IRS Form 1023 Frequently Asked Questions (FAQ)

Form 1023 is the official IRS application for recognition as a 501(c)(3) tax-exempt public charity or private foundation. If your nonprofit wants federal tax exemption under 501(c)(3), you must file this (or the shorter 1023-EZ if you qualify). No magic here — no exemption without filing and approval unless you’re a church.

Form 1024 is for nonprofits seeking exemption under other 501(c) sections — like social clubs (501(c)(7)), veterans groups (501(c)(19)), or business leagues (501(c)(6)). If your group isn’t a 501(c)(3) charity but wants tax exemption, this is your form. Different rules, different hoops.

Yes. Your organization needs a valid EIN to file Form 1023 or 1024. It’s basically your nonprofit’s Social Security number for tax purposes. Get your EIN from the IRS online for free before starting your exemption application.

No. Unlike some states that issue numbers to organizations to indicate that these organizations are exempt from state sales taxes, the IRS does not issue numbers specifically for exempt organizations. While the Internal Revenue Service does issue Employer Identification Numbers (EINs), these are merely a unique identifier, similar to a Social Security number for an individual. Applying for and receiving an EIN says nothing about the organization’s tax status; however, your organization needs an EIN to apply for tax exemption.

For using the long form 1023, the user fee is $600 at this time. Please see the form 1023 user fee page for the latest information.

Yes. The $600 filing fee for Form 1023 or 1024 is nonrefundable. If the IRS has issues with your application, they won’t deny it immediately. First, they’ll send a Request for Additional Information, asking for clarifications, missing documents, or fixes.

You’ll usually get one or two chances to satisfy their demands. But if your answers don’t resolve their concerns — or you don’t respond in time — they can deny the application. When that happens, you lose the application fee.

It really depends on IRS workload, how clean your application is, and your organization’s complexity. Realistically, expect anywhere from 1 month to over a year. Don’t file and then call every week — that just slows it down. Clean, complete applications get faster turnaround.

Yes. You can operate before your exemption is approved, but donations aren’t tax-deductible until you have that official IRS letter. You may also face state tax and registration requirements during that time. Operating without exemption is common but risky—especially if you tell donors their contributions are tax-deductible before the IRS says so. That can lead to serious legal trouble and penalties.

A charity’s organizing document must limit the organization’s purposes to exempt purposes set forth in section 501c3 and must not expressly empower it to engage, other than as an insubstantial part of its activities, in activities that do not further those purposes. This requirement may be met if the purposes stated in the organizing document are limited by reference to section 501c3.

In addition, an organization’s assets must be permanently dedicated to an exempt purpose. This means that if an organization dissolves, its assets must be distributed for an exempt purpose described in section 501c3, or to the federal government or to a state or local government for a public purpose.

To establish that an organization’s assets will be permanently dedicated to an exempt purpose, the organizing document should contain a provision insuring their distribution for an exempt purpose if the organization dissolves. Although reliance may be placed upon state law to establish permanent dedication of assets for exempt purposes, an organization’s application can be processed by the IRS more rapidly if its organizing document includes a provision ensuring permanent dedication of assets for exempt purposes.

For examples of provisions that meet these requirements, see the nonprofit purpose and dissolution clause page.

If the organizing document does not contain these provisions, an organization should amend it before submitting its exemption application. Here you can learn how to amend your organizing documents.

No. Form 1023 instructions state that an individual authorized by Form 2848 (your attorney or a person with the power of attorney) may not sign the application unless that person is also an officer, director, trustee, or other individual who is authorized to sign the application. Form 1023 is an application for the issuance of a determination letter or ruling letter by the IRS that recognizes an organization’s exemption from federal income tax.

Revenue Procedure 2011-4 (or latest update), requires that a letter ruling or determination letter request be accompanied by a penalties of perjury statement signed by the taxpayer, not the taxpayer’s representative.

This requirement is based on the concept that by signing the application, an official of the organization is assuming responsibility for the accuracy of the information. Generally, an authorized representative would not be in a position to verify the accuracy of the information provided by the organization.

Not anymore. Federal tax law used to provide an advance ruling process whereby new section 501c3 organizations could qualify as publicly supported organizations even though they had not existed long enough to establish a record of public support. This process was eliminated in 2008. A new organization now can be treated as a publicly supported organization for its first five years, and must establish that it meets the test beginning with its sixth taxable year.

IRS form 1023 asks whether an organization is a successor (as defined in the instructions) to another organization, for-profit or non-profit. If an organization answers “yes”, it must complete Schedule G, which requests detailed information about the predecessor organization, transfers of assets, and any continuing relationship. Generally speaking, the purpose of Schedule G is to obtain information about whether a transaction creating a successor organization resulted in benefit to private shareholders or individuals associated with the predecessor organization.

Obtaining information about potential tax avoidance transactions is one of the goals of Form 1023. These transactions may include improper business dealings between the applicant and its top officials, excessive compensation arrangements, fundraising involving such areas as vehicle donations and conservation easements, and foreign grants and operations. Tax advisors who promote abusive tax avoidance transactions are subject to penalties.

If an organization does not have the required organizational structure, the IRS will reject the exemption application (the user fee is generally not refundable, however). If the organization can create the required structure within the time specified by the IRS, it can resubmit the application without penalty or paying an additional user fee.

The narrative description, including information referenced in other parts of the application, should 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?
• How does the activity further the organization’s exempt purposes?
• What percentage of the organization’s total time is allocated to the activity?
• How is the activity funded?

This section of the form 1023 is the most important section, please see the Narrative Description of Activities page for complete detail.

If the organization’s organizing documents, purposes, or programs change while the IRS is considering an application, you should report the change in writing to the office processing your application. If you do not know the office that is processing your exemption application, contact Exempt Organizations Customer Account Services.

Because material changes in a charity’s structure or activities may affect its tax-exempt or public charity status, organizations should report such changes to the IRS Exempt Organizations Division.

The IRS reviews your application for completeness and eligibility. They may approve, ask for clarifications via a Request for Additional Information, or deny. You can usually respond to questions and fix issues. Approval means official tax-exempt status and a determination letter.

Incomplete or inconsistent information, vague activity descriptions, missing financial data, organizational documents that don’t match IRS rules, failure to respond timely to IRS questions, and trying to claim exemption for disallowed activities (like excessive lobbying or private benefit).

Keep all your organizing documents, financial records, meeting minutes, and correspondence with the IRS. You’ll need these for annual filings (Form 990), or if the IRS ever audits you. Good record-keeping isn’t optional — it’s mandatory to keep your status.

The application for 501c3 tax exemption is filed online on Pay.gov.

For answers to technical and procedural questions about charities and other non-profit organizations, call IRS Tax Exempt and Government Entities Customer Account Services at (877) 829-5500 (toll-free number). If you prefer to write, use the address below. For answers to employment tax questions, call the Business and Specialty Tax Line at (800) 829-4933 (toll-free). To obtain a determination letter that applies the principles and precedents previously announced to a specific set of facts, or to transmit copies of amended documents, write to:

Internal Revenue Service
Exempt Organizations Determinations
P.O. Box 2508
Cincinnati, OH 45201