Specific Instructions

Part I. Identification of Applicant

Line 1. Full name of organization.   Enter your complete name exactly as it appears in your organizing document, including amendments.

Line 2. c/o Name.   If you have an “in care of” name, enter it here.

Line 3. Mailing address.   Enter your complete address where all correspondence will be sent. If mail is not delivered to the street address and you have a P.O. Box, show the box number instead of the street address.

  For a foreign address, enter the information in the following order: city, province or state, and country. Follow the country's practice in placing the postal code in the address. Do not abbreviate the country name.

Line 4. Employer Identification Number (EIN).   Enter the nine-digit EIN assigned to you.

  
Caution
Do not submit this application until you have obtained an EIN.

  An EIN is your account number with us and is required regardless of whether you have employees. If you need an EIN, you can apply for one by:
  1. Calling 1-800-829-4933.

  2. Calling 1-215-516-6999, if you are located outside the United States.

  3. Mailing Form SS-4 to the IRS.

  4. Faxing Form SS-4 to a location provided in the Instructions for Form SS-4.

  You can get Form SS-4 online at www.irs.gov, or by calling 1-800-829-3676, to order IRS tax forms and publications.

  If you previously applied for an EIN and have not yet received it, or you are unsure whether you have an EIN, please call our toll-free customer account services number, 1-877-829-5500, for assistance.

Line 5. Month the annual accounting period ends (01-12).   Enter the month that your annual accounting period ends, using a two-digit number format. For example, if your annual accounting period ends December 31, enter “12.” Your annual accounting period is the 12-month period on which your annual financial records are based. Your first tax year could be less than 12 months.

  Check your bylaws or other rules of operation for consistency with the annual accounting period entered in line 5.

Line 6a. Primary contact.    Your primary contact person may be an officer, director, trustee, or other individual who is permitted to speak with us according to your bylaws or other rules of operation. Your primary contact person may also be an “authorized representative, such as an attorney or certified public accountant for whom you have submitted a completed Form 2848, with the Form 1023.

Line 7.   If you wish to be represented by an authorized representative, a completed Form 2848 must be attached to the Form 1023.

Line 8.   Provide information about persons, other than your officers, directors, trustees, employees, or authorized representative(s), whom you paid, or promised to pay, to assist you in establishing your organization, developing programs to solicit funds, or otherwise advising you about organizational, financial, or tax matters.

  For example, provide information about a paid consultant who advised you about obtaining tax exemption.

Line 9a. Organization's website.   Enter your complete website address if you have one. Also, list any websites maintained on your behalf. The information on your website should be consistent with the information in your Form 1023.

Line 9b. Email (optional).   Enter your email address to receive educational information from us in the future. Because of security concerns, we cannot send confidential information via email. However, we can use a fax to contact you.

Line 10.   Generally, organizations not required to file Form 990 (or Form 990-EZ) include churches, certain church affiliated organizations, certain affiliates of a governmental unit, and organizations with annual gross receipts normally not more than $25,000. For more information, see the Instructions for Form 990 and Form 990-EZ.

  
Taxtip
Private foundations must file Form 990-PF regardless of the amount of their gross receipts.

Line 11.   List the date you were legally created by month, day, and year (for example, 02/01/2004). The date should be consistent with your organizing document described in Part II.

Line 12.   For purposes of completing this application, you are formed under the laws of a foreign country if you are not formed under the laws of (1) the United States, its territories and possessions, (2) federally recognized Indian tribal or Alaska Native governments, or (3) the District of Columbia.

Part II. Organizational Structure

Only trusts, unincorporated associations, or corporations (including limited liability companies) are eligible for tax-exempt status under section 501(c)(3) of the Code. Sole proprietorships, partnerships, or loosely affiliated groups of individuals are not eligible.

To qualify for tax-exempt status, you must check “Yes” on either line 1, 2, 3, or 4 and submit a copy of your organizing document.

Line 1.   A “corporation” is an entity organized under a Federal or state statute, or a statute of a federally recognized Indian tribal or Alaskan native government. A corporation's organizing document is its “articles of incorporation.

Certification of filing.   If formed under state statute, your articles of incorporation must show certification of filing. This means your articles show evidence that on a specific date they were filed with and approved by an appropriate state authority. The document must be an exact copy of what is on file with your state.

  If you do not have a copy of your articles of incorporation showing evidence of having been filed and approved by an appropriate state official, you may submit a substitute copy of your articles of incorporation. This substitute copy may be handwritten, typed, printed, or otherwise reproduced. It must be accompanied by a declaration, signed by an officer authorized to sign for you, that it is a complete and correct copy of the articles of incorporation and that it contains all the powers, principles, purposes, functions, and other provisions by which you currently govern yourself.

Line 2.   A “limited liability company (LLC)” that files its own exemption application is treated as a corporation rather than a partnership. Instead of articles of incorporation, an LLC's organizing document is its state-approved “articles of organization. If it has adopted an “operating agreement, then this document is also part of its organizing document.

  An LLC may only have 501(c)(3) member(s) to qualify for an exemption. An LLC should not file an exemption application if it wants to be treated as a disregarded entity by its tax-exempt member.

Line 3.    An “unincorporated association” formed under state law must have at least two members who have signed a written document for a specifically defined purpose.

  The articles of organization of an unincorporated association must include the name of your organization, your purpose, the date the document was adopted, and the signatures of at least two individuals. If your copy does not contain the proper signatures and date of adoption, you may submit a written declaration that states your copy is a complete and accurate copy of the signed and dated original. Your declaration should clearly indicate the original date of adoption.

  
Taxtip
Bylaws may be considered an organizing document only if they are properly structured (includes name, purpose, signatures, and intent to form an organization).

Line 4a.   A trust may be formed by a trust agreement or declaration of trust. A trust may also be formed through a will.

  If your trust agreement copy does not contain the proper signatures, you may submit a written declaration that states your copy is a complete and accurate copy of the signed and dated original. Your declaration should clearly indicate the original date that it was signed.

Trust created by a will.   For trusts created by a will, include a copy of the death certificate or a statement indicating the date of death, and a copy of the relevant portions of the will.

Trust agreement and non-charitable interests.   If your trust agreement provided for distributions for non-charitable interests, indicate the date on which these interests expired. If your trust agreement continues to provide for these interests, you will not qualify for tax-exempt status.

Line 4b.   Generally, a trust must be funded with property, such as money, real estate, or personal property to be legally created.

Line 5.    “Bylaws” are generally the internal rules and regulations of an organization. If you have bylaws, you should submit a current copy.

  Bylaws do not need to be signed unless they are the organizing document as described in line 3 above.

Part III. Required Provisions in Your Organizing Document

Line 1. Purpose clause.   Your organizing document must limit your purposes to those described in section 501(c)(3). Those purposes are: charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, and preventing cruelty to children or animals.

  The generally accepted legal definition of “charitable includes relief of the poor, the distressed, or the underprivileged; advancement of religion; advancement of education or science; erecting or maintaining public buildings, monuments, or works; lessening the burdens of government; lessening neighborhood tensions; eliminating prejudice and discrimination; defending human and civil rights secured by law; and combating community deterioration and juvenile delinquency. Therefore, the phrase “relief of the poor” in your organizing document properly limits your purposes.

  If your purposes are limited in some way by referring to section 501(c)(3), your organizing document also properly limits your purposes. For example, the phrase “relief of the elderly within the meaning of section 501(c)(3)” in your organizing document also properly limits your purposes.

  However, if the purposes listed in your organizing document are broader than those listed in section 501(c)(3), you should amend your organizing document before applying. A reference to section 501(c)(3) will not ensure that your purposes are limited to those described in section 501(c)(3). All of the language in your organizing document must be considered. The following is an example of an acceptable purpose clause:
  The organization is organized exclusively for charitable, religious, educational, and scientific purposes under section 501(c)(3) of the Internal Revenue Code, or corresponding section of any future federal tax code.  

  See Publication 557 for further information and examples of how to limit your purposes.

  Any amendment to your articles of organization you submit should show evidence that it was signed, dated, and certified as described in Part II.

Line 2a. Dissolution clause.   Your organizing document must permanently dedicate your assets for a section 501(c)(3) purpose. This means that if you dissolve your organization in the future, your assets must be distributed for an exempt purpose described in section 501(c)(3), or to the federal government, or to a state or local government for a public purpose.

  If your organizing document states that your assets would be distributed to members or private individuals or for any purpose other than those provided in section 501(c)(3), you must amend your organizing document to remove such statements.

  If multiple amendments are required, they may be done at the same time. For example, if you are a corporation and are required to amend both your purpose and dissolution clauses, you may file a single amending document with your appropriate government authority.

  The following is an example of an acceptable dissolution clause:
  Upon the dissolution of this organization, assets shall be distributed for one or more exempt purposes within the meaning of section 501(c)(3) of the Internal Revenue Code, or corresponding section of any future federal tax code, or shall be distributed to the federal government, or to a state or local government, for a public purpose.  

  Naming a specific organization to receive your assets upon dissolution will only be acceptable if your articles state that the specific organization must be exempt under section 501(c)(3) at the time your dissolution takes place and your articles provide for an acceptable alternative if the specific organization is not exempt. See Publication 557 for further information and examples of acceptable language for dedication of assets in your organizing document.

Line 2c. Operation of state law.   If you are a corporation formed in the following states, then you do not need a specific provision in your articles of incorporation providing for the distribution of assets upon dissolution.
  Arkansas   Minnesota
  California   Missouri
  Louisiana   Ohio
  Massachusetts   Oklahoma

  If you are a testamentary charitable trust formed in the following states, then you do not need a specific provision in your trust agreement or declaration of trust providing for the distribution of assets upon dissolution.
  Alabama   South Dakota
  Louisiana   Virginia
  Pennsylvania    

  If you are a testamentary charitable trust formed in the states listed below and the language of your trust instrument provides for a general intent to benefit charity, then you do not need a specific provision in your trust agreement or declaration of trust providing for the distribution of assets upon dissolution.
Arkansas Minnesota
California Mississippi
Colorado Missouri
Connecticut Nebraska
Delaware New Hampshire
District of Columbia New Jersey
Florida North Carolina
Georgia Ohio
Illinois Oklahoma
Indiana Oregon
Iowa Rhode Island
Kansas Tennessee
Kentucky Texas
Maine Vermont
Maryland Washington
Massachusetts Wisconsin
Michigan

  Operation of state law is based on Rev. Proc. 82-2, 1982-1 C.B. 367.

Foreign organizations.   Foreign organizations may be able to rely upon the applicable laws of their jurisdiction in a similar manner. You must provide a copy of the applicable law with an English translation.

Part IV. Narrative Description of Your Activities

Describe completely and in detail your past, present, and planned activities. Do not refer to or repeat the purposes in your organizing document. You may refer to other parts of the application rather than repeat information provided elsewhere.

For each past, present, or planned activity, include information that answers the following questions.

  • What is the activity?

  • Who conducts the activity?

  • When is the activity conducted?

  • Where is the activity conducted (for example: Los Angeles and San Francisco, California)?

  • How does the activity further your exempt purposes?

  • What percentage of your total time is allocated to the activity?

  • How is the activity funded? (This should agree with the financial data in Part IX.)

  • List any alternate names under which you operate, including any “aka” (also known as) or “dba” (doing business as) names.

If you have a website, you may attach a paper copy to support your narrative description of activities.

Part V. Compensation and Other Financial Arrangements With Your Officers, Directors, Trustees, Employees, and Independent Contractors

Compensation.   For purposes of Part V, compensation includes salary or wages, deferred compensation, retirement benefits, whether in the form of a qualified or non-qualified employee plan (pensions or annuities), fringe benefits (personal vehicle, meals, lodging, personal and family educational benefits, low interest loans, payment of personal travel, entertainment, or other expenses, athletic or country club membership, and personal use of your property), and bonuses.

Example.

Assume an organization compensates its director as follows:

Wages  
Director Compensation $ 2,500
Salary as Chief Executive Officer 40,000
Deferred retirement 2,000
Health insurance policy 5,000
Use of a vehicle 5,000
Total Compensation $ 54,500

Information in Part V must be consistent with the information provided in Part IX. Financial Data.

