status in the eyes of donors and the public
As a separate legal entity, incorporation inserts a legal buffer between the corporation and the trustees, officers, members or other individuals. The assets at risk in a lawsuit or claims of creditors are the corporation’s, not the personal assets of the individual trustees, officers, volunteers, etc.
Publication 557, “Tax-Exempt Status for Your Organization” www.irs.gov/publications/p557/index.html