As Non Profit Accounting in Orlando experts we know that 501(c)(3) exemption of taxes is granted to charitable foundation working with either education, religious or educational agendas. To qualify for this exemption, firstly the non-profit organization has to establish itself as a corporation. Contact your state government and get the ball rolling on paper work required to become a corporation. Once you have been registered as a corporation, apply to IRS for the tax exemption. The research for that can be easily done as IRS provides an excellent handbook outlining what they expect from their questionnaire. The application forms necessary for IRS exemption process are Form 1023, this is the application for exempt status, it also includes instruction manual. IRS publication 557 (on-line) s also significant read to understand their take on exemption process.
IRS’s definition of a 501(c)(3) entity is ‘a corporation that is “organized and operated” exclusively for charitable, educational, or religious purposes, no substantial part of whose activities involve trying to influence legislation, does not endorse political candidates, and does not operate for the “private benefit” of insiders (members, founders, directors, etc,) or some other small group of people (though it can pay reasonable compensation for services actually performed).’
By ‘organized and operated’ exclusively, they mean that corporation will work for charitable purposes alone. The organization is created and will function exclusively for an exempt purpose and in case it is dissolved, its assets will be transferred to another 501(c) (3) exempt organization.
By a ‘charitable’ organization, they expect complete use of their funding for charitable purpose. Their initial satisfaction with your examination will depend on how you write the ‘narrative’ portion of their application form. IRS recognizes, relief efforts for poor, distressed and underprivileged a charitable efforts; along with, advancement of religion, education and science, erection of public buildings and monuments. Helping the government, helping distressed neighborhoods, eliminating discrimination and prejudice, defense of human and civil rights, fighting community deterioration and juvenile delinquency; all of these come under recognized charitable practices. Yet, many of these activities are non-traditional charitable activities, therefore, care while formatting the narrative section of IRS form is advised, in order to achieve the exempt.
If any organization seems to be serving a private purpose rather than a public one than it will not be considered. Thus, avoid the impression of private benefiting of organization’s founders, chairmen, high ranking officials or their families from the organization. They can benefit from it as general public but through external channels not internal.
IRS expects the corporation to focus solely on charitable purposes and not conduct any other businesses. IRS and judicial court both allow secondary monetary transactions and secondary businesses but your organization should not give an impression that it was created for any other purpose than charity.
Our experience in non profit accounting in Orlando has taught us that the most unifying significance of this exempt is that foundation grants are given only to organizations with 501(c)(3) exemptions and foundation grants go a long way to ensure yearly fundraising. Thus, these exemptions become economical life lines for non-profit organizations.
For more information about our Orlando accounting and tax services please contact us at 407-502-2400. Freedomtax Accounting’s staff has been providing honest accounting services and tax services for 15 years. Our Orlando accounting and tax firm has its main offices in Kissimmee, FL. Our services are provided nationwide, but mainly in the Central Florida market to areas like Orlando, South Orlando, Kissimmee, St. Cloud, Poinciana, and Hunters Creek, FL. Our tax accountants and IRS enrolled agents (irs ea) specialize in corporate accounting and bookkeeping, tax services, tax preparation, back taxes help, tax debt relief, tax resolution, tax planning, itin numbers, incorporations, and non profit 501c3 tax exempt status applications.
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