By Abigail Neal, Scottsdale charity lawyer
If I form an Arizona nonprofit corporation, is it automatically tax exempt?
No. Although forming a nonprofit corporation is the first step to creating a tax exempt organization, there is an additional step required by the IRS. The IRS requires organizations that wish to be tax exempt to complete a Form 1023, Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code. The 1023 requires specific information about the organization including a detailed narrative about the organization and its activities, budgets and financial statements, copies of corporate governing documents, statements regarding director and officer compensation and more. Learn more about preparing a Form 1023 and Abigail Neal’s 1023 preparation services.
Does my charity qualify for tax exemption?
It depends. The IRS has very specific requirements for organizations that wish to be tax exempt. These requirements include:
- The organization must be organized exclusively for a tax exempt purpose. Tax exempt purposes include charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, and preventing cruelty to children or animals.
- The organization must be operated exclusively for exempt purposes.
- The organization shall not operate to provide a benefit to private individuals, like the organization’s officers, directors, members, or trustees.
- The organization may not substantially engage in lobbying and political activities.
Learn more about when organizations qualify for tax exempt status.
Is my organization required to register with the state before it can solicit contributions?
Many states require that nonprofit and charitable organizations register with the state prior to soliciting contributions from residents of that state. In June, 2013, Arizona abolished this requirement. Read more about Arizona’s repeal of the charitable solicitation registration requirement. As a result, charities and nonprofits wishing to solicit funds from Arizona residents are not required to register. However, this does not mean that any Arizona charities have to register in other states. Most states still require a charity to register prior to fundraising in that state. Even if a charity is only based in one state but is soliciting internet contributions, the charity could inadvertently cross state lines into a state where it is not registered. Instead of registering in each individual state, a charity can complete a Uniform Registration Statement that covers most states that require registration. Abigail Neal can prepare your Uniform Registration Statement for $895.
States that Recognize the URS
Alabama, Alaska, Arizona (prior to repeal), Arkansas. California, Connecticut, District of Columbia, Georgia, Hawaii, Illinois, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, New Hampshire, New Jersey, New Mexico, Minnesota, New York, North Carolina, North Dakota, Ohio, Oregon, Pennsylvania, Ohio, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Utah, Virginia, Washington, West Virginia, Wisconsin
States That Require Registration That Do Not Accept the URS
Colorado, Florida, Oklahoma
States That Do Not Require Registration
Arizona (as of June, 2013), Idaho, Indiana, Iowa, Montana, Nebraska, Nevada, South Dakota, Texas, Vermont, Wyoming