Line 1a.   For each person listed, state their total annual compensation, or proposed compensation, for all services to the organization, whether as an officer, employee, or other position. Use actual figures, if available. Officers, directors, and trustees may use the organization's address for mailing.

Line 1b.   Employees may use the organization's address for mailing. Report total compensation. For employees who are also officers, directors, or trustees, their compensation as employees and for all other services should be reported in line 1a.

Line 1c.   “Independent contractors are persons who are not treated as employees for employment tax purposes. For information on determining if an individual is an employee or an independent contractor, see Publication 15-A, Employer's Supplemental Tax Guide.

Line 2a.   Describe family or business relationships between your officers, directors, or trustees. “Related refers to both family and business relationships.
  • Family relationships include the individual's spouse, ancestors, children, grandchildren, great grandchildren, siblings (whether by whole or half blood), and the spouses of children, grandchildren, great grandchildren, and siblings.

  • Business relationships include employment and contractual relationships, and common ownership of a business where any officers, directors, or trustees, individually or together, possess more than a 35% ownership interest in common. “Ownership means voting power in a corporation, profits interest in a partnership, or beneficial interest in a trust.

Line 2b.   Describe family or business relationships between you and any of your officers, directors, or trustees other than their position with you as an officer, director, or trustee.

Line 2c.   Describe family or business relationships between your officers, directors, or trustees and your five highest compensated employees or five highest compensated independent contractors who will receive more than $50,000 in taxable or non-taxable compensation per year.

Line 3b.   “Common control means that you and one or more other organizations have (1) a majority of your governing boards or officers appointed or elected by the same organization(s), or (2) a majority of your governing boards or officers consist of the same individuals. Common control also occurs when you and one or more commonly controlled organizations have a majority ownership interest in a corporation, partnership, or trust. See the instructions for line 2a, above, for a definition of ownership.

Line 4.   By adopting these recommended compensation-setting practices, such as by resolution of your governing board, you will be establishing procedures aimed at helping to prevent your top officials from receiving excess compensation benefits.

Line 4e.   “Similarly situated organizations means tax-exempt or taxable organizations of a comparable size, purpose, and resources. Adjustments due to geographic area, and other specific conditions are appropriate, but should be documented. The source(s) of comparable compensation data, both taxable and non-taxable, should be documented and copies retained in your permanent records.

Line 4g.   “Reasonable compensation is the amount that would ordinarily be paid for like services by like organizations under like circumstances as of the date the compensation arrangement is made. Establishing and documenting reasonable compensation is important because excessive compensation may result in excise taxes on both the individual and the organization. In addition, this may jeopardize the organization's tax exemption.

Line 5a.    A “conflict of interest arises when a person in a position of authority over an organization, such as a director, officer, or manager, may benefit personally from a decision he or she could make. A Sample Conflict of Interest Policy is included as Appendix A.

  Adoption of a conflict of interest policy is not required to obtain tax-exempt status. However, by adopting the sample policy or a similar policy, you will be choosing to put in place procedures that will help you avoid the possibility that those in positions of authority over you may receive an inappropriate benefit.

Line 6a.   A “fixed payment means a payment that is either a set dollar amount or fixed through a specific formula where the amount does not depend on discretion. For example, a base salary of $200,000 that is adjusted annually based on the increase in the Consumer Price Index is a fixed payment.

  A “non-fixed payment means a payment that depends on discretion. For example, a bonus of up to $100,000 that is based on an evaluation of performance by the governing board is a non-fixed payment because the governing body has discretion over whether the bonus is paid and the amount of the bonus.

Line 7a.   Do not include purchases of goods and services in your normal course of operations that are available to the general public under similar terms and conditions.

Arm's length.   An arm's length standard exists where the parties have an adverse (or opposing) interest. For example, a seller wants to sell his goods at the highest possible price, while a buyer wants to buy at the lowest possible price. These are adverse interests.

  In negotiating with a person, an adverse interest is assumed if that person is otherwise unrelated to you in the sense of not being in a position to exercise substantial influence over you or your affairs. If the person is in a position to exercise substantial influence over your affairs, then an arm's length standard requires additional precautions to eliminate the effect of the relationship.

  Using a conflict of interest policy, information about comparable transactions between unrelated parties, and reliable methods for evaluating the transaction, are examples of precautions that would help make the negotiation process equivalent to one between unrelated persons.

Fair market value.   This is the price at which property or the right to use property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy, sell, or transfer property or the right to use property, and both having reasonable knowledge of relevant facts.

Line 7b.   Do not include sales of goods and services in your normal course of operations that are available to the general public under similar terms and conditions.

Line 9a.   Answer “Yes” if any of your officers, directors, or trustees:
  • Is an officer, director, or trustee in another organization (other than a section 501(c)(3) organization) that has a lease, contract, loan, or other agreement with you.

  • Possess more than a 35% ownership interest in any organization that has a lease, contract, loan, or other agreement with you. For example, you would answer “Yes” if one of your directors were an officer for a section 501(c)(4) organization with whom you had a lease for office space. You would also answer “Yes” if one of your directors owns more than 35% of the voting stock of a corporation to which you made a loan.

Part VI. Your Members and Other Individuals, and Organizations That Receive Benefits From You

Line 1a. Benefits to individuals.   Describe any programs where you provide goods, services, or funds to individuals. For example, describe programs by which you provide food to the homeless, employment counseling to senior citizens, or grants to victims of a disaster.

Line 1b. Benefits to organizations.   Describe any programs where you provide goods, services, or funds to organizations. For example, programs where you provide equipment, accounting assistance, or grants to other organizations.

Line 2.   For programs that are available only for members, include a sample membership application and a schedule of membership dues. Also, describe any different membership levels and the benefits each membership level receives.

Line 3.   Describe any business or family relationship between individuals who receive goods, services, or funds through your programs with any officer, director, trustee, or with any of the five-highest compensated employees or independent contractors listed in Part V, lines 1a, 1b, or 1c.

Part VII. Your History

Line 1.   You are a “successor if you have:
  • Substantially taken over all of the assets or activities of another organization,

  • Been converted or merged from another organization, or

  • Installed the same officers, directors, or trustees as another organization that no longer exists and that had purpose(s) similar to your purpose(s).

  
Tax tip
The predecessor organization may be or may not have been a tax-exempt or non-exempt organization.

Part VIII. Your Specific Activities

Line 1.   You participate in a political campaign if you promote or oppose the candidacy of an individual for public office. Your explanation should include representative copies of your political literature, brochures, pamphlets, etc. Candidate debates and nonpartisan voter education are permitted.

  
Taxtip
Organizations described in section 501(c)(3) are prohibited from supporting or opposing candidates for public office in any political campaign. If you answer “Yes,” you are not qualified for tax exemption under section 501(c)(3) and should reconsider whether the filing of application Form 1023 is appropriate for your organization. See Publication 557 for a description of other Internal Revenue Code sections under which you may qualify.

Line 2a.   You are attempting to “influence legislation if you directly contact or urge the public to contact members of a legislative body for the purpose of proposing, supporting, or opposing legislation. You are also attempting to influence legislation if you advocate the adoption or rejection of legislation. If you answer “Yes,” your explanation should include the percentage of your total time and total funds spent on such legislative activities. Also, submit representative copies of your legislative literature, brochures, pamphlets, etc.

  Organizations described in section 501(c)(3) are prohibited from engaging in a substantial amount of legislative activities. Whether you are engaged in substantial legislative activities depends on all of the facts and circumstances.

Line 2b.   By filing Form 5768 your legislative activities will be measured solely by expenditure limits under section 501(h) rather than by whether legislative activity is considered substantial. Form 5768 is included in Package 1023 for your convenience. It describes the types of organizations that are eligible to make an election. For a discussion of the requirements of section 501(h), see Publication 557. If you are an organization that elects to use expenditure limits in influencing legislation:
  • Attach a copy of Form 5768 that has already been separately filed with us, or

  • Provide a completed Form 5768 with your exemption application.

  
Caution
Churches and private foundations are not eligible to make this election.

Line 3a.   For purposes of this application, “bingo is a game of chance played with cards that are generally printed with 5 rows of 5 squares each on which participants place markers to form a preselected pattern to win the game. Other gaming activities include pull-tabs, raffles, keno, split-the-pot, and other games of chance.

   Describe these activities, including how often your bingo or other gaming activities are conducted, where they are conducted, and who conducts them. Also describe whether your workers are compensated. If workers are compensated, describe who receives compensation and how the amount is determined.

  Revenue associated with these activities means gross revenue amounts.

  Expenses associated with these activities means direct and indirect expenses. The dollar value of prizes should be included in expenses.

  
Tax tip
Gaming may be subject to unrelated business income tax. See Publication 3079 for further information about gaming.

Line 3c.    Local jurisdictions include cities, counties, towns, municipalities, and similar government jurisdictions within a state. A local jurisdiction also includes an Indian Reservation.

Line 4a.   “Fundraising includes efforts to raise funds through appeals for financial support. Fundraising may be conducted by your employees or volunteers, through an agent, or through an independent contractor. If you answer “Yes,” check all the boxes that apply and complete lines 4b through 4e.

Line 4d.   Local jurisdictions include cities, counties, towns, municipalities, and similar government jurisdictions within a state. A local jurisdiction also includes an Indian Reservation.

Line 4e.   This line is intended to obtain information from you regarding donor-advised funds that you may maintain. A “donor-advised fund” is maintained if you establish separate accounts for a donor whereby the donor may exercise a right to make a recommendation on either uses of the account, such as providing advice about how to invest, or distributions from the account, such as providing advice about how to make expenditures.

Line 5.   You are “affiliated with a governmental unit if you were created by, controlled by, or closely related to a governmental unit. Identify each governmental unit and describe your relationship with it. Include details of any financial reports or audits required by the governmental unit. Also, describe any power or authority given to you by the governmental unit.

  For purposes of this question, a “governmental unit” includes a State, a possession of the United States, or any political subdivision of a State or a possession of the United States, or the United States, or the District of Columbia.

  A governmental unit would generally not qualify for exemption under section 501(c)(3). Also, if you can exercise certain sovereign powers, such as the power to tax or police powers, you would generally not qualify for exemption under section 501(c)(3).

Line 6a.   “Economic development organizations are generally formed to combat community deterioration by assisting businesses located in a particular geographic area whose economy is economically depressed or deteriorating. Their varieties of activities include grants, loans, provision of information and expertise, or creation of industrial parks. Economic development organizations may also be formed to eliminate prejudice and discrimination or lessen the burdens of government through involvement with business development.

  If your exempt purpose is to combat community deterioration, describe whether the area or areas in which you will operate have been declared blighted or economically depressed by a government finding. If the area has not been declared blighted or economically depressed, a more suitable exemption may be under sections 501(c)(4) or 501(c)(6). See Publication 557 for more information.

  If your exempt purpose is to eliminate prejudice and discrimination, describe how your activities further this purpose.

  If your exempt purpose is to lessen the burdens of government, describe whether the government has recognized your activities as those for which it would otherwise be responsible, and any involvement you have with governmental entities that demonstrates that you are actually lessening governmental burdens.

Line 7a.   “Develop” means the planning, financing, construction, or provision of similar services involved in the acquisition of real property, such as land or a building. For example, you should provide information regarding the services of a consultant who puts together an arrangement for you to acquire a nursing home through the issuance of tax-exempt bonds.

Line 7b.    “Manage” means to direct or administer. For example, you would provide information about an organization hired to administer a museum gift shop. See the instructions for Part V, line 2a, for a description of the term business or family relationships.

Line 7c.   See the instructions for Part V, line 2a, for a description of the term business or family relationships. See the instructions for Part V, line 7a, for a description of the term arm's length.

Line 8.    A “joint venture is a legal agreement in which the persons jointly undertake a transaction for mutual profit. Generally, each person contributes assets and shares risks. Like a partnership, joint ventures can involve any type of business transaction and the persons involved can be individuals, groups of individuals, companies, or corporations.

Line 9a.   Childcare services provide care for children away from their homes. An organization providing childcare services may qualify for tax-exempt status as either a:
  • School under IRC 170(b)(1)(A)(ii).

  • Childcare organization under IRC 501(k).

Refer to the instructions for Part VII, line 19, to determine if you qualify as a school.

