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 an Oregon nonprofit corporation. Then you apply for tax-exempt status from the IRS and the state of Oregon. Here are the details.
First, you need to form a nonprofit corporation under Oregon state law (Oregon Revised Statutes (“ORS”), Chapter 65).
Oregon requires that you have a minimum of three individuals serve as directors for a public benefit nonprofit corporation. (Religious and mutual benefit nonprofits can have only one director.)
The name of your nonprofit corporation must be distinguishable from the name of any other business entity on record with the Secretary of State. It also must be distinguishable from the name of any other type of business entity on record at the time of filing. Your nonprofit’s name cannot contain the words “cooperative” or “limited partnership.” See ORS 65.094 for information on other name restrictions.
To see if your proposed name is available, you can search the Oregon business name database on the Secretary of State’s website.
You create your nonprofit entity by filing a certificate of incorporation with the Oregon Secretary of State along with the $50 filing fee (as of June 2020). Your articles of organization will include basic information such as:
See ORS 65.047 for additional provisions you may want to include in your articles. Your incorporator can be an individual 18 years of age or older, or a domestic or foreign corporation, a partnership or an association.
The Secretary of State has a fillable articles of incorporation form for nonprofits on its website which you can use to create your nonprofit corporation. Complete and file your articles following the instructions provided with the form. You can file by mail or online through the Secretary of State’s website.
The articles form on the Secretary of State’s website includes optional language regarding distribution of assets on dissolution. Be sure to include this language in the articles you create; it is required by the IRS to obtain 501(c)(3) tax-exempt status. 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.
Before you file your articles of organization, you’ll need to have bylaws that comply with Oregon 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 Oregon. 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 that accurately record the actions taken by the board.
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 nonprofit, assigned by the IRS. You will use the EIN on your state and federal tax filings, and your exemption applications. You can submit the free and simple application on the IRS website.
You do not need a general business license to open a nonprofit in Oregon, but depending on the goods or services your organization will provide, and your location, you might need one or more licenses permits. Check with the Oregon Business Xpress License Directory to determine the requirements for your nonprofit.
To keep your nonprofit in good standing, you must file the Annual Renewal with the Secretary of State. The state will send you a renewal notice 45 days before the due date, which will be the anniversary of when the state originally approved your articles of organization.
Now that you have created your nonprofit corporation, you can obtain your federal and Oregon 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.
Nonprofits who receive 501(c)(3) tax-exempt status from the IRS are generally exempt from Oregon’s income tax. For information and filing requirements for exemptions from other state taxes, including sales or use and property taxes, check with Oregon’s tax agency.
Depending on your activities and the size of your organization, you may need to register with the state before doing any fundraising activities. The Attorney General’s office has information and forms about fundraising and registration requirements for nonprofits.