Lesson 9 of 11
Applying for federal tax exemption
Recognition of exemption is requested from the IRS on Form 1023, or on the shorter Form 1023-EZ if the organisation meets the eligibility criteria.
Which form
Form 1023-EZ is a streamlined application available only to smaller organisations that pass the IRS eligibility worksheet. Everything else uses the full Form 1023, which asks for narrative descriptions of activities, financial data and governance detail.
Both are submitted electronically with a user fee. Check the current fee and eligibility thresholds on the IRS site before applying.
What the full application asks for
- Detailed narrative of past, present and planned activities
- Financial data or projections
- Compensation arrangements for officers, directors and key employees
- Governance structure, policies and conflict of interest procedures
- Copies of articles and bylaws
Timing and the determination letter
If the application is filed within the IRS window after formation, recognition is generally effective from the date of formation. Approval arrives as a determination letter, which funders and platforms will ask to see.
This is educational information, not legal or tax advice for your organisation. Complex activities, foreign grantmaking and unusual compensation arrangements deserve professional review before filing.
Official sources
Want help with the paperwork?
You can incorporate and apply for exemption yourself using the steps in this course. If you would rather have support, Gullia Filing prepares and files your nonprofit incorporation, supplies compliant bylaws and conflict of interest policy, and obtains your EIN.