To apply for tax-exempt status for a nonprofit, you incorporate the organization under state law, prepare governing documents that meet IRS requirements, obtain an Employer Identification Number, and then file Form 1023 or the streamlined Form 1023-EZ electronically through Pay.gov. The fee is $600 for Form 1023 or $275 for Form 1023-EZ. File within 27 months of formation and the IRS backdates your exempt status to your incorporation date; miss that window and exemption starts only when the IRS receives your application.
Incorporate Under State Law First
Federal tax-exempt status recognizes an entity that already exists. You have to create that entity at the state level before the IRS has anything to act on. That means filing articles of incorporation as a nonprofit corporation with your state’s secretary of state (or equivalent office) and paying the state filing fee, which varies. The IRS instructs applicants to form the entity through their state before even applying for an Employer Identification Number.1Internal Revenue Service. Get an Employer Identification Number
Your articles of incorporation are not just state paperwork. The IRS reviews them as part of your federal application, so the language has to satisfy federal requirements from the start. Fixing them later means amending with the state and resubmitting.
Prepare the Documents the IRS Will Want to See
Purpose and Dissolution Clauses
Two clauses in your articles of incorporation carry most of the weight. The purpose clause must limit your activities to those recognized under Section 501(c)(3): religious, charitable, scientific, literary, and educational purposes, among a few others.2Office of the Law Revision Counsel. 26 US Code 501 – Exemption From Tax on Corporations, Certain Trusts, Etc The dissolution clause must state that if the organization shuts down, remaining assets go to another tax-exempt entity or a public purpose. Without both, expect a rejection.
Bylaws and Conflict of Interest Policy
Your board should adopt bylaws before you apply. Bylaws govern internal operations: meetings, elections, decision-making. The IRS doesn’t prescribe a format but does ask about governance on the application.
The IRS also strongly recommends adopting a written conflict of interest policy before filing. The policy sets procedures for situations where a board member’s or officer’s personal financial interests conflict with the charitable mission, most often around setting compensation.3Internal Revenue Service. Form 1023 – Purpose of Conflict of Interest Policy It should require anyone with a conflict to disclose it and step out of the vote. Form 1023 asks directly whether you have one, and “no” invites follow-up.
Employer Identification Number
You need an EIN before you can submit. It’s a nine-digit federal tax ID that identifies your organization on all IRS filings. Applying online at IRS.gov takes minutes and is free.4Internal Revenue Service. Employer Identification Number
Financial Information
The application requires a financial picture of your organization. Established groups submit actual revenue and expense data. If you haven’t yet completed a full tax year, you’ll provide good-faith projections of income and expenses for three years. Organizations that have completed one tax year but existed fewer than five must provide four years of combined actual and projected figures.5Internal Revenue Service. Form 1023 – Tax Periods for Which Statement of Revenue and Expenses Is Required Break income down by source (donations, grants, program service fees) and show where the money goes.
Choose Between Form 1023 and Form 1023-EZ
The IRS offers two versions. Form 1023-EZ is the streamlined option and costs $275. To qualify, your organization must meet all three conditions:
- Projected gross receipts of no more than $50,000 per year for each of the next three years
- Past gross receipts of no more than $50,000 per year for each of the past three years
- Total assets with a fair market value not exceeding $250,000
You confirm eligibility using the Form 1023-EZ Eligibility Worksheet in the instructions. A single “yes” answer on that worksheet disqualifies you and pushes you to the full Form 1023.6Internal Revenue Service. Instructions for Form 1023-EZ – Streamlined Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code
The full Form 1023 costs $600 and is substantially more involved.7Internal Revenue Service. Form 1023 and 1023-EZ – Amount of User Fee It requires a detailed narrative describing every activity your organization conducts or plans to conduct, past, present, and future, and how each serves your exempt purpose. You disclose compensation for officers, directors, and highly compensated employees; the IRS reviews those figures to confirm no one is improperly profiting from the exemption.
