Difference between revisions of "501(c)(3) process"

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''As of 2019, we have been a [https://www.law.cornell.edu/uscode/text/26/501#c_3 501(c)(3)] for . . . quite a few years.''
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*"Status: Revived." We even spent some time in the Dead Entities Society! Check out our undead history [https://egov.maryland.gov/BusinessExpress/EntitySearch/BusinessInformation/D13145479 here at the Maryland Business Entity Search]. ''I've left the rest of this document as it was a decade ago.''
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==2009==
 
In order to facilitate the process a new page dealing directly with completing form 1023 to establish 501(c)(3) has been started here: [[IRS Form 1023 process]].
 
In order to facilitate the process a new page dealing directly with completing form 1023 to establish 501(c)(3) has been started here: [[IRS Form 1023 process]].
  
Line 4: Line 9:
  
 
Being a 501(c)(3) has the following benefits (copied from the interwebs)
 
Being a 501(c)(3) has the following benefits (copied from the interwebs)
* We won't pay federal corporate income tax except on income derived from unrelated business income. With this exemption, an organization can save 15% - 35% of its taxable income.
 
* In most instances, we won't pay state corporate income, franchise, excise, use, or sales tax.
 
* Can offer members, individuals, and corporate donors a tax deduction for their contributions.
 
* Eligible to receive private foundation grants. Private foundations are required by law to distribute a minimum amount of money for charitable purposes. One way they fulfill this obligation is by making grants to 501(c)(3) public charities.
 
* Eligible for lower postal rates on third class bulk mailings through the US Postal Service.
 
  
== The process ==
+
*We won't pay federal corporate income tax except on income derived from unrelated business income. With this exemption, an organization can save 15% - 35% of its taxable income.
=== Phase 1: Get Organized ===
+
*In most instances, we won't pay state corporate income, franchise, excise, use, or sales tax.
# Come up with our [[Mission Statement]]
+
*Can offer members, individuals, and corporate donors a tax deduction for their contributions.
# Develop our fundraising plan (see [[Mo money...]]) We don't need this to incorporate in Maryland, but we'll something like this for our 501(c)(3) application.  
+
*Eligible to receive private foundation grants. Private foundations are required by law to distribute a minimum amount of money for charitable purposes. One way they fulfill this obligation is by making grants to 501(c)(3) public charities.
# Draft [[Bylaws]]. We don't need this to incorporate in Maryland, but we'll something like this for our 501(c)(3) application. (Initial drafting is done, needs to be reviewed by more people)
+
*Eligible for lower postal rates on third class bulk mailings through the US Postal Service.
# Select a few people to act as incorporaters. These people will have their name in the [[Articles of Incorporation]] and act as the interim Board of Directors until our organizational meeting.  
+
 
# File our [[Articles of Incorporation]] with the state of Maryland. The application fee is $170 and takes 7-8 weeks. Or $220 for same day, in person service at their office. State Department of Assessments and Taxation, Charter Room 801, 301 W. Preston Street Baltimore, MD 21201-2395
+
==The process==
# Apply for an Employer Identification Number (EIN) so we can open a bank account. This is a [http://www.irs.gov/businesses/small/article/0,,id=102767,00.html simple form on the IRS website]. Someone on the interim Board of Directors can fill out the online form and we'll get an EIN immediately
+
===Phase 1: Get Organized===
# Open a [[Bank Account]]. One of the interim members of the Board of Directors can do this once we haven an EIN.
+
 
