How to Get a 501(c)(3) Letter: A Step-by-Step Guide
Starting a non-profit organization is an exciting endeavor, but it requires careful planning and compliance with legal requirements. One of the most crucial steps in establishing a non-profit is obtaining a 501(c)(3) letter from the Internal Revenue Service (IRS). This letter confirms that your organization is recognized as tax-exempt under Section 501(c)(3) of the Internal Revenue Code. Here’s a step-by-step guide on how to get a 501(c)(3) letter for your non-profit organization.
1. Formulate a Clear Mission Statement
Before applying for a 501(c)(3) letter, it’s essential to have a clear mission statement that outlines your organization’s purpose and goals. This statement should be concise, compelling, and demonstrate how your organization will benefit the public.
2. Choose a Name and Apply for an Employer Identification Number (EIN)
Select a unique name for your non-profit that reflects its mission and is not already in use by another organization. Once you have a name, apply for an Employer Identification Number (EIN) through the IRS. This number will be used for tax purposes and is required for your 501(c)(3) application.
3. Draft Articles of Incorporation
Articles of Incorporation are legal documents that establish your non-profit as a formal entity. They should include information such as your organization’s name, purpose, and the names of its initial board members. Consult with an attorney or legal expert to ensure your articles of incorporation are properly drafted.
4. File Articles of Incorporation with the State
Submit your Articles of Incorporation to your state’s Secretary of State or similar agency. This process may vary by state, so be sure to check the specific requirements for your location.
5. Apply for State Tax Exemption
Contact your state’s tax agency to apply for state-level tax exemption. This process is separate from the federal 501(c)(3) application and may require additional documentation.
6. Prepare and File the IRS Form 1023
The IRS Form 1023 is the application for recognition of exemption under Section 501(c)(3). This form is lengthy and requires detailed information about your organization, including its purpose, structure, financials, and governance. Be prepared to provide supporting documents, such as your articles of incorporation, board member information, and financial statements.
7. Pay the Application Fee
As of 2021, the IRS charges a filing fee of $275 for Form 1023. If your organization has less than $50,000 in gross receipts, you may qualify for a reduced fee of $105. There is also an option to file Form 1023-EZ, which has a lower fee and is simpler to complete, but it may not be suitable for all organizations.
8. Wait for IRS Review and Approval
After submitting your application, the IRS will review it and determine whether your organization qualifies for 501(c)(3) status. This process can take several months, so be patient. Once your application is approved, the IRS will issue a 501(c)(3) letter confirming your organization’s tax-exempt status.
9. Maintain Compliance
Obtaining a 501(c)(3) letter is just the beginning. To maintain your tax-exempt status, you must comply with the IRS’s requirements, such as filing annual tax returns (Form 990) and maintaining accurate records. It’s also crucial to stay informed about any changes in tax laws and regulations that may affect your organization.
By following these steps, you can successfully obtain a 501(c)(3) letter for your non-profit organization and begin making a positive impact in your community. Remember to seek legal and financial advice throughout the process to ensure your organization is compliant with all applicable laws and regulations.
