Federal and state tax exemption

Step 3 of 5

The proposed nonprofit organization:

Is likely to apply for obtaining Tax exempt status with the federal and/or state authorities

Will not likely apply for tax exemption at any stage


Side note:

A tax exempt organization is also called a 501(c) (3) tax exempt organization. ( that’s the IRS section under which exemption is granted.
What does tax exemption bring ?

A tax exempt organization receives two broad tax exemption benefits –
1) Exemption from payment of Federal Income Tax for the nonprofit organization.

2) Contributions made to them are tax deductible in the hands of the donor, hence acts as an incentive for donors.

In addition, some states provide certain state tax exemptions to 501(c)(3) organization. Another benefit is that some organizations may be exempt from certain employment taxes.

Should my organization seek it ?

If your organization is likely to solicit donations or earn any income whatsoever it should seek Federal tax exemption.

When is it not required ?

If an organization is likely to receive donations from only its members or it is not likely to generate any income, it may not likely need tax exemption.

Proceed to Step 4 of 5

Start all over again