How does a nonprofit organization obtain federal tax exemption?

In Indiana, a nonprofit organization can obtain federal tax exemption by applying to the Internal Revenue Service (IRS). The IRS outlines application requirements and procedures that organizations must follow in order to qualify for federal tax exemption. These guidelines can be found in IRS Publication 557. The first step to applying for tax exemption is to determine that your organization is eligible. Generally, any type of nonprofit organization that meets the requirements in the Internal Revenue Code is eligible. Some of these requirements include operating for a charitable, religious, educational, or public safety purpose and not distributing profits to private individuals or shareholders. Once the organization is eligible, they can obtain federal tax exemption by filing Form 1023 or Form 1024 with the IRS. Depending on the type of organization and its purpose, different forms need to be filed. Form 1023 is for organizations that conduct religious, educational, charitable, or scientific activities, while Form 1024 is for organizations that are organized to promote social welfare. In order to complete the forms, the organization must provide detailed information about its activities and structure. This includes information such as the names of board members and officers, a description of the organization’s activities, a balance sheet of the organization’s financial status, and other documents. Once the forms are completed, the organization must pay the necessary application fee and submit the forms to the IRS. The IRS will then review the documents and notify the organization if their application was accepted or denied. If approved, the organization will be granted federal tax-exempt status and will not have to pay taxes on any income related to their charitable activities.

How does a nonprofit organization obtain federal tax exemption?

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