Most nonprofits are 501(c)(3) organizations, 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 an Idaho nonprofit corporation. Then you apply for tax-exempt status from the IRS and the state of Idaho. Here are the details.
First, you need to form a nonprofit corporation under Idaho state law.
In Idaho, you must have at least three directors on your board (although a religious nonprofit corporation needs only one).
The name of your nonprofit corporation must contain the word corporation, incorporated, company or limited, or an abbreviation thereof. If the word “company” or its abbreviation is used, it cannot be preceded by the word “and” or an abbreviation thereof. The name must be distinguishable from any other entity, such as a corporation, limited liability company, limited partnership, or limited liability partnership on file with the Secretary of State.
To see if your proposed name is available, you can check the Idaho business entity search on the Secretary of State’s website. You can reserve a name with the Secretary of State which will prevent another nonprofit or business from registering the name while you prepare and file your articles.
See Idaho Code § 30-3-27 for more information on name restrictions for nonprofits.
You create your nonprofit entity by filing a certificate of incorporation with the Idaho Secretary of State. Your articles of organization must include basic information such as:
The Secretary of State has a fillinable articles of incorporation form for nonprofits on its website which you can use to create your nonprofit corporation. Complete and file your articles following the instructions provided on the Secretary of State’s website. As of June 2020, the filing fee is $30, plus an additional $20 to submit a paper filing, or $1 credit card transaction fee for online filing.
The articles form available from the state has the minimal information necessary to create a nonprofit in Idaho. It does not include language required by the IRS to obtain 501(c)(3) federal tax-exempt status. To receive tax-exempt status from the IRS, you'll need to have additional specific language in your articles, including:
For more information on IRS requirements for tax exemption, including sample language, see IRS Publication 557, Tax-Exempt Status for Your Organization, available on the IRS website. Make sure you include the tax-exempt required language in the articles you create.
Before you file your articles of incorporation, you’ll need to have bylaws that comply with Idaho law. Your bylaws 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 Idaho. Your bylaws do not need to be filed with the state -- 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, be sure to create minutes that accurately record the actions taken by the board. You should set up a corporate records binder for your nonprofit to hold important document such as articles of incorporation, bylaws, and minutes of meetings. For more information, as well as minutes forms, consent forms, and other resolutions, see Nonprofit Meetings, Minutes & Records, by Anthony Mancuso (Nolo).
An EIN is a unique tax identification number for your nonprofit, which you will use on state and federal tax filings, the organization's bank account, and other filings with the government. The nonprofit must have an EIN before you can submit your federal and state tax exemption applications. To obtain an EIN, submit the free application via the IRS website.
Depending on your location and your services, your nonprofit might need one or more licenses or permits. Check with your town and county business licensing departments to find the requirements for your organization.
To keep your nonprofit in good standing with the state, you must file an annual report, which will update or confirm basic information about your organization, including the nonprofit's address and registered agent. You must file the annual report online via the Secretary of State's SOSBiz portal.
Now that you have created your nonprofit corporation, you can obtain your federal and Idaho state tax exemptions. Here are the 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.
Nonprofits who receive 501(c)(3) tax-exempt status from the IRS are automatically exempt from Idaho’s income tax. For information and filing requirements for exemptions from other state taxes, including sales tax, check with Idaho’s State Tax Commission.
Idaho does not require nonprofits to register with the state before soliciting contributions from state residents. You may have to register your nonprofit in other states before you engage in any out-of-state solicitations.