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 New Mexico nonprofit corporation. Then you apply for tax-exempt status from the IRS and the state of New Mexico. Here are the details.
First, you need to form a nonprofit corporation under New Mexico state law (Chapter 53-8 of the New Mexico Statutes).
In New Mexico, your nonprofit corporation must have three or more directors. The initial directors must be named in your articles of incorporation.
The name of your nonprofit corporation cannot be the same as, or confusingly similar to, the name of any other nonprofit or for-profit corporation existing or authorized to do business in New Mexico. To see if your proposed name is available, you can search the New Mexico business name database on the Secretary of State’s website.
You create your nonprofit entity by filing a certificate of incorporation with the New Mexico Secretary of State and paying the $25 filing fee (as of June 2020). Your articles of organization must include basic information such as:
The Secretary of State has a fillinable nonprofit articles of incorporation form 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.
The articles form on the state's website does not include language required by the IRS to obtain your 501(c)(3) federal tax-exempt status. To receive 501(c)(3) tax-exempt status from the IRS, you'll need to have certain 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 both the state and federal tax-exempt required language in the articles you create.
Before you file your articles of organization, you’ll need to have bylaws that comply with New Mexico 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 New Mexico. 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 of the meeting. 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 for your business, assigned by the IRS. You will use your EIN on your state and federal tax filings, as well as your tax exemption applications. To obtain an EIN, submit the free application via the IRS website.
File an initial report with the Secretary of State within 30 days of the date on your certificate of incorporation. After the initial filing, you must file an annual report, due 5 months and 15 days after the close of your fiscal year. For example, if your fiscal year ends in December, your due date will be May 25th. Both reports will be public record and include essential organizational information, such as the nonprofit's address, the registered agent, and the names of all of the directors and officers.
You may file your initial and annual reports online via the New Mexico Corporations and Business Services website.
You do not need a statewide business license to operate a nonprofit in New Mexico. However, your town or county may require a license or permit. Check with your town's business licensing division to determine the requirements for your nonprofit.
Now that you have created your nonprofit corporation, you can obtain your federal and New Mexico 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 obtain federal 501(c)(3) tax-exempt status from the IRS, your nonprofit is automatically exempt from New Mexico Corporate Income Tax and Franchise Tax. For exemptions from other state taxes and filing requirements, see the New Mexico Taxation and Revenue Department website.
Depending on your activities and the size of your organization, you may need to register with the New Mexico Attorney General before doing any fundraising activities. Check the Attorney General’s website for information and rules about fundraising and registration requirements for nonprofits.