How does a nonprofit organization obtain federal tax exemption?

In order for a nonprofit organization in California to gain federal tax exemption, the organization must apply for what is known as 501(c)(3) status. Obtaining this status means that the organization may not be subject to federal income tax and donations made to the organization may be tax deductible. The 501(c)(3) status is a designation given by the Internal Revenue Service (IRS). In order to obtain 501(c)(3) status, a nonprofit organization must submit a form to the IRS. This form is known as the Form 1023 and it requires the organization to provide detailed information on its mission, operations, sources of income, activities and personnel. The organization must also provide its governing documents, including its articles of incorporation and bylaws. The organization will also need to provide its federal tax identification number and provide evidence that the organization is organized for one of the recognized exempt purposes under Section 501(c)(3) of the Internal Revenue Code. These purposes include providing education and training, performing charitable activities, or religious activities. Once the nonprofit organization has submitted the Form 1023 and accompanying documents, the IRS will review the information and determine if the organization meets the requirements of Section 501(c)(3). If the organization is approved, it will receive a ruling letter from the IRS notifying the organization of its tax exempt status and the tax benefits available to donors.

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How does a nonprofit organization obtain federal tax exemption?

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