Frequently Asked Questions

Q. What are some of the criteria needed to qualify for 501c3 status?

A. In order to qualify for 501c3 exempt status, an organization must prove they provide qualifying programs and services. According to IRS regulations, qualifying organizations must be organized exclusively for charitable, religious, educational, or scientific purposes.

Q. What is required for the application and approval process?

A. You must properly submit Form 1023 to the IRS in order for your organization to be eligible for 501c3 exempt status. Typically, the IRS's determination process can take 3 - 6 months on average from the time they receive the application. In some cases, depending on the type of organization, the process can either be extended or expedited. A 3-year financial projection is also required to be submitted as a part of the application.

Q. What are Articles of Incorporation (AOI) and Bylaws?

A. Articles of Incorporation are essentially what establishes the organization as a legally self-standing entity. The AOI can also identify the purpose of the organization and parties involved with the organization. AOI requirements vary from state to state. There is also specific IRS language that must be included in the AOI before the IRS will grant an organization 501c3 exempt status. Bylaws are simply the delegated rules and obligations determining how the organization's board of directors will operate. They should state the roles of each position within the organization's board of directors and delegate responsibilities for every position.

Q. What is the role of board members and how many do I need?

A. A Board of Directors consists of elected members that are responsible for considering and approving major decisions within the organization. Board members are also responsible for ensuring that the organization is fulfilling its obligations, both internally and to the general public. All non-profit board of directors are required to have at least a President, Secretary, and Treasurer. There are no limits to the number of board members an organization can have, however, the majority of the board members must be unrelated (non-family) in order to protect against preferential decision-making.

Q. What are the conditions for being State income and sales tax exempt?

A. Once your organization is approved for 501c3 exempt status, its ability to become exempt from state taxes, and your requirements for filing those taxes, will depend on the state(s) the organization is operating in. In California, you are required to file a separate form with the Franchise Tax Board before becoming exempt for state income tax.

Q. What are the tax filing and bookkeeping requirements for a 501c3 organization?

A. A non-profit organization is require to file a Form 990 each year disclosing your fiscal income, which is legally required by the Government in order to remain compliant and retain your organization's exempt status. There are a variety of formats of the 990 depending on the financial operations of a given non-profit organization, so consulting a professional non-profit tax consultant is crucial to file properly. By law, the 990 form must be submitted by the 15th day of the 5th month following the end of a fiscal year. It's important to maintain healthy bookkeeping throughout the year to ensure the 990 filing obligations are done correctly.