Claim Public Charity or Private Foundation Status
Every 501(c)(3) is either a public charity or a private foundation, and the IRS presumes private foundation status unless you demonstrate otherwise.8Internal Revenue Service. EO Operational Requirements – Private Foundations and Public Charities The distinction matters because private foundations face tighter operating rules and additional excise taxes.
Public charities generally draw a significant share of funding from the public or from government sources. Churches, schools, hospitals, and organizations that pass a public support test fit here. Private foundations are typically controlled by a family or small group and funded by a narrow donor base. Your application requires specific financial data supporting whichever classification you claim, so have your public support calculation ready if you’re seeking public charity status.
Submit Through Pay.gov
The IRS requires all exemption applications to be submitted electronically through Pay.gov. Register for an account, then search by form number.9Internal Revenue Service. About Form 1023, Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code For the full Form 1023, you upload the completed application as a PDF along with articles of incorporation, bylaws, and other supporting documents. Blurry scans slow the review.
Fees are non-refundable and can be paid by credit card, debit card, or bank withdrawal. Once payment processes and you submit, Pay.gov generates a tracking confirmation.
File Within 27 Months of Formation
Timing controls when your exemption starts. File Form 1023 or 1023-EZ within 27 months after the month your organization was legally formed, and the IRS makes your tax-exempt status effective as of the formation date. Miss the 27-month window, and exempt status only begins on the date the IRS receives your application.10Internal Revenue Service. Information for Organizations Applying for Tax-Exempt Status
The gap creates real problems. Donations received before the effective date aren’t deductible for the donors, which can damage relationships with early supporters. If your organization incorporated in January 2024, file by April 2026 at the latest.
What Happens After You Submit
You’ll receive an acknowledgment that the IRS has your application. Processing times differ sharply by form. The IRS reports 80% of Form 1023-EZ determinations issued within 22 days. The full Form 1023 takes far longer, with 80% of determinations issued within 191 days. A Form 1023-EZ flagged for closer review can take up to 120 days.11Internal Revenue Service. Where’s My Application for Tax-Exempt Status?
If a reviewer finds gaps, you’ll get a development letter requesting specific information. Per the Internal Revenue Manual, you typically have 28 calendar days from the mailing date to respond.12Internal Revenue Service. 7.20.2 Determination Letter Processing of Exempt Organizations Don’t let that slip. Failing to respond can close the case without a refund of your filing fee.
When the review is clean, the IRS issues a determination letter — the official document recognizing your organization as tax-exempt under Section 501(c)(3).13Internal Revenue Service. Exempt Organizations Rulings and Determinations Letters Keep it permanently. You’ll need it to open bank accounts, apply for grants, and prove status to donors. The letter also unlocks donor deductibility: contributions become tax-deductible under Section 170 of the Internal Revenue Code.14Office of the Law Revision Counsel. 26 USC 170 – Charitable, Etc, Contributions and Gifts
Keep the Status You Just Earned
Approval isn’t the end of your obligations. Every tax-exempt organization must file an annual information return, and which one depends on size:
- Form 990-N (e-Postcard) for gross receipts normally $50,000 or less
- Form 990-EZ for gross receipts under $200,000 and total assets under $500,000
- Form 990 for gross receipts of $200,000 or more, or total assets of $500,000 or more
- Form 990-PF for all private foundations, regardless of size
Miss the annual return for three consecutive years and the IRS automatically revokes your exempt status. Revocation takes effect on the filing due date of the third missed return.16Internal Revenue Service. Automatic Revocation of Exemption Reinstating a revoked organization means filing a brand-new application with a new fee. Even organizations small enough to file the free e-Postcard must file it every year.
One boundary worth knowing before you fundraise: federal tax-exempt status does not authorize soliciting donations in every state. Most states require charities to register with a state agency before asking residents for contributions, and requirements vary.17Internal Revenue Service. Charitable Solicitation – State Requirements If you plan to solicit online, that can mean registering in many states at once.