How can a nonprofit organization acquire a federal tax exemption?

In South Dakota, a nonprofit organization can acquire a federal tax exemption by applying for recognition of exemption from the IRS. Organizations must meet the requirements in the Internal Revenue Code in order for their exemption to be granted. To apply, the organization must submit Form 1023 or Form 1023-EZ. Form 1023 is the Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code. This form is more in-depth than Form 1023-EZ and requires organizations to submit evidence of its nonprofit status, such as incorporating documents and other records. Form 1023-EZ is the Streamlined Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code. This form is shorter than Form 1023 and is used by organizations that meet certain criteria, such as organizations with annual gross receipts that do not exceed $50,000 and total assets that do not exceed $250,000. Organizations must submit appropriate documentation along with their form. This includes information on the organization’s activities, governing body, and finances. The IRS reviews the documentation and determines if the organization meets the requirements for tax exemption. If the application is approved, the organization receives an Employer Identification Number (EIN) and a “letter of determination” from the IRS that confirms its exempt status.

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How can a nonprofit organization acquire a federal tax exemption?

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