To achieve tax-exempt status in the United States under IRS Section 501(c)(3), a non-profit organization needs to go through several key steps. Here’s a comprehensive outline of the process: 1. **Incorporate as a Non-profit Corporation**: Before applying for tax-exempt status, an organization must be formally acknowledged as a non-profit entity at the state level. This typically involves filing articles of incorporation with the appropriate state agency, usually the Secretary of State's office, and adhering to any other state-specific requirements. 2. **Obtain an Employer Identification Number (EIN)**: Even if you do not have employees, non-profits must acquire an EIN for identification purposes. This can be done quickly and conveniently through the IRS website, by fax, or by mail. 3. **Adopt a Mission Statement and Bylaws**: The mission statement should clearly define the organization's purpose, and the bylaws should outline the rules for governance. These documents demonstrate to the IRS that the organization will engage in activities consistent with its tax-exempt purposes. 4. **Assemble a Board of Directors**: Select a board of directors who will govern the non-profit. It’s advisable to choose individuals who are committed to the organization's mission and who bring diverse skills to the table. 5. **File IRS Form 1023 or 1023-EZ**: This is the Application for Recognition of Exemption. Form 1023 is the standard, long-form application, while Form 1023-EZ is a streamlined version for smaller non-profits that meet certain criteria. These forms can be quite detailed, requesting information about organizational structure, governance, finances, and activities. - For Form 1023, the organization must provide a detailed description of its activities, including how they further its exempt purposes, and must attach organizational documents, like the articles of incorporation and bylaws. - Form 1023-EZ has eligibility requirements, such as gross receipts of $50,000 or less and assets valued at $250,000 or less, and can be filed online, simplifying the process. 6. **Pay the Applicable Filing Fee**: As of 2021, there is a fee that must be paid with the application, which varies depending on the form submitted. Form 1023 has a higher fee than Form 1023-EZ. 7. **Await Determination**: After submission, the organization must wait for the IRS to review its application. Approval times can vary widely from just a few weeks for 1023-EZ applications to several months or more for Form 1023 applications. The IRS may also request additional information if needed to make a determination. 8. **State-level Tax Exemptions**: Once federal exemption is granted, non-profits may also need to apply for state-level tax exemptions, which often involve a separate application to the state’s department of revenue. Once these steps are completed and the IRS has granted tax-exempt status, the non-profit will receive a determination letter, which is critical proof of the organization's tax-exempt status and is necessary for tasks such as opening a bank account and applying for grant funding. Moreover, the organization must adhere to certain ongoing compliance requirements, such as filing annual informational returns with the IRS (Form 990 series), to maintain its tax-exempt status. It's important to consult with professionals, such as lawyers and accountants who specialize in non-profit law and tax matters, to ensure that the process is handled correctly. The specific steps and documentation required can depend on the nature and size of the organization, and professional expertise can help avoid common pitfalls.