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Scott Haft

Navigating The Path To Tax-Exempt Status With Haft Law Group

One of the first things you must do when establishing a nonprofit organization is to secure tax-exempt status for it. Taking this step offers two crucial benefits: it furthers your cause by maximizing your resources, and it encourages public and private financial support.

Attorney Scott Haft, managing member of Haft Law Group, understands how to guide nonprofit founders in Florida, Colorado and Washington, D.C., through this process. He can help them determine whether their organization is eligible for tax-exempt status. If it is, he will help them take the proper steps to obtain it.

Making The Right Choice For Your Organization

The Internal Revenue Service (IRS) has two applications for nonprofit owners seeking tax-exempt status. One is comprehensive and can be used by all nonprofit organizations. The other is geared toward smaller nonprofits.

Depending on your nonprofit’s mission, structure, activities and policies, one of these options will likely be the better fit. However, choosing the correct designation can be difficult, with ramifications that can hinder the work your organization is able to do. Haft Law Group helps nonprofit organizations navigate this difficult decision with confidence.

Is Your Nonprofit Eligible For Tax-Exempt Status?

The IRS often recognizes the following types of nonprofit organizations as tax-exempt:

  • Charitable organizations
  • Political organizations
  • Private foundations
  • Religious organizations

Some other types of nonprofits, including social and civic organizations, may qualify as exempt as well. Whether they do will depend on requirements that an attorney can help you understand.

What Are The Different IRS 501(c) Nonprofit Designations?

The Internal Revenue Code recognizes several types of nonprofit organizations under Section 501(c). Each serves a different purpose and has distinct requirements for tax exemption. Choosing the correct category is important because it affects eligibility for donations, political activity and reporting obligations.

Below are several common IRS 501(c) nonprofit designations to consider when forming a nonprofit.

  • 501(c)(3) organizations: These are charitable nonprofits formed for religious, educational, scientific, literary or charitable purposes. Donations to these organizations are usually tax-deductible for donors. Examples include charities, foundations and educational nonprofits.
  • 501(c)(4) organizations: These organizations focus on social welfare activities. They often advocate for community improvements, civic engagement or public policy issues. Unlike 501(c)(3) charities, donations to 501(c)(4) groups are generally not tax-deductible, but these organizations have greater flexibility in lobbying and certain political activities.
  • 501(c)(6) organizations: This designation applies to business leagues, trade associations and professional organizations that promote the common interests of their members. Chambers of commerce and industry associations often fall into this category. Their purpose is to support a particular industry or profession rather than serve a charitable mission.
  • 527 political organizations: These organizations are formed primarily to influence elections or support political campaigns. They include political action committees and campaign organizations. While they may receive tax advantages for certain activities, they must comply with specific disclosure and reporting requirements.

Selecting the correct nonprofit tax-exempt status early in the formation process can prevent delays or complications later.

What Are The Steps To Apply For Federal Tax-Exempt Status?

After forming a nonprofit entity, founders must apply to the IRS to receive official federal tax exemption. A nonprofit tax exemption application process includes these steps:

  • Incorporate as a nonprofit organization by filing formation documents with the state.
  • Draft compliant bylaws that explain governance rules and decision-making procedures.
  • Appoint a board of directors and adopt a conflict of interest policy to guide ethical leadership.
  • Obtain an employer identification number (EIN) from the IRS for tax reporting.
  • Develop financial projections and budgets to demonstrate responsible financial planning.
  • Prepare and submit IRS Form 1023 or Form 1023-EZ, including required attachments and supporting documentation.
  • Respond to IRS follow-up requests if the agency needs clarification before granting tax-exempt status.

Following these steps helps to show the IRS that the organization meets the requirements for nonprofit tax exemption. Working with a nonprofit attorney can help ensure the paperwork is accurate, deadlines are met and the organization is positioned for approval without unnecessary delays.

Understand Your Options With Haft Law Group

As a nonprofit owner, applying for tax-exempt status is one of the most difficult yet important steps you can take to ensure your organization’s financial health. Because this is a complex endeavor, it is best undertaken with a lawyer’s help.

Haft Law Group provides consultations to all clients. Call 561-781-8984 or contact Mr. Haft online to learn how he can help you and your organization.