  A childcare organization qualifies under IRC 501(k) if it provides care for children away from their homes; substantially all of the childcare enables individuals to be gainfully employed; and the services provided by the organization are available to the general public.

Line 9b.   “Gainfully employed includes enabling individuals to work or to seek work.

Line 9c.   Section 501(k) states that to qualify as a childcare organization, substantially all of the care you provide should be to permit individuals to be gainfully employed. If less than 85% of your services are for children of working parents or caretakers:
  • Describe the percentage of the children for whom you provide services to permit parents or caretakers to work, and

  • Describe any efforts you are taking to increase the percentage of the children for whom you provide services to permit parents or caretakers to work.

Line 9d.   Describe any eligibility requirements, such as employment with a particular employer.

Line 10.   “ Intellectual property includes:
  • Patents (for inventions).

  • Copyrights (for literary and artistic works such as novels, poems, plays, films, musical works, drawings, paintings, photographs, sculptures, architectural designs, performances, recordings, film, and radio or television programs).

  • Trade names, trade marks, and service marks (for symbols, names, images, and designs).

  • Formulas, know-how, and trade secrets.

Line 12a.   A “foreign country is a country other than the United States, its territories and possessions, and the District of Columbia.

Line 13d.   A “relationship” between you and the recipient organization includes the following situations:
  • You control the recipient organization or it controls you through common officers, directors, or trustees, or through authority to approve budgets or expenditures.

  • You and the recipient organization were created at approximately the same time and by the same persons.

  • You and the recipient organization operate in a coordinated manner with respect to facilities, programs, employees, or other activities.

  • Persons who exercise substantial influence over you also exercise substantial influence over the other organization.

Line 14a.   Answer “Yes” if you make grants, loans, or other distributions, such as goods, to a foreign organization. For purposes of completing this application, a domestic organization is one that is formed under the laws of the United States, its territories and possessions, federally recognized Indian Tribal and Alaska Native governments (including political subdivisions), or the District of Columbia. A “foreign organization is one that is not a domestic organization.

  A list of federally recognized Indian tribes is provided in Rev. Proc. 2002-64, 2002-2 C.B. 717. A list of entities that are treated as political subdivisions of Indian tribal governments is provided in Rev. Proc. 86-17, 1986-1 C.B. 550 and Rev. Proc. 84-36, 1984-1 C.B. 510.

Line 15.   A “close connection” between you and another organization includes the following situations:
  • You control the organization or it controls you through common officers, directors, or trustees, or through authority to approve budgets or expenditures.

  • You and the organization were created at approximately the same time and by the same persons.
    For example, you were formed within months of the time that a social welfare organization and a political action committee were established by the same persons who were instrumental in your formation.

  • You and the organization operate in a coordinated manner with respect to facilities, programs, employees, or other activities.
    For example, you share rental expenses for office space and employees with a for-profit corporation.

  • Persons who exercise substantial influence over you also exercise substantial influence over the other organization and (1) you either conduct activities in common or (2) have a financial relationship.
    For example, a voting member of your governing body is also a voting member of the governing body of a business league with which you intend to cooperate in planning an advertising campaign that will inform the public about the benefits of a particular program.
    For example, a voting member of your governing body is also a voting member of the governing body of a business league that has made a loan to you.

Line 16.   A “cooperative hospital service organization described in section 501(e) is organized and operated on a cooperative basis to provide its section 501(c)(3) hospital members one or more of the following activities.
• Data processing.
• Purchasing (including purchasing insurance on a group basis).
• Warehousing.
• Billing and collection (including purchasing patron accounts receivable on a recourse basis).
• Food.
• Clinical.
• Industrial engineering.
• Laboratory.
• Printing.
• Communications.
• Record center.
• Personnel (including selecting, testing, training, and educating personnel) services.

  A cooperative hospital service organization must also meet certain other requirements specified in section 501(e). For additional information, see Publication 557.

Line 17.   A cooperative service organization of operating educational organizations described in section 501(f) is organized and operated to provide investment services to its members. Those members must be organizations described in section 170(b)(1)(A)(ii) or (iv), and either tax exempt under section 501(a) or whose income is excluded from taxation under section 115(a).

  See Publication 557 for additional information.

Line 18.   A “charitable risk pooldescribed in section 501(n) is organized and operated to pool insurable risks of its section 501(c)(3) members (other than risks related to medical malpractice). A section 501(n) organization must be organized under state law provisions authorizing risk pooling arrangements for charitable organizations and also meet certain other requirements provided by section 501(n).

  See Publication 557 for additional information.

Line 19.   “A school is an educational organization whose primary function is the presentation of formal instruction and which normally maintains a regular faculty and curriculum and normally has a regularly enrolled body of pupils or students in attendance at the place where its educational activities are regularly carried on. A school may include a:
  • Primary, secondary, preparatory, or high school.

  • College or university.

  • Trade or technical school.

  • Nursery or pre-school.

  • School that you operate as an activity, such as a school that is operated as an activity of a museum, historical society, or church.

  If you are a nursery or pre-school that meets the description of a school, you would answer “Yes” to line 19 and complete Schedule B. You would also answer “No” to Part VIII, line 9a.

  If you are a nursery or pre-school that does not meet the description of a school, you would answer “No” to line 19. You would answer “Yes” to Part VIII, line 9a, if you are applying for exemption as a childcare organization.

  See Publication 557 for additional information.

Line 20.   “Hospital or medical care includes the treatment of any physical or mental disability or condition, whether as an inpatient or outpatient. A hospital includes:
  • Hospitals and rehabilitation institutions, outpatient clinics, or community mental health or drug treatment centers if the principal purpose or function is the providing of medical or hospital care or medical education or research.

  • Medical research organizations, if the principal purpose or function is the continuous active conduct of medical research in conjunction with a hospital.

  See Publication 557 for additional information.

Line 21.   “Low-income housing refers to rental or ownership housing provided to persons based on financial need. “Elderly housing refers to rental or ownership housing provided to persons based on age, including retirement, assisted-living, independent living, continuous care, and life care arrangements. “Handicapped housing refers to rental or ownership housing provided to persons based on physical or mental disabilities, including nursing homes.

  If you are a skilled nursing facility, you should also complete Schedule C.

Line 22.    Answer “Yes” if you pay monies to an individual as a scholarship, fellowship, or educational loan, for travel, study, or other similar purposes. Also answer “Yes” if you pay such amounts on behalf of an individual to a school or a tuition or educational savings program.

  Travel, study, or other similar purposes include payments made to enhance a literary, artistic, musical, scientific, teaching or other similar capacity, skill, or talent of the individual recipient. For example amounts paid to:
  • Vocational high school students to be used to purchase basic tools.

  • Teachers to induce them to teach in an economically depressed, public school system.

  • A scientific researcher to underwrite that individual's research project.

  Educational grants do not include amounts you pay to an individual as compensation, such as payments made to a consultant for personal services or to produce a report for you.

  Educational grants do not include amounts paid to another organization that distributes your funds as a scholarship to an individual if you have no role in the selection process.

  If you are a “private foundation as described in Part X, you can request advance approval of your grant-making procedures by completing Schedule H and avoid the possible imposition of excise taxes under section 4945.

Part IX. Financial Data

A. Statement of Revenues and Expenses

Existed 4 years or more.   If you have been in existence for 4 or more years, complete the A. Statement of Revenues and Expenses for your most recently completed year and each of the three years immediately before it for a total of four years of financial information. Place financial information for your most recently completed year in the column marked Current tax year.

  
caution
We may request financial information for more than four years if necessary.

Existed more than one year, less than 4 years.   If you have been in existence for more than 1 year and less than 4 years, provide your actual income and expenses for each completed year you have existed and projections of your likely income and expenses based on a reasonable and good faith estimate of your future finances for your current year and each year you have not existed for a total of 3 years of financial information. Place financial information for the year you are filing this application in the column marked Current tax year.

Existed less than 1 year.   If you have existed for less than 1 year, you must provide projections of your likely income and expenses for your current year and projections of your likely income and expenses for the next 2 years based on a reasonable and good faith estimate of your future finances. Place financial information for the year you are filing this application in the column marked Current tax year.

Preparing the statement.   Prepare the statements using the method of accounting you use in keeping your books and records. If you use a method other than the cash receipts and disbursements method, attach a statement explaining the method used. For example, state whether you used the accrual method of accounting to prepare the financial statements included with this application.

  Prepare the statements using the accounting period entered on Part I, line 5. Financial information should reflect projected activities reported elsewhere in this application.

Line 1.   Include funds or other items of value that you receive as gifts, grants, or contributions. For example, if one of your activities is a food drive, the value of the donated food must be included on this line. Also include on this line payments a governmental unit makes to enable you to both:
  • Accomplish your exempt purpose(s), and

  • Provide a service or facility directly to the general public.

  See the instructions to line 9 if you are uncertain whether revenue should be included as a grant in line 1 or as gross receipts in line 9. Unusual grants are not included on this line, but are included on line 12.

Examples   
  1. A city pays the symphony orchestra to provide free music programs in the public schools. The programs are open to the public. This income received from a governmental unit accomplishes the orchestra's exempt purpose and directly provides a service to the general public. The income is a grant to the symphony orchestra that should be listed on line 1.

  2. The symphony orchestra sells tickets to the public for its fall season. Such income is gross receipts received from the general public in performance of the orchestra's exempt function and should be listed on line 9.

  3. The public school system pays the symphony orchestra to create several musical pieces suitable for the school system's elementary music curriculum. This payment by a governmental unit for the music compositions is primarily for its (the school system's) own use, not for the direct benefit of the public. Therefore, this income is gross receipts received from a governmental unit in performance of the orchestra's exempt function that should be listed on line 9.

Line 2.   Include amounts received from members to provide support to the organization. Do not include payments from members or on behalf of members to purchase admissions, merchandise, services, or use of facilities.

Line 3.   Include gross income from dividends, interest, payments received on securities, loans, rents, and royalties that are held for investment purposes.

Line 4.   Net income from unrelated business activities generally includes income from any trade or business activity that is regularly carried on, not conducted with substantially all (at least 85%) volunteer labor, and not related to your exempt purposes. (This amount can be taken from Form 990-T, if filed.)

  Report on line 9 income from activities that are not related to the accomplishment of your exempt purposes, but are not considered unrelated business activities. For example, income from the sale of merchandise by volunteers that is not treated as an unrelated trade or business is reported on line 9.

  See Publication 598 for additional information regarding unrelated business income.

Line 5.   Include the amount collected by any local tax authority from the public on your behalf.

Line 6.   To determine the value of services or facilities furnished by a governmental unit, use the fair market value of the services or facilities furnished to you. Do not include the value of services or facilities generally provided to the public without charge.

Line 7.   Enter the total income from all sources not reported on lines 1 through 6, or lines 9, 11, and 13. Submit an itemized list showing each type and amount of income included on this line. Also, briefly describe each type of income.

Line 8.   Add lines 1 through 7 and enter the amount.

Line 9.   “Gross receipts” is income from activities that you conduct to further your exempt purposes (excluding amounts listed on other lines). It includes payments by a governmental unit that may be called a “grant,” but that is actually payment for a service or facility for the use of the government payer, rather than for the direct benefit of the public.

  

Example:

The state government gives a conservation group a grant to study the consequences to an ecologically significant woodland area of a new sewage treatment plan. Although the payment is called a grant, it is actually gross receipts that should be included on line 9. The payment is by a governmental unit (state) for a study for its own use, not for the direct benefit of the general public. The study could have been done by a for-profit consulting company rather than by the tax-exempt conservation group.

  Submit an itemized list of payments by any governmental units showing:
  • Payer (governmental unit or bureau).

  • Purpose of payment.

  • Amount.

  Include as gross receipts the income from activity conducted:
  • Intermittently (not regularly carried on), such as an occasional auction.

  • With substantially all (at least 85%) volunteer labor, such as a car wash.

  • For the convenience of members, students, patients, officers, or employees, such as a parking lot for a school's students and employees.

  • With substantially all contributed merchandise, such as a thrift store.

  See Publication 598 for additional information regarding income that is not from an unrelated trade or business.

Line 10.   Add lines 8 and 9 and enter the amount.

Line 11.   Attach a schedule with total amounts entered (rather than each individual transaction) for each category using the format in Figure 2.

