A tax-exempt organization is one that does not have tax obligations. The government provides this incentive to encourage businesses to help better their communities. As a result, organizations that provide a valuable service to the community may qualify for tax exemption.

What types of organizations qualify for this status?

The most common type of tax-exempt organizations is 501(c)3 nonprofit charitable organizations. Examples include that that provide educational and literary services as well as groups that work to prevent cruelty to animals or children, organizations that foster sports or scientific operations and religious institutions.

Nonprofit status is a state law concept. It is important to note that although nonprofits are often tax exempt, the IRS does not consider the two terms as interchangeable. Just because an organization receives a nonprofit designation, does not automatically mean it is also tax-exempt. In order to qualify for tax exemption, the organization must meet requirements set out in the tax code and receive recognition of tax-exempt status from the Internal Revenue Service (IRS).

Other examples of tax-exempt organizations can include 501(c)4 social welfare organizations and 501(a) other nonprofit or tax-exempt organizations.

How do I know if my organization is tax-exempt?

Whether or not your business will qualify will likely depend on its articles of incorporation or trust documents. The first step involves determining whether your organization is a trust, corporation or association. Then you will need to gather organization documents and review your state’s registration requirements. You will also likely need an employer ID number (EIN).

Once these steps are taken, you can fill out the form to receive a tax-exemption status from the IRS. The exact forms needed will depend on the business’ status. The attorneys at Goldburd McCone are familiar with these applications and can provide guidance throughout the process.