IRS Form 1023

The basic requirement of getting tax exempt status is that the organization is specifically limited in powers to purposes that the IRS classifies as tax exempt purposes. Unlike for-profit corporations that benefit from broad and general purposes, non profit organizations need to be limited in powers to function with tax exempt status, but a non profit corporation is by default not limited in powers until it specifically limits itself in the articles of incorporation and/or nonprofit corporate bylaws. This limiting of the powers is crucial to obtaining tax exempt status with the IRS and then on the state level.

You acquire 501(c)(3) tax exemption by filing IRS Form 1023. The form must be accompanied by a $850 filing fee if the yearly gross receipts for the organization are expected to average $10,000 or more. If yearly gross receipts are expected to average less than $10,000, the filing fee is reduced to $400. There are some classes of organizations that automatically are treated as tax exempt under 501(c)(3), without the need to file Form 1023:

Churches, their integrated auxiliaries, and conventions or associations of churches Organizations that are not private foundations and that have gross receipts that normally are not more than $5,000

The IRS also expects to release a software tool called Cyber Assistant, which will assist with preparation of the application for tax exemption, but as of late 2011 the release date is unclear.

IRS Determination Letter

The determination letter is confirmation that the IRS has reviewed an organization's application and has confirmed it is a charitable organization as defined by section 501c3 of the Internal Revenue Code.

Organizations that receive a determination letter should keep it with their permanent records as proof of their tax-exempt status.

Resources & Sample Documents

About the 1023
Help with the 1023
How to File Form 1023 & Form 1023-EZ Electronically
IRS Determination Letter