Figure 2. Part IX-A. Statement of Revenues and Expenses Line 11. Net Gain or (Loss)

  Categories
  (A) Real Estate (B) Securities (C) Other
1. Gross sales price of assets (other than inventory) by category.      
2. Less: Cost or other basis and sales expenses.      
3. Gain or (loss). Subtract line 2 from line 1.      
4. Net gain or (loss) - Add line 3 of columns (A), (B), and (C). Enter here and on Form 1023, Part IX - A. Statement of Revenues and Expenses, line 11.  

Line 12.   “Unusual grants generally are substantial contributions and bequests from disinterested persons that by their size adversely affect classification as a public charity. They are unusual, unexpected, and received from an unrelated party.

  You must fully describe your unusual grants in Part X, line 7. For additional information about unusual grants and a description of public charity classification see Publication 557.

Line 13.   Add lines 10 through 12 and enter the amount.

Line 14.   Fundraising expenses include the total expenses incurred by you for soliciting gifts, grants, and contributions included on line 1. Where you allocate a portion of your other expenses to fundraising, submit an itemized list describing the amounts allocated. Include fees paid to professional fundraisers for soliciting gifts, grants, and contributions.

Line 15.   If distributions have been made, submit an itemized list showing the name of each recipient, a brief description of the purposes or conditions of payment, and the amount paid.

  Colleges, universities, and other educational institutions and agencies subject to the Family Educational Rights and Privacy Act (20 U.S.C. 1232g) need not list the names of individuals who were provided scholarships or other financial assistance where such disclosure would violate the privacy provisions of the law. Instead, such organizations should group each type of financial aid provided, indicate the number of individuals who received the aid, and specify the aggregate dollar amount.

Line 16.   If payments have been made, submit an itemized list showing the name of each recipient, a brief description of the purposes or condition of payment, and amount paid. Do not include any amounts on line 15.

Line 17.   Enter the total amount of compensation. Be consistent with information provided in Part V, lines 1a, 1b, and 1c.

Line 18.   Enter the total amount of employees' salaries and wages not reported on line 17, above.

Line 19.   Enter the total interest expense for the year, excluding mortgage interest treated as an occupancy expense on line 20.

Line 20.   Enter the amount paid for the use of office space or other facilities, heat, light, power, and other utilities, outside janitorial services, mortgage interest, real estate taxes, and similar expenses.

Line 21.   If you record depreciation, depletion, and similar expenses, enter the total amount.

Line 22.   Professional fees are those charged by individuals and entities that are not your employees. They include fees for professional fundraisers (other than fees listed on line 14, above), accounting services, legal counsel, consulting services, contract management, or any independent contractors.

Line 23.   Submit an itemized list showing the type and amount of each significant expense for which a separate line is not provided.

Line 24.    Add lines 14 through 23 and enter the amount on line 24.

B. Balance Sheet

Complete the following for your most recently completed tax year. If you have not completed a full tax year, use the most current information available. Be sure to enter the year-end date for the information provided and not the date the form is prepared.

Line 1.    Enter the total cash in checking and savings accounts, temporary cash investments (money market funds, CDs, treasury bills, or other obligations that mature in less than one year), and petty cash funds.

Line 2.   Enter the total accounts receivable that arose from the sale of goods and/or performance of services, less any reserve for bad debt.

Line 3.   Enter the amount of materials, goods, and supplies you purchased or manufactured and held to be sold or used in some future period.

Line 4.   Enter the total amount of bonds or notes that you issued that will be repaid to you. Submit an itemized list that shows the name of each borrower, a brief description of the obligation, the rate of return, the due date, and the amount due.

Line 5.   Enter the total fair market value (FMV) of corporate stocks you hold. Submit an itemized list of your corporate stock holdings. For stock of closely held corporations, the statement should show the name of the corporation, a brief summary of the corporation's capital structure, the number of shares held, and their value as carried on your books. If such valuation does not reflect current fair market value, also include fair market value.

  For stock traded on an organized exchange or in substantial quantities over the counter, the statement should show the name of the corporation, a description of the stock and the principal exchange on which it is traded, the number of shares held, and their value as carried on your books and their fair market value.

Line 6.   Enter the total amount of loans (personal and mortgage loans) receivable. Submit an itemized list that shows each borrower's name, purpose of loan, repayment terms, interest rate, and original amount of loan. Report each loan separately, even if more than one loan was made to the same person.

Line 7.   Enter the total book value of other investments. Include the total book value of government securities (federal, state, or municipal), and buildings and equipment held for investment purposes. Submit an itemized list identifying and reporting the book value of each building/item of equipment held for investment purposes.

Line 8.   Enter the total book value of buildings and equipment not held for investment. This includes facilities you own and equipment you use in conducting your exempt activities. Submit an itemized list of these assets held at the end of the current tax year/period, including the cost or other basis.

Line 9.   Enter the total book value of land not held for investment.

Line 10.   Enter the total book value of any other category of assets not reported on lines 1 through 9. For example, you would include patents, copyrights, or other intangible assets. Submit an itemized list of each asset.

Line 11.   Add lines 1 through 10 and enter the amount.

Line 12.   Enter the total amount of accounts payable to suppliers and others, such as salaries payable, accrued payroll taxes, and interest payable.

Line 13.   Enter the total unpaid portion of grants and contributions you have committed to pay to other organizations or individuals.

Line 14.   Enter the total of mortgages and other notes payable outstanding at the end of the current tax year/period. Submit an itemized list that shows each note separately, including the lender's name, purpose of loan, repayment terms, interest rate, and original amount.

Line 15.   Enter the total amount of any other liabilities not reported on lines 12 through 14. Submit an itemized list of these liabilities, including the amounts owed.

Line 16.   Add lines 12 through 15 and enter the amount.

Line 17.   Under fund accounting, an organization segregates its assets, liabilities, and net assets into separate funds according to restrictions on the use of certain assets. Each fund is like a separate entity in that it has a self-balancing set of accounts showing assets, liabilities, equity (fund balance), income, and expenses. If you do not use fund accounting, report only the “net assets” account balances, which include capital stock, paid-in capital, retained earnings or accumulated income, and endowment funds.

Line 18.   Add lines 16 and 17 and enter the amount.

Line 19.   If you answer “Yes,” describe the change and explain what caused it.

Part X. Public Charity Status

Line 1a.   Organizations that are exempt under section 501(c)(3) are private foundations unless they are:
  • Churches, schools, hospitals, governmental units, entities that undertake testing for public safety; organizations that have broad financial support from the general public; or

  • Organizations that support one or more other organization(s) that are themselves classified as public charities.

  Section 501(c)(3) organizations excepted from private foundation status are public charities. See the instructions for Part X, lines 5a through 5i for a more detailed description of public charities.

  Unless you meet one of the exceptions above, you are a private foundation and must answer, “Yes,” on line 1a.

Line 1b.   Section 508(e) provides that a private foundation is not tax exempt unless its organizing document contains specific provisions. These specific provisions require that you operate to avoid liability for excise taxes under sections 4941(d), 4942, 4943(c), 4944, and 4945(d). You can also meet these provisions by reliance on state law.

  See Publication 557, Chapter 3, Section 501(c)(3) Organizations: Private Foundations, for samples of provisions that will meet section 508(e). Also, see Appendix B. for a list of states that have enacted statutory provisions that satisfy the requirements of section 508(e), subject to notations. Appendix B. is based on Revenue Ruling 75-38, 1975-1 C.B. 161.

Line 2.   Some private foundations are private operating foundations. These are types of private foundations that lack general public support, but make qualifying distributions directly for the active conduct of their educational, charitable, and religious purposes. “Directly for the active conduct means that the distributions are used by the foundation itself to carry out the programs for which it is organized and operated. Grants made to assist other organizations or individuals are normally considered indirect.

   For additional information about private operating foundations, log on to www.irs.gov/charities/foundations/article/0,,id=136358,00.html.

Line 3.   If you have existed for one year or more, you must provide financial information that demonstrates you meet the requirements to be classified as a private operating foundation.

Line 4.   If you have existed for less than one year, you must ordinarily provide an affidavit or opinion of counsel that sets forth facts concerning your operations and projected support to demonstrate that you are likely to satisfy the requirements to be classified as a private operating foundation. If you have not provided an affidavit or opinion of counsel, you may provide a narrative statement that provides sufficient information to demonstrate that you are likely to satisfy the requirements to be classified as a private operating foundation.

Line 5a.   Check this box if your primary purpose is operating a church or a convention or association of churches. The term “church includes mosques, temples, synagogues, etc. If you select this box, complete and submit Schedule A.

Line 5b.   Check this box if your primary purpose is operating a school. If you select this box, complete and submit Schedule B.

  If you operate a school but it is not your primary purpose, do not check this box. However, you must still complete and submit Schedule B.

  Be sure your response is consistent with Part VIII, line 19.

Line 5c.   Check this box if your primary purpose is providing medical or hospital care, or medical education or research (performed in association with a hospital). If you select this box, complete and submit Schedule C.

  A hospital includes a rehabilitation institution, outpatient clinic, community mental health clinic, drug treatment center, or skilled nursing facility.

  A hospital does not include convalescent homes, homes for children or the aged, or institutions whose principal purpose or function is to train handicapped individuals to pursue some vocation.

  Cooperative hospital service organizations described in section 501(e) should also check this box, but do not complete Schedule C.

Line 5d.   Check this box if you are organized and operated to support organizations described in lines 5a through 5c, 5f, 5g, or 5h, or an organization that is tax exempt under section 501(c)(4), (5), or (6). If you select this box, complete and submit Schedule D.

  The organization(s) you support should have a significant influence over your operations.

Line 5e.   Check this box if your primary purpose is to test products to determine their acceptability for use by the general public.

  Contributions to organizations of this type are not deductible under section 170(c). Also, organizations that primarily test for specific manufacturers do not qualify for exemption under section 501(c)(3).

Line 5f.   Check this box if you are organized and operated exclusively to benefit a college or university owned or operated by a governmental unit. You must also normally receive a substantial part of your support from a governmental unit or from contributions from the general public.

  Organizations that qualify under this category would generally also qualify under section 509(a)(3), line 5d, which would be an easier public charity status to maintain.

Line 5g.   Check this box if you normally receive a substantial part of your support from grants from governmental units or from contributions from the general public, or a combination of these sources. Typically, a substantial part of your income would be shown on Part IX-A. Statement of Revenues and Expenses, lines 1 and 2.

  
Caution
If you select this public charity status, you must request either an advance ruling or a definitive ruling by completing Part X . line 6.

  Under this public charity status, you must meet the one-third public support test or the 10% facts and circumstances test.

Public support test.   An organization must receive either (1) at least one-third of its total support from governmental agencies, contributions from the general public, and contributions or grants from other public charities, or (2) at least 10% of its total support from governmental agencies, contributions from the general public, and contributions or grants from other public charities and also satisfy a facts and circumstances test.

Facts and circumstances test.   Facts and circumstances include (1) the amount of support you received from the general public, governmental units, or public charities, (2) whether you have a continuous and bona fide program for solicitation of funds from the general public, governmental units, or public charities, and (3) all other facts and circumstances, including the public nature of your governing board, the extent to which your facilities or programs are publicly available, the extent to which your dues encourage membership, and whether your activities are likely to appeal to persons having a broad common interest or purpose. For additional information about the 10% facts and circumstances test, see Publication 557 and Treas. Regs. section 1.170A-9(e)(3).

Line 5h.   Check this box if you normally receive more than one-third of your support from contributions, membership fees, and gross receipts from activities related to your exempt functions, or a combination of these sources, and not more than one-third of your support from gross investment income and net unrelated business income. Typically, a substantial part of your income would be shown on Part IX-A. Statement of Revenues and Expenses, lines 1, 2, and 9.

  Under this public charity status, you must meet both the “one-third public support test” and the “not-more-than-one-third investment income and net unrelated business income test”. Before checking this box, consider the types of income you listed on Part IX-A. Statement of Revenues and Expenses, lines 1 through 13. If you select this public charity status, you must request either an advance ruling or a definitive ruling by completing Part X, line 6. See Publication 557 for additional information about these tests.

Line 5i.   Check this box if you are unsure whether you are better described in box 5g or 5h. By checking this box, you agree to let us choose the best public charity status for you.

