Update to 15th edition of How to Form a Nonprofit Corporation in California
In How to Form a Nonprofit Corporation in California, we give two reasons why nonprofits should always apply for a federal tax exemption, even if they are exempt from the IRS application requirements: 1) it's safer to get the exemption rather than assume you qualify for one, and 2) it helps you attract support from donors and agencies. (See Chapter 8, "Do You Need to File Form 1023?")
There is a third reason to apply for a federal tax exemption, even if you are not required to. Once you get your federal exemption, all you need to do to obtain a California tax exemption is to file a FTB3500A form, "Submission of Exemption Request," together with a copy of your federal determination letter. This 3500A form is a whole lot simpler than separately applying for a California tax exemption (by filling out the full FTB 3500 form). Further, the information required to fill out the California application is the same or similar to that required to complete the federal form, so why do this (arduous) work twice -- once to apply for the state exemption, and possibly later when you are required or wish to apply for the federal tax exemption? The book assumes that all organizations will seek to obtain a California income tax exemption after successfully applying for and obtaining their federal 501(c)(3) income tax exemption (and will, therefore, be eligible to use Form FTB3500A to request a California income tax exemption).