Both churches and religious organizations, regardless of whether the entity has any employees, must obtain an Employer Identification Number (EIN) by filing Form SS-4. Form 1023-EZ, Streamlined Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code can then be used to apply for tax-exempt status.
Non-Profit Organizations & the IRS
Like churches and religious organizations, nonprofits will typically qualify for tax-exempt status under Section 501(c)(3). Other subsections of Section 501(c) cover labor unions, trade groups, chambers of commerce, social advocacy groups, and more. Contributions are tax-deductible.
If the non-profit is being organized as a charitable organization, certain IRS-mandated provisions in its articles of incorporation are required. The articles must assure that the organization’s assets are permanently dedicated to an exempt purpose. Even if the organization dissolves, it must still dedicate its remaining assets to an exempt purpose. Specifically, it must
- Be organized and operated exclusively for the exempt purpose specified
- Have a charitable purpose
- Ensure earnings do not inure to any individual or private shareholder
- Have no political affiliations or participation in partisan politics
Non-profits, like all other groups discussed, must obtain an Employer Identification Number (EIN). The group can then use either Form 1023, Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code, or Form 1023-EZ, the streamlined application, to apply.
Non-profit status may automatically exempt the organization from state sales or property and income taxes without application.
Political Organizations & the IRS
Political organizations – parties, campaign committees, political action committees (PACs), fundraising groups, and the like – fall under IRS Section 527. They are generally taxable, unless they take steps to demonstrate that they are “organized and operated for the primary purpose of carrying out exempt function activities” and file a notice to that effect with the IRS.
There are similar and related requirements for a 501(c)(4) organization, whose primary purpose is advocacy.
Per Section 527, an exempt function is “influencing or attempting to influence the selection, nomination, election, or appointment of any individual to any Federal, State, or local public office or office in a political organization, or the election of Presidential or Vice-Presidential electors….” The organization is tax-exempt, but contributions are not tax-deductible.
After obtaining exempt function status, the organization must also file periodic reports on expenditures and contributions, along with an annual tax return and annual information returns. Form 8871 is required for reporting on contributions and expenditures, but many organizations are exempt. Form 990 is used for annual information returns, but again, certain exemptions may apply. Check with me on all your filing requirements.
Why You Need an Attorney
The IRS places various qualifying and reporting requirements on any group hoping to receive tax-exempt status. Churches are the only group that automatically qualify. If you’re seeking to qualify as a religious, political, or nonprofit organization and obtain tax-exempt status, you can rely on my experience and resources to help you successfully complete every step of the process.