Request For Advance Ruling Or Definitive Ruling

If you checked the box for line 5g, 5h, or 5i, you must check either line 6a or 6b. Your request for an “advance ruling” or a “definitive ruling” depends on the following factors:

  • The date you were formed or other date that your exemption would be effective;

  • Whether you have completed at least one tax year (consisting of at least 8 full months) from the date you were formed or other date that your exemption would be effective; and

  • The amount and type of income you have received.

Line 6a. Request for Advance Ruling.   By checking the box on line 6a, you are requesting an advance ruling for your public charity status. The advance ruling gives you a 5-year period in which you can get the financial support needed to meet one of the public support tests described in line 5g or 5h. Generally, the financial information for the 5-year period is submitted at the end of your advance ruling period and a final determination is made as to whether you are a public charity or a private foundation.

  When your advance ruling period ends in 5 years, we will ask that you provide updated information about your public support by completing Form 8734.

Statute extension.   To receive an advance ruling, you must agree to extend the statute of limitations for any of the 5 tax years in the advance ruling period. This agreement allows us additional time to assess federal taxes under section 4940 if you do not qualify as a public charity for any of the 5 tax years in the advance ruling period. You are not required to agree to the extension requested. However, in this situation, we will not be able to issue an advance ruling. If you agree to the extension, the statute will extend 8 years, 4 months, and 15 days beyond the end of your first tax year. By signing the consent, you are agreeing to the statute extension. If, at the end of your 5-year advance ruling period, we determine that you do not meet the public support tests and you are a private foundation, we will assess the tax under section 4940 for that 5-year period.

  If you requested an advance ruling, we will return a copy of Part X of your application with your signed consent, also signed by an IRS official. Keep this signed document in your permanent records.

First tax year not completed.   If you have not yet completed your first tax year consisting of at least 8 full months, you must check the box for line 6a to request an advance ruling. For example, if you were formed on May 15, 2003, with an accounting period that ends December 31, and you submitted your application on August 15, 2004, you must request an advance ruling since your first tax year consisted of only 7½ months and you have not completed your second tax year.

Completed first tax year.   If you have completed your first tax year consisting of at least 8 full months but cannot currently meet one of the required public charity supports tests, you may still wish to request an advance ruling. This request should only be made if you reasonably expect to meet the required public charity support tests within the 5-year advance ruling period.

Completed more than 5 tax years.   If you have completed more than 5 tax years from the date your exemption would be effective, do not request an advance ruling.

Line 6b. Request for Definitive Ruling.   By checking line 6b, you are requesting a definitive ruling for your public charity status. The definitive ruling is given to you when you apply if you have existed at least one tax year of 8 months or more, and meet one of the public support tests described in these instructions and Publication 557.

  A definitive ruling must be based on your public support computed on the cash method of accounting. Therefore, if you use the accrual method of accounting, please use a worksheet to convert your revenue accounts from the accrual to the cash basis. Such a worksheet is provided in Instructions for Schedule A (Form 990 or 990-EZ), Part IV-A. Support Schedule.

  If you have completed your first tax year consisting of at least 8 full months and can meet one of the required public charity support tests, you should check the box for line 6b.

  To show that you meet one of the required public charity support tests, complete lines 6b(i) and/or 6b(ii).

Line 6b(i)(a).   From Part IX-A. Statement of Revenues and Expenses, add the line 8 amounts from completed tax years only. Multiply the total by 2% (0.02) and enter the amount in the space provided.

Line 6b(ii)(b).   The required list for this line should include the name of and amounts paid by each individual or organization included on line 9, Part IX-A. Statement of Revenues and Expenses, that were greater than the larger of 1% of line 10, of the Part IX-A. Statement of Revenues and Expenses or $5,000 for any completed tax year. Your list for each payer must show a year-by-year breakdown of the amounts reported for completed tax years on Part IX-A. Statement of Revenues and Expenses, line 9.

  
caution
Do not include disqualified persons in this list. Disqualified persons should be listed in line 6b(ii)(a).

  If you did not receive such payments, check the box for this line.

  For purposes of this application, a “disqualified person is any individual or organization that is:
  1. A "substantial contributor" to you (defined below).

  2. An officer, director, trustee, or any other individual who has similar powers or responsibilities.

  3. An individual who owns more than 20% of the total combined voting power of a corporation that is a substantial contributor.

  4. An individual who owns more than 20% of the profits interest of a partnership that is a substantial contributor.

  5. An individual who owns more than 20% of the beneficial interest of a trust or estate that is a substantial contributor.

  6. A member of the family of any individual described in 1, 2, 3, 4, or 5 above.

  7. A corporation in which any individuals described in 1, 2, 3, 4, 5, or 6 above, hold more than 35% of the total combined voting power.

  8. A trust or estate in which any individuals described in 1, 2, 3, 4, 5, or 6 above, hold more than 35% of the beneficial interests.

  9. A partnership in which any individuals described in 1, 2, 3, 4, 5, or 6 above, hold more than 35% of the profits interest.

Substantial contributor.   A “substantial contributor is any individual or organization that gave more than $5,000 to you from the date you were formed or other date that your exemption would be effective, to the end of the year in which the contributions were received. This total amount contributed must also be more than 2% of all the contributions you received. A creator of a trust is treated as a substantial contributor regardless of the amount contributed.

  For more information regarding substantial contributors, log on to the IRS website at www.irs.gov/charities/foundations/article/0,,id=136935,00.html.

Family members.   A “member of the family” includes the spouse, ancestors, children, grandchildren, great grandchildren, and their spouses.

  For additional information concerning members of the family, go to www.irs.gov/charities/foundations/article/0,,id=136955,00.html.

   Further information about disqualified persons, can be obtained at www.irs.gov/charities/foundations/article/0,,id=136927,00.html.

Line 7.   “Unusual grants generally are substantial contributions and bequests from disinterested persons that by reason of their size adversely affect classification as a public charity. They are unusual, unexpected, and received from an unrelated party. If you answer “Yes” to line 7, submit a statement for each grant. The statement should include the name of the contributor, the date and amount of the grant, a brief description of the grant, and an explanation of why it is unusual. You should include details of any additional funds you expect to receive from the contributors listed. If they qualify for unusual grant treatment, these amounts should be reported on Part IX-A. Statement of Revenues and Expenses, line 12.

  See Publication 557 for additional information about unusual grants.

Part XI. User Fee Information

Caution
Your application will not be processed without payment of the proper user fee.

Your user fee may be paid by a personal or certified check, bank check, or cashier's check. Your check should be made payable to the United States Treasury.

Gross receipts.   The total amount listed on Part IX-A. Statement of Revenues and Expenses, line 10 is your gross receipts for purposes of determining your user fee.

Line 1.   Compute the average of your gross receipts for a 4-year period based on either (1) the gross receipts you expect to receive over your first four years if you have not completed a 4-year period, or (2) the gross receipts you actually received for the immediately preceding 4 years if you have completed a 4-year period.

Schedule A. Churches

General Information:

There is no single definition of the word “church for tax purposes. When determining whether a section 501(c)(3) religious organization is also a church, we will consider characteristics generally attributed to churches and the facts and circumstances of each organization applying for public charity status as a church.

The characteristics generally attributed to churches are as follows.

  • A distinct legal existence.

  • A recognized creed and form of worship.

  • A definite and distinct ecclesiastical government.

  • A formal code of doctrine and discipline.

  • A distinct religious history.

  • A membership not associated with any other church or denomination.

  • Ordained ministers ministering to the congregation.

  • Ordained ministers selected after completing prescribed courses of study.

  • A literature of its own.

  • Established places of worship.

  • Regular congregations.

  • Regular religious services.

  • Sunday schools for the religious instruction of the young.

  • Schools for the preparation of ministers.

Although it is not necessary that each of the above criteria be met, a congregation or other religious membership group is generally required. A church includes mosques, temples, synagogues, and other forms of religious organizations. For more information, see Publication 1828.

The practices and rituals associated with your religious beliefs or creed must not be illegal or contrary to clearly defined public policy.

Specific Line Items

Line 1a.   Provide a copy of your written creed, statement of faith, or summary of beliefs.

Line 1b.   A “form of worship” refers to religious practices that express your devotion to your creed, faith, or beliefs.

Line 2a.   A “code of doctrine and discipline” refers to a body of laws or rules that govern behavior.

Line 2b.   Your “religious history” includes the story of your establishment and major events in your past.

Line 2c.   Your literature includes any writings about your beliefs, rules, or history.

Line 3.   A “religious hierarchy or ecclesiastical government” refers to people or institutions that exercise significant influence or authority over you.

Line 4a.   Indicate the regular days and times of your religious services. Describe the order of events during your regular worship service and explain how the activities conducted as part of your services further your religious purposes. Also include sample copies of church bulletins, pamphlets, or flyers that are distributed to your members or the general public.

Line 4b.   Enter on the line provided, the average number of members and non-members who attend your regularly scheduled religious services.

Line 5a.   An “established place of worship” is a place where you hold regularly scheduled religious services. It may be a place that you own, rent, or which is provided freely for your use. If you answer “Yes,” go to line 5b. If you answer “No,” describe where you meet to hold regularly scheduled religious services.

Line 6.   An “established congregation” or “other religious membership group” includes individuals who regularly attend and take part in the religious services of your organization at an established location. An established congregation generally does not include members of only one family. If you answer “No” because you do not have an established congregation or other religious membership, you may be a religious organization that does not qualify as a church. If you do not qualify as a church, you will need to go back to Part X, line 5, to reconsider your public charity status.

  
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You may request classification as a church at a later date after you establish a congregation or other religious membership group. For information about this option, contact our customer account service representatives at 1-877-829-5500 (toll-free).

Line 7.   Enter the total number of your current members in the line provided. If you have no members, enter zero.

Line 8a.    Answer “Yes” if you have a prescribed way to become a member. Answer “Yes” even if you just keep records of who is currently a member. Describe any actions required for individuals to become members. Submit copies of any application forms used.

Line 8b.   Describe any rights and benefits of members. You should include details of any levels of membership and the rights and/or benefits associated with each level.

Line 8c.   If your members may be associated with another denomination or church, describe the circumstances in which your members would be members of your church and another church.

Line 8d.   See Glossary, Appendix C, for a description of the word “family.

Line 9.    Answer “Yes” if you conduct baptisms, weddings, funerals, or other religious rites.

Line 10.   A school for the religious instruction of the young refers to any regularly scheduled religious, educational activities for youth, such as a “Sunday school.

Line 11a.    A “prescribed course of study refers to formal or informal training. It does not include self-ordination or paying a fee for an ordination certificate without completing a course of study. Describe the course of study completed by your religious leader.

Line 12.   Answer “Yes” if your religious leader is listed in Part V, line 1a.

Line 14.    Answer “Yes” if you are part of a group of churches with similar beliefs and structures, such as a convention, association, or union of churches.

Line 16.    If you answer “Yes,” submit a copy of your church charter. Identify the organization that issued the charter and describe the requirements you met to receive it. Do not describe organizational charters you received from your state's Secretary of State, Franchise Tax Board, or similar administrative office.

Line 17.   Attach any additional information you would like us to consider that would help us classify you as a church.

Schedule B. Schools, Colleges, and Universities

General Information:

An organization is a school if it:   
  • Presents formal instruction as its primary function.

  • Has a regularly scheduled curriculum.

  • Has a regular faculty of qualified teachers.

  • Has a regularly enrolled student body.

  • Has a place where educational activities are regularly carried on.

  The term “school” includes primary, secondary, preparatory, high schools, colleges, and universities. It does not include organizations engaged in both educational and non-educational activities, unless the latter are merely incidental to the educational activities. Non-traditional schools such as an outdoor survival school or a yoga school may qualify.

  The term “school” does not include home schools.

Section I. Operational Information

Line 1a.   Answer “Yes” if you have a regularly scheduled curriculum, a regular faculty of qualified teachers, a regularly enrolled student body, and facilities where your educational activities are regularly carried on. Submit evidence establishing that you meet these factors, as described below:
  • Evidence that you have a regularly scheduled curriculum includes a list of required courses of study, dates and times courses are offered, and other information about how to complete required courses.

