Nonprofit (NPO) requirements include a mix of federal, state, and local obligations focused on legal formation, governance, compliance, and filing. To qualify for federal tax exemption as a 501(c)(3) organization, a nonprofit must be organized and operated exclusively for charitable, religious, educational, scientific, or similar purposes[1].
- Legal Formation: Incorporate by filing Articles of Incorporation with the appropriate state office and appoint a board of directors. Write a clear mission statement and bylaws that govern the organization’s structure and operations[5].
- Federal Employer Identification Number (FEIN): Obtain an FEIN from the IRS by submitting Form SS-4. This is required for tax filings and opening bank accounts[8].
- Tax Exemption Application: Apply to the IRS using Form 1023 (or Form 1023-EZ for smaller organizations) to receive recognition as a 501(c)(3) tax-exempt entity[2].
- Annual IRS Filing: File Form 990 (or 990-EZ/990-N) annually to maintain tax-exempt status. The IRS has increased scrutiny of filings, especially after 2025 rule changes[19].
- State Registration: Register for charitable solicitation and with state tax authorities, as applicable[4].
- Operational Compliance:
- Maintain a registered agent and file annual state reports[9].
- Prepare and approve annual financial statements.
- Maintain up-to-date licenses and fundraising registrations[9].
- Governance and Policies:
- Hold regular board meetings and document minutes.
- Create policies such as Conflict of Interest and Whistleblower assurances[9].
- Keep complete and accessible organizational records[9].
- Beneficial Ownership Information (BOI) Reporting: Starting in 2025, some nonprofits may be required to report beneficial ownership details per the Corporate Transparency Act. Most nonprofits, such as 501(c)(3), 501(c)(4), and others, are exempt but should verify their compliance status[11].
- State and Local Tax Compliance: Register, file, and pay state and local taxes where applicable (sales, franchise, property)
Nonprofits must remain proactive in compliance—new regulations in 2025 introduce stricter limits on lobbying and adjustments to public support tests, requiring careful review of annual filings and eligibility[19].
References
- [1] Exemption requirements – 501(c)(3) organizations – IRS
- [2] Application process (IRS.gov)
- [4] Nonprofit Organizations (Texas Secretary of State)
- [5] How to Start a Nonprofit (Council of Nonprofits)
- [8] How to Start a Nonprofit in California – Foundation Group®
- [9] Nonprofit Compliance Guide | Harbor Compliance
- [11] 2025 Charity Compliance Updates: Key Changes Nonprofits Need to Know
- [19] Understand the 501(c)(3) Nonprofit Rule Changes for 2025
Leave a Reply