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 Nebraska nonprofit corporation. Then you apply for tax-exempt status from the IRS and the state of Nebraska. Here are the details.
Form Your Nebraska Nonprofit Corporation
1. Choose who will be the initial directors for your nonprofit
In Nebraska, your nonprofit corporation must have three or more directors.
2. Choose a name for your nonprofit corporation
The name of your nonprofit corporation cannot be the same as, or deceptively similar to, the name of any other business or nonprofit entity on file with the Nebraska Secretary of State. You can check the availability of a name by submitting the name in writing to the Secretary of State’s Office by email, fax, or mail. You will receive a written confirmation as to whether the name is available. You can also check Nebraska's name database on the Nebraska Secretary of State’s website.
3. Prepare and file your nonprofit articles of incorporation
You will need to create and file nonprofit articles of incorporation with the Nebraska Secretary of State’s office. Unlike most states, the Nebraska Secretary of State's website does not provide a sample or fillinable nonprofit articles of incorporation form. Instead, you must create your own articles and include all the information required under the Nebraska Nonprofit Corporation Act. Under Nebraska nonprofit law, the articles must contain:
- the nonprofit’s name
- whether it is a mutual benefit corporation
- the street address of the corporation's initial registered office and the name of its initial registered agent at that office
- the name and street address of each incorporator
- whether the corporation will have members, and
- provisions regarding the distribution of assets on dissolution in compliance with nonprofit law.
Complete and file your articles following the instructions provided on the Secretary of State’s website.
The information required in nonprofit articles of incorporation under state law only satisfies state law requirements for a nonprofit. To obtain 501(c)(3) tax-exempt status from the IRS, you need to have additional specific language in your articles including:
- a statement of purpose that meets IRS requirements
- statements that your nonprofit will not engage in prohibited political or legislative activitiy, and
- a dissolution of assets provision dedicating your assets to another 501(c)(3) organization upon dissolution.
Make sure you include both the language required to form a nonprofit under state law and the additional language required by the IRS for tax exemption. For more information on IRS requirements for tax exemption, you can refer to IRS Publication 557, Tax-Exempt Status for Your Organization, available on the IRS website.
4. Prepare bylaws for your Nebraska nonprofit corporation
You'll need to prepare bylaws that comply with Nebraska 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 Nebraska. Your bylaws do not need to be filed with the Nebraska 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 How to Form a Nonprofit Corporation, by Anthony Mancuso (Nolo).
5. Hold an organizational meeting of your board
Your first board meeting is usually referred to as the organizational meeting of the board. If initial directors are not named in the articles of incorporation, then the incorporator or incorporators must hold the meeting and elect directors.
At the organizational meeting, the board should take such actions as:
- approving the bylaws
- appointing officers
- setting an accounting period and tax year, and
- approving initial transactions of the corporation, such as the opening of a corporate bank account.
Be sure to keep minutes of the meeting that accurately record the actions taken by the board.
6. Set up a corporate records binder
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).
Obtain Your Federal and State Tax Exemptions
Now that you have created your nonprofit corporation, you can obtain your federal and Nebraska state tax exemptions. Here are the steps you must take to obtain your tax-exempt status:
1. File your Form 1023 federal tax exemption application.
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.
2. Obtain your Nebraska state tax exemption
Once you receive an IRS federal determination letter that your nonpofit qualifies as a 501(c)(3) tax-exempt organization, then you are also exempt from state corporate income tax. Check with the Nebraska Department of Revenue to find out whether your nonprofit qualifies for exemptions from sales and use tax.
3. Other state reporting and registration requirements
Depending on your activities and the size of your organization, you may need to register with the Nebraska Attorney General before doing any fundraising activities. Check the Nebraska Attorney General website for registration rules.