Non Profit 501c3 Tax Exempt Application Sections 4 to 7

The first three section of an IRS 102 form for 501c3 tax exempt application relates to the internal environment of the organization i.e. how the organization operates and manages its business. The later section looks into the financial sourcing of your organization and the allocation of the acquired funds and resources.

The Fourth section of the 501c3 tax exempt application looks into the Compensation and Financial arrangements of the organization.  This section asks for specific details such as the proposed compensation of the directors and the projected contributions. You will be required to provide information relating to:

• The Founding Directors
• Founding members namely the President of the corporation, Chief Executive Officer, Chief Operating Officer, Vice President of the company, Chief Financial Officer, Treasurer, Secretary, or any other officer holding a position within your organization)
• Name and Contact Information of the trustees
• Name and designation of employees earning more than $50,000 per year
• Name and nature of the independent contractor earning more than $50,000 per year

The compensation plan should also include the expected bonus payments, IRAs, employee benefits plan and 401(k) s and other included incentives. The clause should also stipulate the action that will be liable on the employee in case of conflict of interest that might occur in due course of the business.

Next section of the 501c3 tax exempt application looks into the benefits that will be provided to the members of the organization. This includes details of any tax exempt goods and services provided to its member. To qualify for the exemption, you must clarify that such services can be availed by all segments of the society and are not limited to any particular segment.

This section of the non profit 501c3 tax exempt application looks into detailed description of the Organization’s History. In case the current organization is a successor of a previous organization, specify the following in your application:

• Detailed description of the nature of business and activities of the previous organization.
• Asset contribution from the previous organization.
• Conversion from any previous status to a non-profit organization.

Following section is about details of specific activities.  Specific activities include fundraising and political activities.  For instance, as a 501(c) (3) nonprofit organization, it is not permissible to participate in political campaigns and fund raising activities including gambling activities and bingo and use of a professional fundraiser is restricted by the Internal Revenue Service (IRS).

Under this section of the 501c3 tax exempt application, you will be required to provide detailed information of your financial sources which include statement income statements and balance sheets of the organization. If your organization is 5 years or older, you will be required to provide details regarding the most recent five years. Other organizations are required to provide the mentioned documents for each year of their incorporation.

The public charity or private foundation section relates to the public charities including hospital, churches or any other organization that derives funds to operate from public. The new 501(c)(3) groups, as specified under the IRS regulation, are classified as public charities unless specified otherwise.

The last section of the 501c3 tax exempt application provides you with details of application fee that you will be required to pay along with the form. For more information, contact your tax advisor.

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