FAQs regarding applying for tax exempt 501 (c) (3) status?
1. Why would a CTA want to become a 501(c)(3) nonprofit corporation?
The main reason is if your CTA plans on implementing a number of fundraising campaigns, then it may enhance the possibilities of receiving donations from individuals and other entities who may be attracted by the tax advantages.
2. How do we know if our organization qualifies to be a 501 (c) (3)?
First and foremost to apply for 501 (c) (3) status a CTA must first be incorporated as a nonprofit organization in your state. After doing that, then you are ready to file with the IRS.
To qualify as a 501 (c) (3) you must convey in your application that you are either one, two or all of the following:
· a charitable organization
· a research institution
· educational
3. How do we know if our CTA is ready to become a 501 (c) (3)?
[The following was taken from materials obtained during a workshop entitled "Are you Ready to be a 501 (c) (3)" at the Community Resource Center in Denver.] If you can answer all of these questions with confidence, then you are probably ready:
Do you have a clear and well-defined mission statement?
Do you have a constituency that embraces the mission and program?
Have you identified a group of individuals who will serve as a founding board of directors?
Do you know what your legal obligations will be as a 501 (c) (3) nonprofit organization?
Do you know of other organizations that provide similar services in your community?
Do you know where your first round of funding will come from?
4. How do we obtain the forms to file for 501 (c) (3) status?
The quickest and most efficient way is to go to your state IRS office to pick up the forms. If your state office is a significant distance away from you then you can also find the forms on-line at: www.irs.ustreas.gov/prod/forms_pubs/index.html.
5. So, if our CTA is incorporated as a nonprofit then we are now ready to file the papers to become a 501 (c) (3) tax-exempt corporation?
Not quite. You will need an EIN before you can submit your 501 (c) (3) application. Fill out form SS-4 and fax it to the IRS regional office in Ogden, UT at (801) 620-7115 along with a letter asking to receive an EIN within five days. If after five days, you have not received your EIN, you can call the Ogden IRS office at (801) 620-6755.
Once you have your EIN, you can start to complete Form 1023 which is your 501 (c) (3) application to the IRS. Fill out the application before you read the Form 1023 Guidelines then refer to the guidelines for those questions you find confusing. Reading the guidelines first tends to create doubt and confusion about the application. It also helps to get a copy of an approved 501 (c) (3) application from another nonprofit organization. The approved application will give you an idea of the information you must include and the best way to answer the questions.
The completed application must be accompanied by your Certificate of Incorporation from your state and the bylaws of your corporation. If your bylaws are not completed, a letter stating that you are in the process of completing them will be sufficient.
6. Once we complete Form 1023 are we done and how long will it take to be approved?
Within 30-40 days you will receive a letter from the IRS asking for additional information or giving your application final approval. It is rare to get final approval during this period so do not be discouraged if the IRS asks for additional information. That is the norm in this process. If additional information is requested, respond as soon as possible. You are generally given 20 days to respond. If you do not respond within 20 days, your application can be denied. If you are not able to obtain the answers to the questions within the 20-day period, call the IRS to work out arrangements. You can also call to clarify any questions you may have.
Note: The above information came from "Are you Ready to be a 501 (c)(3)" a workshop conducted by the Community Resource Center of Denver. The USTA/Intermountain is not an expert on incorporation and obtaining tax exempt status. Please consult with your lawyer and/or accountant when going through the process.