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These guidelines are supplied by Executive Service
Corps of Chicago. Once you have secured 501(c)(3) status, ESC can provide
technical assistance relative to board and/or management issues.
STEPS TO BECOMING A 501(c)(3)
Why apply for 501(c)3 status?
Federal tax laws provide tax benefits to nonprofit
organizations under section 501(c)(3) of the Internal Revenue Code. One
must complete an application and provide proper documentation to receive
these benefits. Once recognized, the organization is exempt from federal
income tax, may be exempt from certain employment taxes and is eligible to
receive tax-deductible charitable contributions. A 501(c)(3) status is
recognized by many sources including individual and corporate donors;
state laws, specifically exemption from state income, sales and property
tax; and the US Postal Service.
Organizations may receive 501(c)(3) benefits by affiliating
with an existing nonprofit which has already received 501(c)(3) status.
The nonprofit with the official status will be the fiscal agent and have
full control and authority over the second organization.
Who is
eligible for 501(c)(3) status?
A nonprofit must be organized and operate exclusively for
one or more exempt purposes.
Organized:
The nonprofit must be organized as a corporate, trust or unincorporated
association. The organization of the nonprofit must fall within the limits
of the purposes described in section 501(c)(3) of the tax law.
Operated:
A substantial portion of the nonprofit’s activities must further its
exempt purposes. Restrictions include not participating in political
campaigns, restriction from lobbying, ensuring that earnings do not
benefit the shareholder(s), not operating for private interests, etc.
Exempt Purpose:
The nonprofit must have one of the following exempt purposes: charitable,
educational, religious, scientific, literary, fostering national or
international sports competition, preventing cruelty to children or
animals, and testing for public safety.
How do you
apply for 501(c)(3) status?
FEDERAL
1.
File
IRS form SS-4 Application for Employer Identification Number:
An employer identification number (EIN) is required regardless of whether
the organization will have employees. Once an EIN has been obtained,
include it in all correspondence with the IRS. For more information, see
IRS Publication 1635, Understanding Your EIN. This process takes
about four weeks.
2.
File
application with IRS Exempt Organizations Division, applications include:
a.
IRS form 1023 Application for Recognition of Exemption Under
Section 501(c)(3) of the Internal Revenue Code. The application
requires a user fee and will not be processed without it. Included in the
form:
i.
Narrative
describing the organization’s past, present and planned activities
ii.
Organization’s current and proposed financial support
iii.
Actual
and planned fundraising program
iv.
Financial
information: for new organizations, current year and two future years’
projected budgets; established organizations, budget for the current year
and three years previous
b.
Two IRS Forms 872-C if requesting an advanced ruling
(Consent Fixing Period of Limitation Upon Assessment of Tax under Section
4940 of the Internal Revenue Code).
c.
IRS Form 8718 and check payable to “Internal Revenue Service” in
appropriate filing fee amount
d.
Conformed copy of Certificate of Incorporation and By-laws if any
have been adopted.
e.
IRS Form 2848 if attorney-in-fact is representing the organization.
For this process, adopt a resolution authorizing filing for tax exemption
and all documents related to the application and authorize an officer or
attorney-in-fact to sign the application.
It is STRONGLY
recommended that you use the services of a knowledgeable attorney for
this step.
3.
A request for 501(c)(3) status may take six months or more to be
granted. While waiting, you must indicate to interested parties,
“Application for 501(c)(3) tax exemption pending.” If your application is
rejected, you must inform past, present and future donors of the rejection
in order to protect them from tax liability.
4.
An IRS tax specialist may contact you in writing requesting
additional information. If your organization meets the requirements for
exemption, you will be issued an IRS determination letter recognizing your
tax exempt status and providing public charity classification. Keep
this document with your permanent records.
Forms for Federal
exemption available at Social Secretary Administration Offices, by
calling the IRS at (800) 829-3676 or at
www.irs.gov
See Applying for 501(c)(3) Tax-Exempt Status published by the
Internal Revenue Service.
ILLINOIS
1.
Select
and reserve your corporate name:
Your organization’s name must be different from all others on file. To see
if your name is available, contact:
Illinois Secretary of State
Centennial Building
Corporate Department, 3rd Floor
Springfield, IL 62706
(217) 782-9520
It takes 2 to 4 weeks to confirm the receipt of your
charter. Reserving the name for 90 days requires a $25 fee and either a
written request or a copy of the Articles of Incorporation form
(Form NP-104.10) to the same address.
2.
File
Form NP-102.10:
submit it with a $50 registration fee to:
Illinois Secretary of State
17 North State Street, Suite 1137
Chicago, IL 60601
(312) 793-3380
It takes 2 to 4 weeks for confirmation and receipt of a
state charter.
3.
Register with the recorder of Deeds Office in the county where the
registered office of the nonprofit is located:
In Cook County there is a fee of $13 for the first two pages and $1 for
each additional page.
Cook County Recorder of Deeds
118 North Clark Street
Chicago, IL 60602
(312) 443-5050
See A Guide for
Organizing Not-For-Profit Corporations published by the Illinois
Secretary of State; obtain a copy at their office at 17 N. State Street,
Suite 1137 in Chicago, IL or online at the Illinois Secretary of State (www.ilsos.gov/nfparticles).
Questions?
While ESC does not provide programs and services to those
without or applying for 501(c)(3) status, we would be happy to answer
question and recommend resources.
Call (312) 580 1840
x317 or email
info@esc-chicago.org
Organizations which
can provide assistance: |
