If you’ve been considering turning your non–profit organization into a 501(c)(3) entity, you’re not alone. Becoming a 501(c)(3) allows your organization to access a variety of resources, including tax–exempt status, corporate sponsorships, and access to grants and donations.
The process of transitioning from a non–profit to a 501(c)(3) can seem daunting, but it’s important to remember that the end result is worth the effort.
Here are some steps to help you get started on the path to becoming a 501(c)(3):
To turn your non-profit into a 501(c)(3) organization, you will need to follow these general steps:
First, you need to incorporate your non-profit organization as a legal entity in your state. This means that you will need to file articles of incorporation with the Secretary of State’s office in the state where your non-profit is located.
You will need to obtain an EIN from the Internal Revenue Service (IRS). This is a unique identification number that your organization will use for tax purposes.
Draft and file your 501(c)(3) application: You will need to draft and file Form 1023, the application for recognition of exemption under section 501(c)(3) of the Internal Revenue Code. This application will require detailed information about your organization, including your purpose, structure, governance, and financial information.
As of 2021, the application fee for Form 1023 is $600 for organizations with annual gross receipts of $50,000 or more, and $275 for organizations with annual gross receipts of less than $50,000.
Once you have filed your application, the IRS will review it to ensure that your organization meets the requirements for tax-exempt status. This process can take several months, so be patient.
You may check the status of your application during your wait time, but the IRS specifically requests that you not call to request information about your filing
Organizations must electronically file this form to apply for recognition of exemption from federal income tax under section 501(c)(3).
Note. You may be eligible to file Form 1023-EZ, a streamlined version of the application for recognition of tax exemption. You must complete the Form 1023-EZ Eligibility Worksheet in the Instructions for Form 1023-EZPDF to determine if you are eligible to file this form. If you are not eligible to file Form 1023-EZ, you can still file Form 1023.
To submit Form 1023, you must:
LLC Applying for Tax-exempt Status under Section 501(c)(3) Must Submit Information Described in Notice 2021-56
Changes to Jan. 2020 Revision of Instructions for Form 1023, Schedule E, Line 2 and Line 2a — 27-JAN-2021
Updated Information on Signing Electronically Submitted Form 1023 — 05-MAY-2020
Taxpayer Relief for Certain Tax-Related Deadlines Due To Coronavirus Pandemic — 14-APR-2020
Electronic Filing of Form 1023 — 31-JAN-2020
Once your organization has been granted 501(c)(3) status, you will need to make sure that you comply with all of the rules and regulations that apply to tax-exempt organizations. This includes filing annual information returns with the IRS, keeping accurate financial records, and following other rules related to governance, fundraising, and charitable activities.