Updates
Here are summaries of important legal or procedural changes that affect the latest edition of this product.
If you want to check on the accuracy of any other information in the book, please follow the legal research
instructions in the book or in Nolo's research manual, Legal Research: How to Find and Understand the Law.
IRS Streamlines Tax Exemption Application Process for New Nonprofits
Effective date:
Sep. 9, 2008
On September 9, 2008, the IRS adopted regulations that eliminate the requirement that new groups applying for 501(c)(3) tax-exempt status seek an advance ruling on their public charity status. Under the new regulations, all new 501(c)(3) groups will automatically be classified as a public charity (as opposed to a private foundation) for the first five years. To qualify for this treatment, the group must be able to demonstrate in its Form 1023 application that it reasonably expects to receive qualifying public support.
For the first five years, the group will maintain its public charity status regardless of how much public support it actually receives. After the initial five year period, the IRS will start to monitor whether the group receives the public support necessary to qualify as a public charity. It will do this based on the group's annual IRS Form 990 return. The time period that the IRS will review in making its determination is the current year and the preceding four years.
These new rules replace the two-step procedure that existed before. Under the old rules, an organization had to seek an advance ruling that it would be publicly supported and then had to demonstrate at the end of five years that it met the required public support test.
The current IRS Form 1023 tax exemption application, revised June 2006, does not reflect these changes. Before filling in your Form 1023 application, go to the IRS website at www.irs.gov to see if a newer Form 1023 is available. If not, fill out the Form 1023 (June 2006 version) according to the instructions in the book, but ignore the book's instructions to Part IX and Part X. Instead, follow the IRS's instructions to these parts posted on their website (see "Errata Sheet for Form 1023" at www.irs.gov).
For more information on the new rules, including transition rules that apply to organizations that have already received their advance ruling, see "Elimination of the Advance Ruling Process" on the IRS website at www.irs.gov.
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New Notarization Requirements for California
Effective date:
Jan. 1, 2008
As of January 1, 2008, the official California notarization statement changes to the following:
State of California
County of _________________
On _______________ before me, ______________________, a notary public, personally appeared ____________________________________, who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing is true and correct. Witness my hand and official seal.
Signature ________________________________
(Seal)
The change was made to combat identify theft and real estate fraud, according to the legislators who sponsored the statutory change to California Civil Code section 1185.
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New Simplified Process for California Nonprofits Seeking State Tax Exemption
Effective date:
Jan. 1, 2008
Effective January 1, 2008, California 501(c)(3) nonprofits will no longer need to file Form FTB 3500, the California state tax exemption application. Once a California nonprofit receives its federal 501(c)(3) determination from the IRS, it can simply submit a copy of that letter to the California Franchise Tax Board, along with the new state Form 3500A, Submission of Exemption Request: Exemption Based on 501(c)(3) Federal Determination Letter. After the California Franchise Tax Board approves the affirmation, the nonprofit is tax exempt in California.
This new law applies only to nonprofits exempt under Section 501(c)(3) of the Internal Revenue Code. All other entities seeking California state tax exemption must file form FTB 3500, Exemption Application, with the California Franchise Tax Board.
For more information, go to the California Franchise Tax Board website at www.ftb.ca.gov and search for Form 3500A.
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