  • Evidence that you have a regular faculty of qualified teachers, includes certifications by the appropriate state authority or successful completion of required training.

  • Evidence of a regularly enrolled student body includes records of regular attendance by students at your facility.

  • Evidence of a place where your exclusively educational activities are regularly carried on includes a lease agreement or deed for your facility.

  If you answer “No,” do not complete Schedule B. You do not meet the requirements of a school and you will need to go back to Part X, line 5, to reconsider your public charity status.

Line 1b.   Answer “Yes” if your primary function is the presentation of formal instruction. If you answer “No,” do not complete Schedule B. You do not meet the requirements of a school and you will need to go back to Part X, line 5, to reconsider your public charity status.

Line 2a.   Answer “Yes” if you are a public school. Submit documentation of your status as a public school. If you answer “Yes,” do not complete the remainder of Schedule B.

Line 2b.   Answer “Yes” if you have a signed contract or agreement with a state or local government under which you operate and receive funding. Submit a signed and dated copy of your contract or agreement. If you answer “Yes,” do not complete the remainder of Schedule B.

Line 3.   Enter the name of the public school district and county where you operate.

Line 4.   Answer “Yes” if you were formed or substantially expanded during a period of time when public schools in your district or county were desegregated by court order.

  
caution
If you are unsure whether to answer “Yes,” contact an appropriate public school official.

Line 5.   Answer “Yes” if a state or federal administrative agency or judicial body ever determined your organization to be racially discriminatory. Identify the parties involved and the forum in which the case was presented. Explain the reason for the action, the decision reached, and provide legal citations (if any) for the decision. Also, explain in detail any changes made in response to the action against your organization or the decision reached.

Line 7.   In responding to this line, you may reference information previously provided in response to Part VIII, line 7a, 7b, or 7c, along with any additional information to fully respond.

Line 8.   Answer “Yes” if you manage or intend to manage your programs through your own employees or by using volunteers. Answer “No” if you engage or intend to engage a separate organization or independent contractor. Make sure your answer is consistent with the information provided in Part VIII, line 7b. In responding to this line, you may reference information previously provided in response to Part VIII, line 7a, 7b, or 7c, along with any additional information to fully respond.

Section II. Establishment of Racially Nondiscriminatory Policy

A section 501(c)(3) organization that is a school must publish a notice of its racially nondiscriminatory policy as to students as follows.

  The M school admits students of any race, color, national origin, and ethnic origin to all the rights, privileges, programs, and activities generally accorded or made available to students at the school. It does not discriminate on the basis of race, color, national origin, and ethnic origin in administration of its educational policies, admission policies, scholarship and loan programs, and athletic and other school-administered programs.  

Every private school is subject to the provisions of Revenue Procedure 75-50, 1975-2 C.B. 587 (Rev. Proc. 75-50). See Publication 557, which sets forth the requirements of Rev. Proc. 75-50 under the section for Private Schools.

A private school must also certify annually that it meets the requirements of Rev. Proc. 75-50. This can be accomplished by filing Schedule A (Form 990, Form 990-EZ) Organization Exempt Under Section 501(c)(3).

Schools that do not file Form 990 must file Form 5578, Annual Certification of Racial Nondiscrimination for a Private School Exempt From Federal Income Tax.

Line 1.   Answer “Yes” if your organizing document or bylaws contain a nondiscriminatory statement as to students similar to the one shown above.

  Answer “No” if the nondiscrimination statement is not included. If the statement is not included in your organizing document or bylaws, you may submit a copy of your signed and dated resolution that was adopted according to your internal rules or regulations. Your resolution should approve a nondiscriminatory policy similar to the one shown above.

Line 2.   Answer “Yes” if your brochures, application forms, advertisements, and catalogues dealing with student admissions, programs, and scholarships contain a statement similar to the following.

  The M school admits students of any race, color, and national or ethnic origin.

  Submit representative copies of each document.

  If you answer “No,” to line 2, but checked the box on line 2b, you are agreeing that all future printed materials, including Internet content, will contain a statement of nondiscriminatory policy as to students similar to the one provided above.

Line 3.   You must demonstrate that you have made your nondiscriminatory policy known to all segments of the general community served by the school. One way of meeting this requirement is to publish the school's nondiscriminatory policy annually. If you have already published your notice, submit the actual page of the newspaper on which the notice appears. We cannot accept a photocopy, other electronic reproduction, or partial page of the newspaper.

  Answer “No,” if you have not attached your notice and describe how you meet the publicity requirement of Rev. Proc. 75-50.

  See Publication 557 or Rev. Proc. 75-50 for guidance on the format and content of the required notice and whether any exceptions may apply to you.

  
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A notice published in the legal notices section or classified advertisements of your local newspaper is generally not acceptable.

Line 5.   Enter the racial composition of your student body, faculty, and administrative staff in the spaces provided. Enter actual numbers, rather than percentages, for the current year and projected numbers for the next academic year. If the number is zero, then enter “0.

  
Caution
Do not identify students, faculty, and staff by name.

  If you are completing the table based on estimates, submit documentation that supports how you arrived at the estimated numbers. For example, if your estimates are based on the racial composition of the community in which you operate, submit current census data of the racial composition for the area. If your numbers and the census numbers differ greatly, explain why.

Line 6.   Enter the racial composition of students to whom you award loans and scholarships in the spaces provided. Enter actual numbers, rather than percentages, for the current year and projected numbers for the next academic year. If the number is zero, then enter “0.

  
Caution
Do not identify students by name.

Line 7a.   Submit a list that identifies each individual or organization by name. Your list must include your incorporators, founders, board members, donors of land, and donors of buildings.

Line 7b.   Answer “Yes” if any individuals or organizations on your list have an objective to keep public or private school education segregated by race. Explain how these individuals or organizations promote segregation in public or private schools.

Line 8.    Answer “Yes” if on a continuing basis, you will maintain for a minimum period of three years the following records.
  • Your racial composition (similar to the information requested in Schedule B, Section II, line 5).

  • Evidence that your scholarships and loans are awarded on a racially nondiscriminatory basis (similar to the information requested in Schedule B, Section II, line 6).

  • Copies of all materials used by you or on your behalf to solicit contributions.

  • Copies of brochures, application forms, advertisements, and catalogues dealing with student admissions, programs, and financial aid.

  Answer “No” if you do not maintain records and explain how you meet the recordkeeping requirements under Rev. Proc. 75-50.

  
caution
Failure to maintain these records or produce them upon the proper request, will create a presumption that you have not complied with the requirements of Rev. Proc. 75-50.

Schedule C. Hospitals and Medical Research Organizations

General Information:

An organization qualifies as a hospital if it is a:

  • Hospital.

  • Cooperative hospital service organization (Schedule C not required).

  • Medical research organization operated in conjunction with a hospital.

Hospital.   An organization is a “hospital if its principal purpose or function is providing medical or hospital care or medical education or research. Medical care includes treatment of any physical or mental disability or condition, on an inpatient or outpatient basis. Thus, if an organization is a rehabilitation institution, outpatient clinic, or community mental health or drug treatment center, it is a hospital if its principal function is providing treatment services as described above.

  A hospital does not include convalescent homes, homes for children or the aged, or institutions whose principal purpose or function is to train handicapped individuals to pursue a vocation.

Medical research organization.   An organization is a “medical research organization if its principal purpose or function is the direct, continuous, and active conduct of medical research in conjunction with a hospital. The hospital with which the organization is affiliated must be described in section 501(c)(3), a federal hospital, or an instrumentality of a governmental unit, such as a municipal hospital.

  “Medical research means investigations, experiments, and studies to discover, develop, or verify knowledge relating to the causes, diagnosis, treatment, prevention, or control of human physical or mental diseases and impairments. For more information, see Treas. Regs. section 1.170A-9(c)(2).

  If you are a hospital, check the first box on Schedule C and complete Section I.

  If you are a medical research organization, check the second box on Schedule C and complete Section II.

Section I. Hospitals

Line 1.   Answer “Yes” if all doctors in your community are eligible for staff privileges at your facility. You may answer “Yes” if staff privileges at your facility are limited by capacity.

  Answer “No” if all doctors in your community are not eligible for staff privileges at your facility.

  If you answer “No,” describe in detail how you limit eligibility for staff privileges at your facility. Include details of your eligibility criteria and selection procedures for your courtesy staff of doctors.

Line 2a.   Answer “Yes” if you admit all patients in your community who can pay for themselves or through private health insurance.

  Answer “No” if you limit admission for these individuals in any way. If you answer “No,” describe your admission policy in detail. You should explain how and why you restrict patient admission.

Line 2b.   Answer “Yes” if you admit all patients in your community who participate in Medicare.

  Answer “No” if you limit admission in any way for these individuals. If you answer “No,” describe your admission policy in detail. You should explain how and why you restrict patient admission to exclude persons who participate in Medicare.

Line 2c.   Answer “Yes” if you admit all patients in your community who participate in Medicaid.

  Answer “No” if you limit admission in any way for these individuals. If you answer “No,” describe your admission policy in detail. You should explain how and why you restrict patient admission to exclude persons who participate in Medicaid.

Line 3a.   Answer “Yes” if you require a deposit from Medicare and/or Medicaid patients before admission. If you answer “Yes,” describe in detail how you determined the amount required and explain why a deposit is needed.

Line 3b.    Answer “Yes” if you require a deposit for other patients before admission and the requirement is the same as for Medicare and/or Medicaid patients.

  Answer “No” if you require a deposit, but deposits for Medicare/Medicaid patients and other patients differ as to: (1) the way the amount is determined, or (2) the reason for the deposit. If you answer “No,” describe the differences in detail.

Line 4a.   Answer “Yes” if you offer emergency medical or hospital care at your facility on a 24-hour basis, seven days a week. If “No,” explain why you do not offer an emergency room. For example, emergency care may be inappropriate for the type of services you provide. Also, describe any emergency services that you provide.

Line 4b.   Answer “Yes” if you have a specific written plan or policy to accept all patients in need of emergency care without considering their ability to pay.

  If you answer “Yes,” submit a copy of your plan or policy.

Line 4c.    Answer “Yes” if you have specific arrangements with any police, fire, or ambulance service providers to bring emergency cases to your facility.

  If you answer “Yes,” describe each specific agreement. For written agreements, you may submit a copy of each agreement. If it is oral, explain fully the agreement. For any oral agreements, include details of how and when the agreement was arranged.

Line 5a.   Answer “Yes” if you provide free or low cost medical or hospital care services to the poor. If you answer “Yes,” answer lines 5b through 5e. Do not answer 5b through 5e if you answer “No.

Line 5b.   Submit a copy of your written policy or explain fully the understanding under which you operate regarding the admission and/or treatment of charity cases. Explain how you distinguish between charity care and bad debts.

  
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Include details of how you inform the general public about your policy. Submit copies of any documents or agreements you require charity patients to sign before being admitted and/or treated.

Line 5c.   Submit information that shows the amounts you expend for treating charity care patients and the types of services you provide. Include an explanation that distinguishes charity care patient expenditures from uncollected bad debts.

Line 5d.   Submit copies of any written agreements you have with municipalities or government agencies to subsidize the cost of admitting or treating charity patients.

Line 5e.   A sliding fee scale establishes payments depending on financial ability to pay.

Line 6a.    Answer “Yes” if you have a formal program of medical training and research. If you answer “Yes,” describe your program in detail, including its length and criteria for acceptance into your program.

Line 6b.    Answer “Yes” if you have a formal program of community educational programs. If you answer “Yes,” describe your program in detail.

Line 7.    Answer “Yes” if you provide office space to physicians conducting their own medical practices.

Line 8.    Answer “Yes” if you have a board of directors that is representative of the community you serve. Include a list of each board member with the individual's name and employment affiliation. Also, for each board member, describe how that individual represents the community. Generally, hospital employees and staff physicians are not individuals considered to be community representatives.

  
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Answer “Yes” if an organization described in section 501(c)(3) with a community board exercises rights or powers over you, such as the right to appoint members to your governing board of directors and the power to approve certain transactions. Describe these rights and powers. In addition, describe how each of that organization's board of directors represents the community.

