How does a nonprofit organization obtain federal tax exemption?

In South Dakota, a nonprofit organization may obtain federal tax exemption by filing for recognition of exemption under Section 501(c)(3) of the Internal Revenue Code (IRC). To do this, the organization must first obtain an Employer Identification Number (EIN) from the IRS. The organization then completes IRS Form 1023, Application for Recognition of Exemption, and submits a copy of its articles of incorporation, which must include a statement that it is organized and operated exclusively for exempt purposes. Once Form 1023 is submitted, the IRS will review it to determine if the organization is entitled to be exempt from federal income tax under Section 501(c)(3). If the IRS approves the application, the organization will receive a letter of determination that confirms the exemption. The organization must also provide annual reports to the IRS and follow the rules and regulations that govern its activities. For organizations in South Dakota, there may also be state tax exemption requirements and rules that must be addressed as well. Charitable organizations should contact the Secretary of State’s office of the South Dakota Department of Revenue to learn more about any additional requirements. In addition to obtaining federal tax exemption, the organization must apply for recognition of exemption from individual states in which it has activities, and if necessary, obtain exemption from unemployment and other taxes. It is also important to adhere to any applicable laws that govern fundraising activities.

How does a nonprofit organization obtain federal tax exemption?

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