How to Get a Determination Letter from the IRS
Obtaining a determination letter from the IRS is a crucial step for organizations seeking recognition of tax-exempt status under Section 501(c)(3) of the Internal Revenue Code. This letter is a formal acknowledgment from the IRS that your organization meets the necessary criteria for tax-exempt status. Here’s a comprehensive guide on how to get a determination letter from the IRS.
1. Understand the Eligibility Requirements
Before applying for a determination letter, ensure that your organization meets the eligibility requirements set by the IRS. These requirements include being organized and operated exclusively for charitable, religious, educational, scientific, literary, testing for public safety, fostering amateur sports competition, or preventing cruelty to children or animals purposes. Additionally, your organization must not be an private foundation as defined by Section 509(a) of the Code.
2. File Form 1023 or Form 1023-EZ
The next step is to file the appropriate form with the IRS. Form 1023 is the standard application for recognition of tax-exempt status, while Form 1023-EZ is a simplified version for small organizations with gross receipts of less than $50,000 per year and assets of less than $250,000. Ensure that you complete the form accurately and provide all the necessary information.
3. Pay the Application Fee
The IRS charges a filing fee for Form 1023 applications. The fee varies depending on the organization’s gross receipts and whether it has received a determination letter in the past. Pay the fee using the payment method specified on the form or through the IRS website.
4. Submit Required Supporting Documents
In addition to the application form, you must submit supporting documents to provide further evidence of your organization’s eligibility. These documents may include:
– Articles of Incorporation or Certificate of Formation
– Bylaws
– List of directors, officers, and trustees
– Minutes of meetings
– Financial statements
– Information about any related organizations
5. Wait for the IRS Review
After submitting your application and supporting documents, the IRS will review your application. The review process may take several months, depending on the complexity of your application and the volume of applications the IRS is processing at the time.
6. Receive Your Determination Letter
Once the IRS has reviewed your application and determined that your organization meets the necessary criteria, you will receive a determination letter. This letter will confirm your organization’s tax-exempt status and provide details about any restrictions or special conditions.
7. Maintain Compliance
After receiving your determination letter, it is essential to maintain compliance with the IRS’s requirements. This includes filing annual returns (Form 990 or 990-EZ), updating your organization’s information with the IRS, and adhering to the organization’s tax-exempt purposes.
In conclusion, obtaining a determination letter from the IRS is a vital step for organizations seeking tax-exempt status. By following these steps and ensuring compliance with the IRS’s requirements, your organization can successfully obtain this letter and continue its charitable work.