  

  Answer “Yes” if you are subject to a state corporate practice of medicine law that requires your governing board to be composed solely of physicians licensed to practice medicine in the state. If you answer “Yes” on this basis, also provide the following information.
  • Describe whether a hospital described in section 501(c)(3) exercises any rights or powers over you.

  • Identify the corporate practice of medicine law under which you operate.

  • Explain how the section 501(c)(3) hospital exercises any rights or powers over you, such as the right to appoint members to your governing board of directors and the right to approve certain transactions.

  • Explain what services you provide to the section 501(c)(3) hospital.

Line 10.   Answer “Yes” if you manage or intend to manage your programs through your own employees or by using volunteers. Answer “No” if you engage or intend to engage a separate organization or independent contractor. Make sure your answer is consistent with the information provided in Part VIII, line 7b.

Line 11.   Recruitment incentives may be offered to attract or retain physicians as employees or to serve the community in which the hospital is located. Such incentives are generally offered when there is an acute shortage of such physicians in your hospital or within the community.

Line 12.   Physicians who have a financial or professional relationship with you include physicians with whom you have a business relationship, such as employees, staff physicians, participants in joint ventures, or physicians with whom you contract for services.

Line 13.   A business relationship includes employment, contractual relationship, or status as a member of your board of directors.

Line 14.    Answer “Yes” if you have adopted a conflict of interest policy consistent with the sample conflict of interest policy provided in these instructions or you are subject to similar conflict of interest policies under state law. Provide copies of the policies to which you are subject. Although a conflict of interest policy is not required as a matter of tax law, we encourage adoption of a substantive conflict of interest policy because it makes it more likely that you will operate for the benefit of the community and not for private interests.

  An example of a substantive conflict of interest policy is available in Appendix A. in these instructions.

  Answer “No” if you have not adopted a conflict of interest policy or you are not subject to conflict of interest policies under state law.

Section II. Medical Research Organizations

Line 1.   Attach a list of hospitals with which you have relationships relating to the conduct of medical research. Describe in detail the relationship you have with each hospital. Submit copies of any written agreements.

Line 2.   Describe in detail all activities that directly accomplish your conduct of medical research.

  Making grants to other organizations does not directly accomplish the conduct of medical research.

Line 3.   Your schedule should explain how you determine the fair market value of your assets.

Schedule D. Section 509(a)(3) Supporting Organizations

General Information:

A section 509(a)(3) organization is commonly referred to as a “supporting organization. An organization that a supporting organization benefits is commonly referred to as a “supported organization.” A supporting organization may support more than one supported organization.

An organization qualifies for public charity status as a supporting organization under section 509(a)(3) if:

  • It is organized and at all times thereafter is operated exclusively for the benefit of, to perform the functions of, or to carry out the purposes of one or more public charities described in section 509(a)(1) or 509(a)(2);

  • It meets one of three required relationship tests with the supported organization(s); and

  • It is not controlled directly or indirectly by “disqualified persons.” See specific instructions for Part X, line 6b(ii)(b), for a definition of a “disqualified persons.

A supporting organization can also support the charitable purposes of organizations that are exempt under sections 501(c)(4), (5), or (6).

Section I. Identifying Information About Supported Organization(s)

Line 1.    Enter the name, address, and EIN of each organization you support.

Line 2.   Answer “Yes” if each supported organization has received a letter from the IRS recognizing it as a public charity under section 509(a)(1) or 509(a)(2). Then, go to Section II, line 1.

  Answer “No” if any supported organization has not received a letter from us recognizing it as a public charity under section 509(a)(1) or 509(a)(2). Then, go to line 3.

Line 3.   Answer “Yes” if any supported organization you listed in line 1 received a letter from us stating that it is exempt under section 501(c)(4), (5), or (6). Also, to show how the organization meets the public support test, submit the amounts and sources of revenue for the last four completed tax years for the supported organization(s). You should provide the requested financial data in the format shown on Part IX-A. Statement of Revenues and Expenses, for each supported organization. You must then submit the lists requested by Part X, line 6b(ii), which is applicable to the public support test under section 509(a)(2).

  Answer “No” if no supported organization listed in line 1 has been recognized as tax-exempt under section 501(c)(4), (5), or (6).

  
Caution
If any organization you intend to support has not received a letter from us recognizing it as a public charity under section 509(a)(1) or 509(a)(2), or has not received a determination recognizing that it is tax-exempt under section 501(c)(4), (5), or (6), you must demonstrate, in writing, that each organization you support is described in section 509(a)(1) or 509(a)(2). For example, if you support a church or foreign organization, you should describe how this organization qualifies as a public charity under section 509(a)(1) or 509(a)(2).

Section II. Relationship with Supported Organization(s) - Three Tests

To qualify under section 509(a)(3), you must show that you meet one of three relationship tests with the supported organization(s).

  • Test I. Operated, supervised, or controlled by (comparable to a parent-subsidiary relationship);

  • Test 2. Supervised or controlled in connection with (comparable to a brother-sister relationship); or

  • Test 3. Operated in connection with (responsive to the needs or demands of, and having significant involvement in the affairs of, the supported organization(s)).

Line 1.   Answer “Yes” if your governing document, bylaws, or other internal rules and regulations show that the majority of your governing board or officers is elected or appointed by the supported organization(s). Then, go to Section III.

  Answer “No” if your governing document, bylaws, or other internal rules and regulations do not show that the majority of your governing board or officers is elected or appointed by the supported organization(s). If you answer “No” but still believe you satisfy this test, explain and go to Section III. Otherwise, go to line 2 because you do not meet the “operated, supervised, or controlled by” relationship test.

Line 2.   Answer “Yes” if your governing document, bylaws, or other internal rules and regulations show that a majority of your governing board consists of individuals who also serve on the governing board of the supported organization(s). Then, go to Section III.

  Answer “No” if your governing document, bylaws, or other internal rules and regulations do not show that a majority of your governing board consists of individuals who also serve on the governing board of the supported organization(s). If you answer “No” but still believe you satisfy this test, explain and go to Section III. Otherwise, go to line 3 because you do not meet the “supervised or controlled in connection with” relationship test.

Line 3.   Answer “Yes” if you are a charitable trust under state law, you name each specified publicly supported organization as a beneficiary in your trust agreement, and each beneficiary organization has the power to enforce the trust and compel an accounting under state law. Then, go to Section II, line 5.

Line 4a.   Answer “Yes” if the officers, directors, trustees, or members of the supported organization(s) elect or appoint any of your officers, directors, or trustees. If your governing document, bylaws, or other internal rules and regulations do not provide for this, explain how your officers, directors, or trustees are elected or appointed. Then, go to line 4d.

Line 4b.   Answer “Yes” if any members of the governing body of the supported organization(s) also serve as your officers, directors, trustees, or hold another important office for your organization. Describe the position held and whether the position is ongoing. Then, go to line 4d.

Line 4c.    Answer “Yes” if your officers, directors, or trustees maintain a close and continuous working relationship with the officers, directors, or trustees of the supported organization(s). Explain the continuous relationship in detail. Then, go to line 4d.

  
Taxtip
If you answer “No,” on line 4c and your answer to lines 3, 4a, and 4b were “No,” you do not meet the “operated in connection with” relationship test. You must establish a different relationship with the supported organization or go back to Part X, to reconsider your public charity status.

Line 4d.   Answer “Yes” if the supported organization has a significant involvement in your investment policies, making and timing of grants, and directing the use of your income and assets. Explain how the supported organization is involved in these matters.

Line 5.   An applicant for tax exemption as a supporting organization under the “operated in connection with” relationship must satisfy either the integral part test or the alternative integral part test. If you are requesting supporting organization status by meeting the “operated in connection with” relationship, you must satisfy either the integral part test or the alternative integral part test. If you satisfy the integral part test described in line 5, then you do not have to complete line 6.

  Answer “Yes” if you conduct activities that the supported organization would otherwise conduct. Describe the activities that you conduct, other than distributing funds. Then, go to Section III.

Line 6a.   To satisfy the alternative integral part test as a supporting organization, you must distribute at least 85% of your annual “net income” to the organization(s) you support. See the Glossary for a description of “net income” to be used in calculating whether you meet the 85% distribution threshold.

  Answer “Yes” if you distribute at least 85% of your net income to the supported organization(s). For purposes of this schedule, “net income” has the same meaning as the term “adjusted net income,” which is applicable to private operating foundations.

  In general, “adjusted net income is the excess of gross income, including gross income from any unrelated trade or business, determined with certain modifications, reduced by total deductions. Gross income does not include gifts, grants, or contributions.

  If you answer line 6a “No,” and your answer to line 5 was “No,” unless you establish that the supported organization(s) will be attentive to your operations, you do not meet the “operated in connection with” relationship test. Go back to Part X, to reconsider your public charity status.

Line 6b.   Submit a list that shows the total amount distributed annually to each supported organization. Also, indicate how each amount will vary from year to year.

Line 6c.   Submit a list that shows the total annual income for each supported organization.

Line 6d.    Answer “Yes” if your funds are “earmarked” for a particular program or activity.

  If you distribute your income to, or for the use of, a particular department or program of an organization, list the total annual revenue of the supported department or program in line 6c.

Line 7a.   The “operated in connection with” test requires that you specify the supported organization(s) by name in your organizing document unless there has been an historic and continuing relationship between you and the supported organization(s).

Line 7b.   An historic and continuing relationship depends on all the facts and circumstances that would demonstrate a substantial identity of interests between you and the supported organization.

  If you answer “No” to lines 7a and 7b, you may consider amending your organizing document to specify the supported organization(s) by name so you can answer “Yes” to line 7a. Otherwise, you will need to go back to Part X to reconsider your public charity status.

Section III. Organizational Test

Line 1a.   If you answered “No” to line 1a, you must amend your organizing document to specify the supported organization(s) by name, purpose, or class. Otherwise, you will not meet the operational test under section 509(a)(3) and you will need to go back to Part X to reconsider your public charity status.

Line 1b.   If you answered “No” to line 1b, you must amend your organizing document to specify the supported organization(s) by name. Otherwise you will not meet the operational test under section 509(a)(3) and you will need to go back to Part X to reconsider your public charity status.

Section IV. Disqualified Person Test

Control.   As a section 509(a)(3) supporting organization, you may not be controlled directly or indirectly by disqualified persons. You are controlled if disqualified persons can exercise 50% or more of the total voting power of your governing body. You are also controlled if disqualified persons have authority to affect significant decisions, such as power over your investment decisions, or power over your charitable disbursement decisions. You are also controlled if disqualified persons can exercise veto power. Although control is generally demonstrated where disqualified persons have the authority over your governing body to require you to take an action or refrain from taking an action, indirect control by disqualified persons will also disqualify you as a supporting organization.

  See the instructions for Part X, line 6b for a description of the term “disqualified person.

  A public charity is not a disqualified person.

  A “foundation manager means your:
  • Officers, directors, or trustees, or

  • An individual having powers or responsibilities similar to those of your officers, directors, or trustees.

Line 1b.    See the instructions for Part V, line 2a, for a description of the terms “family or business relationship.

Schedule E. Organizations Not Filing Form 1023 Within 27 Months of Formation

General Information:

The questions in this schedule will help us determine the effective date of exemption for an organization that filed its application more than 27 months after the end of the month in which it was legally formed.

  • If you meet exceptions for late filing, your exemption under section 501(c)(3) will be effective from the date you were legally formed.

  • If you do not meet any exceptions, your exemption under section 501(c)(3) will be effective from the date you filed your application.

  • Although you do not meet any exceptions, you may, nevertheless, qualify for tax exemption as an organization described in section 501(c)(4) for the period beginning with the date you were legally formed and ending with the date you are recognized under section 501(c)(3). Generally, contributions made to a section 501(c)(4) organization are not tax deductible.

Line 1.   Answer “Yes” if you are a church or an association of churches. You should have also checked Part X, line 5a, and completed Schedule A. If you qualify as a church or an association of churches, your exemption will be effective from the date of your legal formation.

  Answer “Yes” if you are an integrated auxiliary of a church. If you qualify as an integrated auxiliary of a church, your exemption will be effective from the date of your legal formation.

  An “integrated auxiliary of a church refers to a class of organizations that are related to a church or convention or association of churches, but are not such organizations themselves. In general, you must:
  • Be described as both tax exempt under section 501(c)(3) and a public charity described in sections 509(a)(1), (2), or (3); and

  • Receive financial support primarily from internal church sources as opposed to public or governmental sources.

