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 York nonprofit corporation. Then you apply for tax-exempt status from the IRS and the state of New York. Here are the details.
First, you need to form a nonprofit corporation under New York state law (the Not-For-Profit Corporation Law (“NPCL”)).
In New York, your nonprofit corporation must have at least three directors. Directors must be at least 18 years old, with certain exceptions for nonprofits involved in youth activities.
The name of your nonprofit corporation must be distinguishable from the name of any other corporation, limited liability company, or limited partnership already on file with the Department of State. To see if your proposed name is available, you can search the New York business name database on the Division of Corporation’s website. You may reserve a name for 60 days by filing an Application for Reservation of of Name with the New York Department of State. The application must be filed by mail. There is a $10 filing fee.
In New York, the name of a nonprofit must contain one of the following words (unless an exemption applies): “Incorporated,” “Corporation,” or “Limited,” or one of the following abbreviations: “Inc.,” “Corp.,” or “Ltd.” You cannot use certain words and phrases in your nonprofit’s name and others may be used only with written approval from the appropriate state agency. (See NPCL § §301 and 404.)
Every New York corporation must appoint the New York Department of State as its registered agent for service of process in the state. The Department will accept and forward legal papers on the corporation's behalf if it is sued.
You create your nonprofit entity by filing a certificate of incorporation with the New York Department of State. Your certificate of incorporation must include basic information such as:
The incorporator must be at least 18 years old.
The Department of State has a fillable Certificate 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 Department of State’s website.
The articles form on the Department of State’s website has the minimal information necessary to create a nonprofit in New York. It does not include language required by the IRS to obtain 501(c)(3) tax-exempt status. To receive 501(c)(3) tax-exempt status from the IRS, your corporation must have certain specific language in its articles, including:
You must add these clauses to the certificate yourself. You may do so in the Ninth article on the certificate form, which is blank. You can find sample language to use approved by the IRS in the Instructions for IRS Form 1023-EZ, (see Part II).
For more information on IRS requirements for tax exemption, including sample language, consult How to Form a Nonprofit Corporation, by Anthony Mancuso (Nolo).
The filing fee is $75.
Before you file your certificate of incorporation, you’ll need to have bylaws that comply with New York 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 York. 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, minutes of the meeting should be created. Set up a corporate records binder to hold the corporation's articles, bylaws, consent forms, minutes, and other important documents. For more information, as well as minutes forms, consent forms, and other resolutions, see Nonprofit Meetings, Minutes & Records, by Anthony Mancuso (Nolo).
Your nonprofit corporation must obtain a federal employer identification number (EIN). You may obtain an EIN by completing an online application on the IRS website. There is no filing fee.
Depending on the type of activities your nonprofit intends to carry on and where it is located, it may need to obtain a local and/or state business license or permit. For state license information, see the New York Business Permits Assistance Program website. Contact the county clerk and the clerk of the city, town, or village in which the business will operate with questions regarding local licenses or permits.
All corporations doing business in New York must file a Biennial Statement with the Department of State every other year. The statement is due during the calendar month in which the corporation's original certificate of incorporation was filed. The statement is filed online. The filing fee is $9.
Now that you have created your nonprofit corporation, you can obtain your federal and New York 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 your federal 501(c)(3) tax-exempt status from the IRS, your nonprofit is eligible for certain state tax exemptions. To obtain an exemption from New York corporation franchise taxes, your nonprofit must file Form CT-247 with the New York Department of Taxation and Finance. To obtain an exemption from state and local sales taxes, your nonprofit must file Form 25-119.2 with the New York Sate Department of Taxation and Finance. For information and filing requirements for exemptions from income, property, sales, and other state taxes, see the New York Department of Taxation and Finance website.
Depending on your activities and the size of your organization, you may need to register with the New York Attorney General before doing any fundraising activities. Check the Attorney General’s website for information and rules about New York's fundraising and registration requirements for nonprofits. For more information about fundraising registration requirements, see Nonprofit Fundraising Registration Digital Guide, by Ronald J. Barrett and Stephen Fishman.