Most nonprofits are 501(c)(3) corporations, which means they are formed for religious, charitable, scientific, literary, or educational purposes and are eligible for federal and state tax exemptions. To create a 501(c)(3) tax-exempt organization, first you need to form a D.C. corporation, and then you then apply for tax-exempt status from the IRS and the District of Columbia. Here are the details.
In the District of Columbia, a nonprofit corporation must have three or more directors.
The name of your nonprofit corporation cannot be the same as the name of another nonprofit corporation on file with the District of Columbia Department of Consumer & Regulatory Affairs. To see if your proposed name is available, you can search D.C.'s name database.
You will need to create and file nonprofit articles of incorporation with the office of D.C.'s Department of Consumer & Regulatory Affairs and pay the $80 filing fee (as of June 2020). The articles of incorporation need to include basic information such as your nonprofit's name, your nonprofit's statement of purpose, certain provisions required for state and federal tax-exempt purposes, and the name and address of your registered agent (the person to whom legal notices should be sent).
The D.C. Department of Consumer & Regulatory Affairs has a nonprofit articles of incorporation form -- either a fill-in-the-blank form or a sample on which you can base your articles. To ensure that you'll receive 501(c)(3) tax-exempt status when you apply with the IRS, you'll need to include specific language to ensure that you'll receive tax-exempt status, such as a clause dedicating the nonprofit's assets to another 501(c)(3) nonprofit organization when your nonprofit ends.
Your state form may include these provisions already, but if yours doesn't, consult a legal self-help guide such as How to Form a Nonprofit Corporation, by Anthony Mancuso (Nolo), to make sure your articles comply with D.C.'s nonprofit laws.
You'll need to prepare bylaws that comply with D.C. law and contain the rules and procedures your corporation will follow for holding meetings, electing officers and directors, and taking care of other corporate formalities required in the District of Columbia. For more information, see Nolo's article Nonprofit Formation Documents: Articles of Incorporation, Bylaws, and Organizational Minutes, or, for help creating your bylaws, see Nolo's book How to Form a Nonprofit Corporation, by Anthony Mancuso (Nolo). Your bylaws do not need to be filed with the D.C. Department of Consumer & Regulatory Affairs -- they are your internal operating manual.
Your first board meeting is usually referred to as the organizational meeting of the board. The board should take such actions as:
After the meeting is completed, minutes of the meeting should be created. You should set up a corporate records binder for your nonprofit to hold important documents such as articles of incorporation, bylaws, and minutes of meetings.
An EIN is a unique tax identification number for your business, assigned by the IRS. You will use the number on your nonprofit's tax returns, bank account, other government filings, and your tax exemption applications. You can submit the free EIN application via the IRS website.
Every business in D.C., including nonprofit organizations, must have a Basic Business License. You must first complete the prerequisites for the license, including registration with the Office of Tax and Revenue. You may submit your application online or submit a paper application. The fees vary widely depending on your services and whether you will solicit charitable donations.
If your organization has a physical location within the District of Columbia, even if you are operating the nonprofit out of your home, you must obtain a Certificate of Occupancy. For more information about the application process, check with the D.C. Business Center.
To keep your nonprofit in good standing with the D.C. Corporate Division, you must file biennial reports and pay the $80 filing fee (as of June 2020). Your first report is due by April 1 following the year of your registration, and each subsequent report is due April 1 every two years. For example, if you registered your organization on May 1, 2020, your first report will be due by April 1, 2021, and the next report will be due by April 1, 2023.
Now that you have created your nonprofit corporation, you can obtain your federal and District of Columbia tax exemptions. Here are the three steps you must take to obtain your tax-exempt status:
To obtain federal tax-exempt status from the IRS, you will need to complete and file IRS Form 1023, Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code. This long and detailed form asks for lots of information about your organization, including its history, finances, organizational structure, governance policies, operations, activities, and more. For line-by-line instructions on how to complete the Form 1023, see How to Form a Nonprofit Corporation, by Anthony Mancuso (Nolo).
Smaller nonprofits may be eligible to file Form 1023-EZ, Streamlined Application for Recognition of Exemption under Section 501(c)(3) of the Internal Revenue Code. This is a much simpler, shorter form that is filed online. Only smaller nonprofits--those with projected annual gross receipts of less than $50,000 and total assets of less than $250,000--are eligible to use the streamlined 1023-EZ application.
See the IRS website for more information on the Form 1023 and Form 1023-EZ filing requirements.
Once you have your federal tax exemption, you need to obtain your District of Columbia tax exemption. This may include exemptions from income, property, sales, and other state taxes. The District of Columbia's tax agency will have a form you need to file to obtain your state tax exemption.
Depending on your activities and the size of your organization, you may need to register with the D.C. attorney general before doing any fundraising activities. Check with the D.C. attorney general for the rules, or for more information about fundraising registration requirements, see Nonprofit Fundraising Registration: The 50-State Digital Guide, by Ronald J. Barrett and Stephen Fishman (Nolo).