Application for Exemption

Nonprofit organizations are not automatically exempt from federal and state taxes. In order to obtain exemption from federal income taxes and any applicable state income and sales taxes, it is necessary for a nonprofit organization to file applications with the appropriate agencies (the IRS and state authorities). The IRS has significantly increased its scrutiny of federal applications for exemption over the past few years, resulting in the need for particular attention and care in the preparation of the application.

A quality application for exemption with the IRS is a product of an organization engaging in sufficient strategic planning to determine what its activities will be, where it will obtain funding, and the manner in which it will qualify for exemption. For an organization that wishes to qualify as an organization described in Section 501(c)(3) of the Internal Revenue Code, further analysis is required to determine whether the organization will be a private foundation or a public charity and which of the three public charity tests it will satisfy. After all of these decisions are made, the application itself must be prepared. Ice Miller can assist and advise with these structuring and planning processes as well as with the preparation of the federal and state applications.