# Hold our organizational meeting where we will ratify the [[bylaws]] and elect Officers (President, VP, Treasurer, Secretary) who will also serve as the Board of Directors. (At least that's what's in the draft [[Bylaws]] at the moment.) We need to take special care in keeping minutes at this meeting for later filings.
+
#Come up with our [[Mission Statement]]
 +
#Develop our fundraising plan (see [[Mo money...]]) We don't need this to incorporate in Maryland, but we'll something like this for our 501(c)(3) application.
 +
#Draft [[Bylaws]]. We don't need this to incorporate in Maryland, but we'll something like this for our 501(c)(3) application. (Initial drafting is done, needs to be reviewed by more people)
 +
#Select a few people to act as incorporaters. These people will have their name in the [[Articles of Incorporation]] and act as the interim Board of Directors until our organizational meeting.
 +
#File our [[Articles of Incorporation]] with the state of Maryland. The application fee is $170 and takes 7-8 weeks. Or $220 for same day, in person service at their office. State Department of Assessments and Taxation, Charter Room 801, 301 W. Preston Street Baltimore, MD 21201-2395
 +
#Apply for an Employer Identification Number (EIN) so we can open a bank account. This is a [http://www.irs.gov/businesses/small/article/0,,id=102767,00.html simple form on the IRS website]. Someone on the interim Board of Directors can fill out the online form and we'll get an EIN immediately
 +
#Open a [[Bank Account]]. One of the interim members of the Board of Directors can do this once we haven an EIN.
 +
#Hold our organizational meeting where we will ratify the [[bylaws]] and elect Officers (President, VP, Treasurer, Secretary) who will also serve as the Board of Directors. (At least that's what's in the draft [[Bylaws]] at the moment.) We need to take special care in keeping minutes at this meeting for later filings.
  
 
'''all of this is done [[User:Abachman|Abachman]] 19:22, 5 August 2009 (UTC)'''
 
'''all of this is done [[User:Abachman|Abachman]] 19:22, 5 August 2009 (UTC)'''
  
=== Phase 2: Register for Charitable Solicitation (Complete and Current as of Oct. 2010)===
+
===Phase 2: Register for Charitable Solicitation (Complete and Current as of Oct. 2010)===
# In order to "solicits charitable contributions" we need to register with Maryland by submitting form [http://www.sos.state.md.us/charity/COR-92.pdf COR-92]. There is no fee if we solicit less than $25,000 in a year. A [http://www.sos.state.md.us/Charity/AnnualUpdate.pdf renewal form] must be submitted annually.
+
 
#* ''The membership-only exemption is in the case that it is only from members that donations are ever solicited. This would mean we could never solicit donations (e.g., donation jar next to the keg) outside the voting membership of the organization. [[User:Abachman|Abachman]] 21:15, 6 July 2009 (UTC)''
+
#In order to "solicits charitable contributions" we need to register with Maryland by submitting form [http://www.sos.state.md.us/charity/COR-92.pdf COR-92]. There is no fee if we solicit less than $25,000 in a year. A [http://www.sos.state.md.us/Charity/AnnualUpdate.pdf renewal form] must be submitted annually.
#* ''duly stricken -[[User:Jonlesser|Jonlesser]] 21:31, 6 July 2009 (UTC)''
+
#*''The membership-only exemption is in the case that it is only from members that donations are ever solicited. This would mean we could never solicit donations (e.g., donation jar next to the keg) outside the voting membership of the organization. [[User:Abachman|Abachman]] 21:15, 6 July 2009 (UTC)''
#* '''done [[User:Abachman|Abachman]] 19:22, 5 August 2009 (UTC)'''
+
#*''duly stricken -[[User:Jonlesser|Jonlesser]] 21:31, 6 July 2009 (UTC)''
# If we want to solicit contribution in another state, there is more paperwork to file.
+
#*'''done [[User:Abachman|Abachman]] 19:22, 5 August 2009 (UTC)'''
 +
#If we want to solicit contribution in another state, there is more paperwork to file.
 +
 
 +
===Phase 3: Obtain Federal Tax-Exemption Determination===
 +
 
 +
#File IRS Form 1023: [http://www.irs.gov/pub/irs-pdf/f1023.pdf Application for Recognition of Exemption Under Section 501(c)(3)]. We are anticipating annual revenue over $10,000 so the application fee will be $750.
 +
#In a few months we'll get a designation letter back from the IRS authorizing you to be a nonprofit for five years. At the end of five years we have to prove to the IRS that we are really a charitable organization and submit [http://www.irs.gov/pub/irs-pdf/f8734.pdf form 8734].
 +
 