  Men's and women's organizations, seminaries, mission societies, and youth groups that satisfy the above referenced sections 501(c)(3) and 509(a)(1), (2), or (3) requirements are considered integrated auxiliaries whether or not they meet the internal support requirements. More guidance as to the types of organizations that qualify as integrated auxiliaries can be found in Treas. Regs. section 1.6033-2(h).

Line 2a.    Answer “Yes” if you are a public charity and your annual gross receipts are normally $5,000 or less. For information about whether your annual gross receipts are normally $5,000 or less, see Publication 557. If you qualify as an organization with annual gross receipts of normally $5,000 or less, your exemption would be effective from the date of your legal formation.

  Answer “No” if you are a private foundation, regardless of your gross receipts.

Line 2b.   Answer “Yes” if:
  • Your gross receipts were normally less than $5,000 for years before your last completed tax year,

  • Your gross receipts normally exceeded $5,000 for your last completed tax year, and

  • You filed this application within 90 days from the end of your last completed tax year.

Line 3.   Lines 3a, 3b, and 3c are applicable to subordinates included in a group exemption application. See Publication 557 for information regarding group exemptions. If you were a subordinate of a group exemption that was timely filed and you are filing for exemption within 27 months from the date you were notified by the organization holding the group exemption letter that either (1) you are no longer covered by the group exemption letter, or (2) the group exemption request was denied, answer “Yes” and do not complete the remainder of this schedule.

Line 4.    Answer “Yes” if you were formed on or before October 9, 1969. If you are a corporation, your formation date is the date your articles of incorporation were filed with and approved by your state officials. If you are an association, your formation date is the date you adopted your organizing document. If you are a trust, your formation date is generally the date your trust was both adopted and funded.

  
Caution
If you answer “Yes,” do not complete the rest of this schedule. As an organization formed on or before October 9, 1969, your exemption would be effective from the date of your legal formation. Answer “No” if you were formed after October 9, 1969.

Line 5.   You may receive an extension of time to file Form 1023 beyond the 27-month period if you can establish that you acted reasonably and in good faith, and that granting an extension will not prejudice the interests of the government.
  • You filed Form 1023 before we discovered your failure to file.

  • You failed to file because of intervening events beyond your control.

  • You exercised reasonable diligence but you were not aware of the filing requirements. (The complexity of your filing and experience in these matters is taken into consideration.)

  • You reasonably relied on written advice from us.

  • You reasonably relied on the advice of a qualified tax professional who failed to file or advise you to file Form 1023.

  Answer “Yes” if you wish to request an extension of time to file under these provisions. If you answer “Yes,” describe in detail the reasons for filing late based on the factors listed above. Do not complete the rest of this schedule.

  Answer “No” if you do not wish to request an extension under these provisions and go to line 6a.

Line 6a.   By checking “Yes,” and completing Part X, line 6a, you are eligible for an advance ruling to be classified as a public charity from the postmark date of your application.

  Do not complete line 6a, 6b, or 7 if you checked the boxes in Part X, lines 5a, 5b, 5c, 5d, or 5e.

Line 6b.   If you anticipate significant changes in your sources of support in the future, answer “Yes,” and we will base your qualification for an advance ruling on the financial information you provide in line 7. If you check “Yes,” complete the financial information requested in line 7 of Schedule E.

  If you answer “No,” we will base your qualification for an advance ruling on the financial information you provided in Part IX. If you answer “No,” do not complete line 7 of Schedule E.

Line 7.   Complete projected budgets of income for the first two full tax years after the date you mailed your Form 1023. See the specific instructions for Part IX-A. Statement of Revenues and Expenses, lines 1 through 13, if you need guidance on what to include in the various categories.

Line 8.   Check the box if you wish to request exemption under section 501(c)(4) for the period before the postmark date of your Form 1023. If you check the box, attach page 1 of Form 1024. Form 1024 is available on the IRS website at www.irs.gov or by calling 1-800-829-3676.

  If you qualify for exemption under section 501(c)(4), you will not be liable for income tax returns as a taxable entity, but you will need to file any exempt organization returns for which you may be responsible. Contributions to section 501(c)(4) organizations are generally not deductible by donors.

  Do not check the box if you do not wish to be tax exempt under section 501(c)(4) for the period before the postmark date of your Form 1023. If you do not request and obtain exemption under section 501(c)(4) for the period before the postmark date of your Form 1023, you may be liable for income tax returns as a taxable entity for that time period.

Schedule F. Homes for the Elderly or Handicapped and Low-Income Housing

General Information:

Homes for the elderly or handicapped are eligible for tax exemption as charitable organizations only if they meet the special needs of the elderly or handicapped for residential facilities designed to meet their physical, social, recreation, health care, and transportation needs. Homes for the elderly or handicapped must also be within the financial reach of a significant segment of the elderly or handicapped in the community. Once admitted to the elderly or handicapped housing facility, the organization must have an established policy to maintain them as residents, to the extent possible, even if the residents subsequently become unable to pay the monthly charges.

Low-income housing must provide affordable housing for a significant segment of individuals in your community with low incomes. Your housing may serve a combination of purposes, such as for poor, frail, and elderly persons.

Section I. General Information about Your Housing

Line 1.   The type of housing you provide should include both a description of the type of facility provided, such as apartment complex, condominium, cooperative, or private residence, and the nature of your facility, such as assisted-living facility, continuing-care facility, nursing home, low-income facility, etc.

Line 7.   See the instructions for Part V, line 7a, for a description of the terms arm's length and fair market value.

Line 8.   Answer “Yes” if you manage or intend to manage your programs through your own employees or by using volunteers. Answer “No” if you engage or intend to engage a separate organization or independent contractor. Make sure your answer is consistent with the information provided in Part VIII, line 7b.

Line 9.   Government programs include federal, state, or local government programs.

Section II. Homes for the Elderly or Handicapped

Line 2a.   Answer “Yes” if you charge a one-time fee for admission to your facility.

Line 2b.   Answer “Yes” if you charge daily, weekly, monthly, or annual fees or maintenance charges.

Line 2c.   A “community refers to the area that will be served by your facility. For example, a community may be a local area or a region.

Line 3a.   Describe what happens to individuals if they become unable to pay your regular charges. For example, you may have a policy whereby you have a reserve fund for maintaining residents who are having trouble in paying their regular charges. You may also have a policy of keeping residents who are having trouble in paying their regular charges in place for a period of time to permit them to find alternative housing. Include a copy of any printed materials that informs the public about your policy.

Line 3b.   Describe any arrangements you have or expect to have with welfare agencies, sponsoring organizations, or others to assist residents who become unable to afford to remain residents.

Line 4.   Describe how you provide for the health care needs of residents, including the services provided. This can include providing for the activities of daily living of residents at your facilities and transporting residents to other facilities for medical services.

Line 5.   Describe how living units and common areas are designed to meet the physical needs of residents (such as grab bars in bathrooms, wide doorways and hallways, design of kitchens and bathrooms, etc.). Also, include information about facilities and programs designed to meet some combination of physical, emotional, recreational, social, religious, and similar needs of residents.

Section III. Low-Income Housing

Line 2.   Answer “Yes” if you charge daily, weekly, monthly, or annual fees or maintenance charges.

Schedule G. Successors to Other Organizations

General Information:

You should complete this schedule as a successor organization if any of the following situations pertain to you.

  • You have taken or will take over the activities that were previously conducted by another.

  • You have taken or will take over 25 percent or more of the fair market value of the net assets of another organization.

  • You were established upon the conversion of an organization from for-profit to non-profit status.

The other organization is the predecessor organization. You should complete this schedule regardless of whether the predecessor (other organization) was exempt or not exempt from federal income tax.

Line 1a.   For purposes of this schedule, a “for-profit organization is one in which persons are permitted to have an ownership or partnership interest, such as corporate stock. It includes sole proprietorships, corporations, and other entities that provide for ownership interests.

Schedule H. Organizations Providing Scholarships, Fellowships, Educational Loans, or Other Educational Grants to Individuals and Private Foundations Requesting Advance Approval of Individual Grant Procedures

General Information:

Complete this schedule if you provide scholarships, fellowships, grants, loans, or other distributions to individuals for educational purposes. When answering the questions on this schedule, you should demonstrate how these distributions further your exempt purposes.

Generally, distributions made to individuals may advance educational purposes if selection is made:

  • In a non-discriminatory fashion in terms of racial preference,

  • Based on need and/or merit, and

  • To a charitable class in terms of being available to an open-ended group, rather than to pre-selected individuals.

A scholarship or fellowship is tax free to the recipient only if he or she is:

  • A candidate for a degree at an eligible educational institution; and

  • Uses the scholarship or fellowship to pay qualified education expenses.

Qualified education expenses include tuition and fees; and course-related expenses such as books, supplies, and equipment. Room and board, travel, research, clerical help, and non-required equipment are not qualified education expenses. See Publication 970, Tax Benefits for Education, for additional information.

Selection of individuals using a lottery system generally has not been approved by the IRS.

Section I

Line 1b.   If you have different grant programs, describe the purpose and amount of each program.

Line 1c.   If you award educational loans, describe the terms of the loan (for example, interest rate, duration, forgiveness provision, etc.). Also, describe how any other loan institutions are involved in your program.

Line 1d.   Explain how you will publicize your program and whether you publicize to the general public or to another group of possible recipients. Include specific information about the geographic area in which your program will be publicized and the means you will use, such as through newspaper advertisements, school district announcements, or community groups.

Line 1e.   Submit sample copies of your solicitation material for applicants or materials announcing the awards. If solicitation is done orally through school counselors or others, explain fully.

Line 2.   Organizations that make grants to individuals must maintain adequate records and case histories showing the name and address of each recipient pursuant to Revenue Ruling 56-304, 1956-2 C.B. 306. If you answer “No,” explain how you will be able to demonstrate that your distributions serve exempt purposes.

Section II

Line 1a.   Only complete lines 1a through 4 if you are a private foundation based on your answers to Part X, line 1a. Answer “Yes” if you are a private foundation and you are requesting advance approval of your grant-making procedures under section 4945(g). Answer “No” if you are a private foundation but do not wish to request advance approval of your grant-making procedures under section 4945(g). If you answer “No,” the amounts you distribute as educational grants provided to individuals may be considered taxable expenditures under section 4945.

  Answer “N/A” if you are requesting public charity status in Part X.

  For more information about advance approval of grant-making procedures of a private foundation, log on to www.irs.gov/charities/foundations/article/0,,id=137397,00.html.

Line 1b.   Check the box for section “4945(g)(1)” if your award qualifies as a scholarship or fellowship grant that is awarded on an objective and nondiscriminatory basis and is used for study at a school (see the Schedule B, General Information for what is considered a school).

  Check the box for section “4945(g)(3)” if the purpose of your award is to achieve a specific objective, produce a report or other similar product, or improve or enhance a literary, artistic, musical, scientific, teaching, or other similar capacity, skill, or talent of the recipient. Include your educational loan program under this section. You may check more than one box.

  If your award qualifies as a prize or award that is subject to the provisions of section 74(b) and your recipient is selected from the general public, you do not have to request advance approval of your grant-making procedures since a prize or award is not subject to the advance approval procedure requirements because it is not a grant for travel, study, or other similar purposes. See Revenue Rulings 77-380, 1977-2 C.B. 419; 76-460, 1976-2 C.B. 371, and 75-393, 1975-2 C.B. 451.

Line 4.   For additional information regarding private foundations requesting advance approval of individual grant procedures, go to www.irs.gov/charities/foundations/article/0,,id=137396,00.html.

Line 4a    Answer “Yes” if you award scholarships on a preferential basis because you require, as an initial qualification, that the individual be an employee or be related to an employee of a particular employer.

Line 4c.   Answer “N/A” if you do not provide scholarships, fellowships, or educational loans to employees of a particular employer.

Line 4d.   Answer “N/A” if you do not provide scholarships, fellowships, or educational loans to children of employees of a particular employer.

Line 4e.   Answer “N/A” if your answer to line 4d is “N/A.

  
tip
For purposes of this schedule, a program for children of employees of a particular employer includes children and family members of employees.


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