An organization that seeks to be a tax-exempt charity under Section 501(c)(3) of the Internal Revenue Code must apply for tax exempt status by preparing and filing with the IRS one of the following two IRS forms:
- Form 1023 (26 pages of complex and difficult questions and exhibits). The IRS review period could be nine months or more. See the Instructions for IRS Form 1023
- IRS Form 1023-EZ (2 -3 pages submitted online). The IRS review period is 2 – 4 weeks. See the Instructions for IRS Form 1023-EZ.
If your organization is considering filing for tax-exempt status under Section 501(c)(3) it must be able to answer no to each of the following questions. If it answers any question with yes, the organization must file for tax exempt status using IRS Form 1023.
Under section 501(p)(3) of the Code, suspension of an organization’s tax exemption begins on the date of the first publication of a designation or identification with respect to the organization, as described above, or the date on which section 501(p) was enacted, whichever is later. This suspension continues until all designations and identifications of the organization are rescinded under the law or Executive Order under which such designation or identification was made.
- A distinct legal existence,
- A recognized creed and form of worship,
- A definite and distinct ecclesiastical government,
- A formal code of doctrine and discipline,
- A distinct religious history,
- A membership not associated with any other church or denomination,
- Ordained ministers ministering to the congregation,
- Ordained ministers selected after completing prescribed courses of study,
- A literature of its own,
- Established places of worship,
- Regular congregations,
- Regular religious services,
- Sunday schools for the religious instruction of the young, and
- Schools for the preparation of ministers.
Although it is not necessary that each of the above characteristics be present, a congregation or other religious membership group that meets regularly for religious worship is generally required. A church includes mosques, temples, synagogues, and other forms of religious organizations. For more information, see Publication 1828.
- Presents formal instruction as its primary function,
- Has a regularly scheduled curriculum,
- Has a regular faculty of qualified teachers,
- Has a regularly enrolled student body, and
- Has a place where educational activities are regularly carried on.
The term “school” includes primary, secondary, preparatory, high schools, colleges, and universities. It does not include organizations engaged in both educational and non-educational activities, unless the latter are merely incidental to the educational activities.
A hospital does not include convalescent homes, homes for children or the aged, or institutions whose principal purpose or function is to train handicapped individuals to pursue a vocation.
An organization is a medical research organization described in section 170(b)(1)(A)(iii) if its principal purpose or function is the direct, continuous, and active conduct of medical research in conjunction with a hospital. The hospital with which the organization is affiliated must be described in section 501(c)(3), a federal hospital, or an instrumentality of a governmental unit, such as a municipal hospital.
An organization is a hospital organization described in section 501(r)(2)(A)(i) if the organization operates a facility which is required by a state to be licensed, registered, or similarly recognized as a hospital
- Data processing.
- Purchasing (including purchasing insurance on a group basis).
- Billing and collection (including purchasing patron accounts receivable on a recourse
- Industrial engineering.
- Record center.
- Personnel (including selecting, testing, training, and educating personnel) services.
A cooperative hospital service organization must also meet certain other requirements specified in section 501(e).
- Is organized and operated only to pool insurable risks of its members (not including risks related to medical malpractice) and to provide information to its members about loss control and risk management,
- Consists only of members that are section 501(c)(3) organizations exempt from tax under section 501(a),
- Is organized under state law authorizing this type of risk pooling,
- Is exempt from state income tax (or will be after qualifying as a section 501(c)(3)organization),
- Has obtained at least $1,000,000 in startup capital from nonmember charitable organizations,
- Is controlled by a board of directors elected by its members, and
- Is organized under documents requiring that: (a) Each member be a section 501(c)(3) organization exempt from tax under section 501(a), (b) Each member that receives a final determination that it no longer qualifies under section 501(c)(3) notify the pool immediately, and (c) Each insurance policy issued by the pool provide that it will not cover eventsoccurring after a final determination described in (b).
- Is organized and operated exclusively for the benefit of, to perform the functions of, or to carry out the purposes of one or more specified organizations as described in section 509(a)(1) or 509(a)(2). These section 509(a)(1) and 509(a)(2) organizations are commonly called publicly supported organizations.
- Has one of three types of relationships with one or more organizations described in section 509(a)(1) or 509(a)(2). It must be: (a) Operated, supervised, or controlled by one or more section 509(a)(1) or 509(a)(2)organizations (Type I supporting organization); (b) Supervised or controlled in connection with one or more section 509(a)(1) or 509(a)(2) organizations (Type II supporting organization); or (c) Operated in connection with one or more section 509(a)(1) or 509(a)(2)organizations (Type III supporting organization).
- Is not controlled directly or indirectly by disqualified persons (as defined in section 4946) other than foundation managers and other than one or more organizations described in section 509(a)(1) or 509(a)(2).
See Publication 557 for more information.
“No” applies if you are a governmental unit referred to in section 170(c)(1) or a private foundation referred to in section 509(a).