 +
===Phase 4: State filings after receiving 501(c)(3) determination letter===
 +
 
 +
#Obtain a sales and use tax exemption certificate by filing [http://forms.marylandtaxes.com/current_forms/cra.pdf Combined Registration Application]
 +
#Request State Income Tax Exemption. This is mentioned on [http://www.sos.state.md.us/Charity/Non-Profit.htm this page], but isn't mentioned elsewhere.
 +
#There is a property tax exemption should we ever end up owning property
  
=== Phase 3: Obtain Federal Tax-Exemption Determination ===
+
===Maintaining our status===
# File IRS Form 1023: [http://www.irs.gov/pub/irs-pdf/f1023.pdf Application for Recognition of Exemption Under Section 501(c)(3)]. We are anticipating annual revenue over $10,000 so the application fee will be $750.
 
# In a few months we'll get a designation letter back from the IRS authorizing you to be a nonprofit for five years. At the end of five years we have to prove to the IRS that we are really a charitable organization and submit [http://www.irs.gov/pub/irs-pdf/f8734.pdf form 8734].
 
  
=== Phase 4: State filings after receiving 501(c)(3) determination letter ===
+
#Each year we will need to file [http://www.dat.state.md.us/sdatweb/ppbooklet_2009.pdf Personal Property Forms] with the state.
# Obtain a sales and use tax exemption certificate by filing [http://forms.marylandtaxes.com/current_forms/cra.pdf Combined Registration Application]
+
#File Form 990 with the IRS depending on annual gross receipts if necessary. If we don't have to file a 990, we have to submit [http://www.sos.state.md.us/Charity/COF-85.pdf COF-85] if not filing IRS Form 990
# Request State Income Tax Exemption. This is mentioned on [http://www.sos.state.md.us/Charity/Non-Profit.htm this page], but isn't mentioned elsewhere.
 
# There is a property tax exemption should we ever end up owning property
 
  
=== Maintaining our status ===
+
==Links==
# Each year we will need to file [http://www.dat.state.md.us/sdatweb/ppbooklet_2009.pdf Personal Property Forms] with the state.
 
# File Form 990 with the IRS depending on annual gross receipts if necessary. If we don't have to file a 990, we have to submit [http://www.sos.state.md.us/Charity/COF-85.pdf COF-85] if not filing IRS Form 990
 
  
== Links ==
+
*Mike Sublesky recommended [http://www.amazon.com/How-Form-Nonprofit-Corporation-Your/dp/1413310265 How to Form your Own Nonprofit].  Official IRS information is [http://www.irs.gov/publications/p557/ch03.html here].
* Mike Sublesky recommended [http://www.amazon.com/How-Form-Nonprofit-Corporation-Your/dp/1413310265 How to Form your Own Nonprofit].  Official IRS information is [http://www.irs.gov/publications/p557/ch03.html here].
+
*There is a nice [http://www.sos.state.md.us/charity/ChecklistNonProfit.pdf checklist] from [http://marylandnonprofits.org Maryland Nonprofits].
* There is a nice [http://www.sos.state.md.us/charity/ChecklistNonProfit.pdf checklist] from [http://marylandnonprofits.org Maryland Nonprofits].
+
*Maryland Secretary of State has a page on [http://www.sos.state.md.us/Charity/Non-Profit.htm forming a nonprofit in Maryland]
* Maryland Secretary of State has a page on [http://www.sos.state.md.us/Charity/Non-Profit.htm forming a nonprofit in Maryland]
 

Revision as of 04:51, 13 September 2019

As of 2019, we have been a 501(c)(3) for . . . quite a few years.

2009

In order to facilitate the process a new page dealing directly with completing form 1023 to establish 501(c)(3) has been started here: IRS Form 1023 process.

