Filling out the IRS Forms for Nonprofit Status

by Paul Castelloe
Center for Participatory Change

There are several key parts to the IRS application for nonprofit status (Form 1023):

You’ll have to complete THE FORM ITSELF. This includes some general information (addresses), information about your group’s activities, some technical questions, and a budget.

You’ll need to send attachments, including your ARTICLES OF INCORPORATION and your BYLAWS. These need to be complete copies of the original (signed) documents.

Another attachment will likely include a detailed account of your organization’s ACTIVITIES. There is space for this on the form, but you will likely need to include more information.

Copies of organizational PUBLICATIONS — newsletters, brochures, bulletins, pamphlets, and advertising — may be helpful to include as well (as long as they support the case that you should be classified as a nonprofit organization).

You’ll also need to include a list of your BOARD OF DIRECTORS, and an explanation of how the board represents the community as a whole.


Is your organization eligible?

For the IRS, a 501(c)(3) organization is one that operates for one of the following purposes: religious, educational, charitable, scientific, literary, testing for public safety, fostering amateur sports competition, or preventing cruelty to animals or children.

Also, a nonprofit does not exist solely for the benefit of its members, or solely to distribute profits to their members.

Finally, a nonprofit cannot exist primarily to influence legislation. If you are unsure, talk with a tax law expert about whether or not your group meets these criteria.

Completing IRS Forms for Nonprofit Status

In this part of the Toolbox, CPC provides some basic information on the IRS forms that you need to fill out to get nonprofit (501(c)(3) status for your organization.

ADVANTAGES OF NONPROFIT STATUS
Having Section 501(c)(3) status with the IRS provides benefits such as:

  • Recognition of tax-exempt status;
  • Advance assurance to donors that
    their donations are tax-deductible;
  • Exemption from some state taxes;
  • Exemption from some federal taxes;
  • Nonprofit mailing status;
  • Qualifying for foundation grants.

THE FORMS YOU NEED
There are several forms that you need to get from the IRS, complete, and submit. The forms you need are: Form 1023, Form SS-4, Form 8718, and Publication 557. These can be ordered from the IRS, by calling 800-829-3676 or 800-829-1040 or by requesting or downloading the forms from the IRS website. (http://www.irs.gov/)

FORM 1023: THE BIGGIE
The main form you need to fill out is Form 1023 (“Application for Recognition of Exemption”). It’s a long form. You’ll need somebody with some tax law expertise (a lawyer or CPA) to look over your work. You can make a first cut at it, though. It’s doable.

The form. Start by filling out (in pencil at first) the form itself. There are several sections to it.

Part I asks for general information about your organization — address, contact information, introductory tax information. This section is pretty straightforward.

Part II asks about your organization’s activities. You will probably need to provide more information than the space allows, so you’ll want to include an attachment providing a detailed overview of what your organization does. Part II also asks about your fundraising plan, and it asks some information about how your organization will be structured (e.g., will it have members or influence political processes?) This section is key, because the IRS will use it to determine whether or not you fit the 501(c)(3) criteria.

Part III asks you for technical, tax-related information about your organization. This section can be confusing — it’s probably the place where you’ll most need outside expertise to answer the questions. A key here is how the organization will be supported financially. That’s important to the IRS.

Part IV asks you to provide an organizational budget for the current tax year and a proposed budget for the next two years. If you have a budget worked out already, you can attach it to show the IRS your financial plans in more detail.

The attachments. Along with the form itself, you will need to submit attachments. These will be documents that you probably have already created as you planned your organization and its work.

1. Organizing documents. Basically, this means your Articles of Incorporation (which you should have filed with the NC Secretary of State) and your bylaws (which you should have written and had approved at your first board meeting). These need to be “conformed copies”— exact copies of the original, signed documents.

2. Description of activities. Also include a detailed description of your activities — what your organization will do, and how it will do it. This will be important for the IRS in determining whether or not you meet 501(c)(3) criteria.

3. Financial data. The form asks for budget information for the current tax year and the next two years (or the past three years, if applicable). You will need to include more detailed budget information. Include a detailed budget, if you have one.

4. Other information. You may get a letter or phone call back from the IRS asking for more information. This is normal. They may ask for: more information about your activities, copies of advertising or publications such as newsletters or brochures, or copies of leases, contracts, or agreements into which your organization has entered.

THE OTHER FORMS

Form SS-4 is the first form you need to fill out — it gives you an Employer Identification Number (EIN), an important number used in all IRS transactions. It’s an easy form, and you can fax the form and get the number immediately.

Form 8718 is just a brief form that you use to submit your fee for applying.

Publication 557 provides a lot of information about the IRS and nonprofit tax laws. It's a pretty thick book, but it's an essential guide to use in writing the narrative sections of Form 1023.

For more information on the other steps you need to take and other government agencies to contact, see Forming as a Nonprofit Organization in The Toolbox.

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