Section 501(c)(3) describes an organization that is one that is organized and operated exclusively for religious, charitable, scientific, . . . literary, or educational purposes, . . . or for the prevention of cruelty to children or animals. No part of such an organization’s net earnings of can inure to the benefit of any private person or entity. Such an organization also has restrictions on its ability to engage in the carrying on propaganda and to attempt to influence legislation, and is absolutely prohibited from intervening in any political campaign on behalf of any candidate for public office.
While a 501(c)(3) can be organized as an unincorporated association or trust, the corporation is the gold standard for 501(c)(3) organizations. This is because unlike the trust or association, the corporation limits the personal liability of its directors, officers and members. A 501(c)(3) can also be organized as an LLC in very limited circumstances, which include the necessity of a 501(c)(3) LLC to be wholly owned by either 501(c)(3) or government entities. This is why, the path towards 501(c)(3) tax-exemption almost always begins with forming a corporation.
Once the nonprofit corporation has been formed, its bylaws have been prepared, and an organizational meeting has been held to ratify the corporate documents and take appropriate corporate action, the next step is to complete IRS Form 1023 (“Application for Recognition of Exemption under Section 501(c)(3) of the Internal Revenue Code”).
Form 1023 is an extensive document that describes how the organization gets its funding, what activities it will conduct, who will be paid, and who are in charge. Based on what is submitted, and any other questions the IRS examining officer might have, the IRS will determine whether or not the organization qualifies as a 501(c)(3) not-for-profit, and, if requested, also whether the organization is a private foundation or public charity. In general, the determination is made by examining the 501(c)(3) application against applicable laws, rules and regulations, as well as unwritten customs.
If you think your organization is ready to become a 501(c)(3) tax-exempt entity, our firm can guide you through the process of completing Form 1023 and review it before it is submitted to the IRS.
New York 501(c)(3) Application Package
Package includes the following:
- Prepare IRS Form 1023 or IRS Form 1023-EZ, as appropriate, the application for recognition as a 501(c)(3) tax-exempt organization.
- File 501(c)(3) application package with the IRS.
- Representation before the IRS in connection with the application.
- Prepare charitable registration statement for one state
- Prepare New York Form CHAR 410, the New York registration statement for charitable organizations.
- Prepare New York Form CT-247, the application for exemption from New York corporate franchise tax.
- Prepare New York Form 119.2, the application for a New York sales tax exemption certificate.
- Consultation on issues related to the above.
Legal Fee*: starting at $1,800 (1023-EZ) and $3,800 (1023)
*Legal fee is an estimate representing what we normally charge clients to prepare a standard 501(c)(3) application when they have formed the underlying nonprofit corporation with us. Fees will be higher if we did not handle the incorporation process. Additionally, depending on the complexity and volume of anticipated activities by the organization, fees may be higher. We are usually able to offer this service for a flat-fee once we’ve had the opportunity to discuss with you your vision for the nonprofit. Quote does not include state and federal fees. As of February 2018, federal fees are between $275 (1023-EZ) and $600 (1023), and New York’s registration fee is $25.