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 a Maine corporation, then you apply for tax-exempt status from the IRS and the State of Maine. Here are the details.
In Maine, your nonprofit corporation must have three or more directors.
The name of your nonprofit corporation cannot be the same as the name of another corporation, limited liability company, or limited partnership on file with the Maine Secretary of State. To see if your proposed name is available, you can search Maine's corporate name search on the Secretary of State's website. For other restrictions on name use, see Section 301-A of Maine's Nonprofit Corporation Act.
You will need to create and file nonprofit articles of incorporation with the Maine Secretary of State office and pay the $40 filing fee (as of July 2020). The articles of incorporation must include:
The Maine Secretary of State has a nonprofit articles of incorporation form on its website which you can use to create your articles. Complete and file your articles following the instructions provided on the Secretary of State's website.
To receive 501(c)(3) tax-exempt status from the IRS, you'll need to include additional specific language in your articles, including:
For more information on IRS requirements for tax exemption, see IRS Publication 557, Tax-Exempt Status for Your Organization, available on the IRS website. Make sure you include the federal tax-exempt required language in the articles you create.
You'll need to prepare bylaws that comply with Maine 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 Maine. Your bylaws do not need to be filed with the Maine Secretary of State -- they are your internal operating manual.
For more information, see Nolo's article Nonprofit Formation Documents: Articles of Incorporation, Bylaws, and Organizational Minutes. For help creating your bylaws, see Nolo's book How to Form a Nonprofit Corporation, by Anthony Mancuso (Nolo).
Your first board meeting is usually referred to as the organizational meeting of the board. The board should take such actions as:
Be sure to prepare and keep minutes of your board meetings.
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. 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 assigned by the IRS. You will use the EIN on your state and federal tax filings, as well as your tax exemption applications. You may obtain an EIN by submitting a free application through the IRS website.
You do not need a statewide business license to operate a nonprofit in Maine. However, depending on your services and your location, your organization might need one or more licenses or permits. Check with your town and county offices to determine the requirements for your nonprofit.
To keep your nonprofit in good standing, file an annual report each year by June 1 with the Secretary of State. You may file your report online or mail in a paper copy.
Now that you have created your nonprofit corporation, you can obtain your federal and Maine 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.
Once you have your federal tax exemption, you are automatically exempt from Maine income tax. Check with Maine's tax revenue agency for any filing requirements and to see whether you qualify for any other state tax exemptions, like sales or property taxes.
Depending on your activities and the size of your organization, you may need to register before you engage in any fundraising activities with the Maine Department of Professional and Financial Regulation, Office of Professional and Occupational Regulation. Check their website for the rules and registration requirements for fundraising activities.