501(c)(3) requirements may be lengthy, but they do not have to be difficult to understand. With a basic knowledge base of what's required, many non-profits are granted tax-exempt status without any issue.
The Basic 501(c)(3) Requirements
The IRS has laid out the requirements for 501(c)(3) status quite clearly on their website. To gain this tax-exempt privilege, an organization must follow all exempt purposes that are set forth by the government. They also cannot have any of its earnings go to any private shareholder or one single individual. It also cannot be an "action organization", meaning that it cannot campaign for or against a particular political candidate or issue that attempts to influence legislation.
The easiest way to know if you are 501(c)(3) eligible is to reflect upon whether you would be considered a "charitable organization." All non-profits outside of public safety organizations can apply to be tax-deductible as long as they have a charitable stance throughout their group. You cannot be in operation for the benefit of promoting your own personal interests or income, and you cannot accept an excessive donation from a benefactor for the purpose of being swayed toward a particular direction personally, politically, religiously or socially.
Again reiterating the political side of things, 501(c)(3) organizations have restrictions on how much political lobbying they are allowed to conduct and participate in. In other words, an eligible tax-exempt group will serve all people, though obviously focusing on a particular cause or demographic. There is no discrimination or personal agenda permitted.
Further Determination of Eligibility
To further determine whether or not you are eligible, you can ask yourself the following questions:
Do You Have An Appropriate Legal Document?
The IRS requires all potential 501(c)(3)s to be officially organized as a trust, corporation or association prior to applying for tax-exempt status.
Do You Have An Exempt Purpose?
You must have a reason to request tax-exemption status. For example, if you are simply a business making a profit, there is no reason for the IRS to include you under the 501(c)(3) umbrella. Likewise, if you are a charitable group that survives on donations alone, then you are very eligible for such a covering since you do not make a profit or benefit a single person.
Is Your Application Properly Filled Out?
An incomplete 501(c)(3) application will greatly delay your status confirmation. Fill out the form, the largest of all 501(c)(3) requirements, with the assistance of an attorney or knowledgeable individual, and return to the IRS.
Have You Existed For Three Years?
You must exist for at least three tax periods before you can be considered a non-profit organization by governmental standards.
Do You Have Financial Statements?
The IRS is very interested in how you plan to pay your bills, and how you have thus far. Keeping proper financial documentation is the best way you can show them you are organized and ready to receive 501(c)(3) status. This is probably one of the most important requirements - it presents to the government not only your group's cause and concern, but how efficiently you run your organization and how you handle money, time and volunteers efficiently and wisely.
You can find a complete list of requirements for 501(c)(3) status by visiting the IRS' official website. You may also consult a lawyer or an IRS representative if you have additional questions, concerns, or feel you need guidance in a particular issue you may have while filling out your forms and preparing/gathering all documents.
