Frequently asked questions about applying for tax exempt status.

What is the difference between nonprofit and tax-exempt status?

Nonprofit status is a state law concept. Nonprofit status in a state may make an organization eligible for certain benefits, such as state sales, property and income tax exemptions.

Although most federal tax-exempt organizations are nonprofit organizations, organizing as a nonprofit organization at the state level, that alone does not automatically grant the organization exemption from federal income tax. To qualify as exempt from federal income tax, an organization must meet requirements set forth in the Internal Revenue Code.

How does an organization become tax-exempt?

To be recognized as exempt from federal income taxation, most organizations are required to apply for recognition of exemption. For section 501(c)(3) organizations, the law provides only limited exceptions to this requirement.

How do I obtain an application for tax-exempt status?

Most organizations applying for exemption must use specific application forms. Two popular forms currently used by the IRS are:

Form 1023-EZ, Streamlined Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code

Form 1023, Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code

The eligibility to use of either forms is based on a number of determining factors which are in the instructions to the forms.

 Is there a fee for applying for exemption?

Yes, user fees apply to all requests for determination letters, including exemption applications.

Is there anything I can do to help ensure that my application is processed as quickly as possible?

Answering all questions completely and submitting all required items will ensure agents reviewing your application are able to process it as quickly as possible.

What if purposes or programs change after an application is submitted?

If the organization’s organizing documents, purposes, or programs change while the IRS is considering an application, you should report the change in writing to the office processing your application.

Because material changes in a charity’s structure or activities may affect its tax-exempt or public charity status, organizations should report such changes to the IRS Exempt Organizations Division.

Is an exemption application subject to public disclosure?

An exemption application is subject to public disclosure once it has been finally approved or denied.