Life Cycle of a Private Foundation - Applying to the IRS
Once a foundation has been created under state law and begins to operate, it may want to be recognized as exempt under section
501(c)(3) of the Internal Revenue Code. In addition to exemption from federal income taxation, organizations recognized as exempt under section 501(c)(3) may enjoy collateral benefits under the Internal Revenue Code, as well as under state or local income, property, sales, use or other tax provisions.
To apply for exemption, a foundation should obtain and complete the required forms (exemption application and application for employer identification number) and submit them, along with the required user fee. If a foundation will be represented by an attorney or other representative, it must also submit a power of attorney. See When to File for a discussion of deadlines for filing Form 1023.
Public disclosure requirements apply to exemption applications that the IRS approves. In addition, cases in which the IRS has issued a letter denying or revoking an organization's exempt status are subject to public disclosure under Internal Revenue Code section 6110.
Help from the IRS
You can get help with questions about applying for tax exemption through the IRS Exempt Organizations Division:
EO Web Site [www.irs.gov/eo]
The EO Web site includes a step-by-step explanation of the Application Process.
IRS Processing of Exemption Applications
Your exemption application may provide enough information for the IRS to issue a ruling on your exempt status under section 501(c)(3). Frequently, however, the IRS reviewer will need additional information to complete your application. The reviewer will write a letter requesting the additional information by a specified date.
While You Wait
If an annual exempt organization return is due while the organization's application for recognition of exempt status is pending with the IRS (including any appeal of a proposed adverse determination), the organization must file it, indicating that its exemption application is pending.
If an organization has unrelated business income of more than $1,000, also file
Your organization should comply with tax law requirements applicable to section 501(c)(3) tax-exempt organizations. See Publication 4221-PF, Compliance Guide for 501(c)(3) Tax-Exempt Organizations, for more information.
If an exemption application does not contain the required information, the IRS may return it with a letter of explanation, and will not consider the application on its merits.
Different Application Form Needed
If a different application form is required for your organization, the IRS will so advise your organization and will provide the appropriate application form for your convenience in reapplying under that paragraph, if you wish to do so. Although supporting information previously furnished need not be duplicated, you must provide any necessary additional information required for the application. If your reply is not received within a limited time, your application will be processed only for the paragraph under which you originally applied.
When a specific application form is needed for the paragraph under which your organization qualifies, that form is required before a letter recognizing exemption can be issued. This includes cases in which an exemption letter is modified to recognize an organization's exempt status under a paragraph other than the paragraph under which it originally established exemption.
Organizations that submit a complete application will receive an acknowledgment from the IRS. Others will receive a letter requesting more information or returning an incomplete application.