501(c)(3) is a tax-exempt designation from the IRS which generally applies to nonprofit organizations. 501(c)(3) refers to that section of the tax code, found at 26 U.S.C. § 501.

Being a 501(c)(3) has the following benefits (copied from the interwebs)

  • We won't pay federal corporate income tax except on income derived from unrelated business income. With this exemption, an organization can save 15% - 35% of its taxable income.
  • In most instances, we won't pay state corporate income, franchise, excise, use, or sales tax.
  • Can offer members, individuals, and corporate donors a tax deduction for their contributions.
  • Eligible to receive private foundation grants. Private foundations are required by law to distribute a minimum amount of money for charitable purposes. One way they fulfill this obligation is by making grants to 501(c)(3) public charities.
  • Eligible for lower postal rates on third class bulk mailings through the US Postal Service.

The process

Phase 1: Get Organized

  1. Come up with our Mission Statement
  2. Develop our fundraising plan (see Mo money...) We don't need this to incorporate in Maryland, but we'll something like this for our 501(c)(3) application.
  3. Draft Bylaws. We don't need this to incorporate in Maryland, but we'll something like this for our 501(c)(3) application. (Initial drafting is done, needs to be reviewed by more people)
  4. Select a few people to act as incorporaters. These people will have their name in the Articles of Incorporation and act as the interim Board of Directors until our organizational meeting.
  5. File our Articles of Incorporation with the state of Maryland. The application fee is $170 and takes 7-8 weeks. Or $220 for same day, in person service at their office. State Department of Assessments and Taxation, Charter Room 801, 301 W. Preston Street Baltimore, MD 21201-2395
  6. Apply for an Employer Identification Number (EIN) so we can open a bank account. This is a simple form on the IRS website. Someone on the interim Board of Directors can fill out the online form and we'll get an EIN immediately
  7. Open a Bank Account. One of the interim members of the Board of Directors can do this once we haven an EIN.
  8. Hold our organizational meeting where we will ratify the bylaws and elect Officers (President, VP, Treasurer, Secretary) who will also serve as the Board of Directors. (At least that's what's in the draft Bylaws at the moment.) We need to take special care in keeping minutes at this meeting for later filings.

all of this is done Abachman 19:22, 5 August 2009 (UTC)

Phase 2: Register for Charitable Solicitation (Complete and Current as of Oct. 2010)

  1. In order to "solicits charitable contributions" we need to register with Maryland by submitting form COR-92. There is no fee if we solicit less than $25,000 in a year. A renewal form must be submitted annually.
    • The membership-only exemption is in the case that it is only from members that donations are ever solicited. This would mean we could never solicit donations (e.g., donation jar next to the keg) outside the voting membership of the organization. Abachman 21:15, 6 July 2009 (UTC)
    • duly stricken -Jonlesser 21:31, 6 July 2009 (UTC)
    • done Abachman 19:22, 5 August 2009 (UTC)
  2. If we want to solicit contribution in another state, there is more paperwork to file.

Phase 3: Obtain Federal Tax-Exemption Determination

  1. File IRS Form 1023: Application for Recognition of Exemption Under Section 501(c)(3). We are anticipating annual revenue over $10,000 so the application fee will be $750.
  2. In a few months we'll get a designation letter back from the IRS authorizing you to be a nonprofit for five years. At the end of five years we have to prove to the IRS that we are really a charitable organization and submit form 8734.

Phase 4: State filings after receiving 501(c)(3) determination letter

  1. Obtain a sales and use tax exemption certificate by filing Combined Registration Application
  2. Request State Income Tax Exemption. This is mentioned on this page, but isn't mentioned elsewhere.
  3. There is a property tax exemption should we ever end up owning property

Maintaining our status

  1. Each year we will need to file Personal Property Forms with the state.
  2. File Form 990 with the IRS depending on annual gross receipts if necessary. If we don't have to file a 990, we have to submit COF-85 if not filing IRS Form 990

Links