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 Montana nonprofit corporation. Then you apply for tax-exempt status from the IRS and the state of Montana. Here are the details.
In Montana, your nonprofit corporation must have three or more directors.
The name of your nonprofit corporation must be distinguishable from the name of any other business entity on file with the Montana Secretary of State. To see if your proposed name is available, you can search Montana's name database on the Secretary of State’s website.
You will need to create and file nonprofit articles of incorporation with the Montana Secretary of State’s office and pay the $20 filing fee (as of July 2020). The articles of incorporation contain basic information about your nonprofit, including:
Check with the Secretary of State for a sample nonprofit articles of incorporation form which you can use to create your Montana nonprofit corporation. The articles form includes the minimal information needed to create a nonprofit corporation in Montana. It does not include certain language required by the IRS to obtain your federal tax-exempt status.
To ensure you get 501(c)(3) tax-exempt status from the IRS, you will need to have 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. Be sure to include the additional language required by the IRS for 501(c)(3) tax-exempt status.
You'll need to prepare bylaws that comply with Montana 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 Montana. Your bylaws do not need to be filed with the Montana 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 keep minutes that accurately record your board’s actions.
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 organization's tax filings, exemption application, and other filings with the government. The EIN application is free, and you may submit your application online.
You do not need a statewide business license to run a nonprofit in Montana. However, your town or county might require one or more permits, depending on what services your organization will provide. Check with your local licensing divisions to determine the requirements for your organization.
To keep your nonprofit in good standing with the state, file your annual report each year by April 15. You may file your annual report online.
Now that you have created your nonprofit corporation, you can obtain your federal and Montana 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 need to obtain your Montana state tax exemptions. In Montana, you must file a tax-exempt request form with the Department of Revenue to obtain your state tax-exempt status. Check the Montana Department of Revenue to find out how to obtain your state tax exemptions.
Montana 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.