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 Utah nonprofit corporation. Then you apply for tax-exempt status from the IRS and the state of Utah. Here are the details.
First, you need to form a nonprofit corporation under Utah state law (the Utah Revised Nonprofit Corporation Act (“RNCA”)).
In Utah, you must have at least three directors on your board. If you do not name initial directors in your articles of incorporation, you must provide their names to the state no later than the filing of your first annual report.
The name of your nonprofit must be distinguishable from the name of any domestic or foreign, nonprofit or for profit corporation, limited liability company, or limited partnership authorized or incorporated in the state, or any name reserved or registered or any trademark or assumed name on file with the Secretary of State. See RNCA §16-6a-401 for more on name restrictions.
To see if your proposed name is available, you can check the online business name search on the Division of Corporations & Commercial Code website.
You create your nonprofit entity by filing articles of incorporation with the Utah Department of Commerce, Division of Corporations & Commercial Code. Your articles of incorporation must include basic information such as:
See RNCA §16-6a-202 for more on what to include in your articles of incorporation. The incorporator must be a natural person 18 years or older.
The Utah Department of Commerce, Division of Corporations & Commercial Code, has a fillinable articles of incorporation form for nonprofits on its website which you can use to create your articles. Complete and file your articles following the instructions provided on the website, and include the $30 non-refundable processing fee (as of June 2020). You can file your articles in person or by mail or fax.
To receive your federal tax exemption from the IRS, make sure you include the language required to obtain 501(c)(3) tax-exempt status. This includes:
For 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 the tax-exempt required language in the certificate you create.
Before you file your articles of incorporation, you’ll need to have bylaws that comply with Utah 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 Utah. 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).
Apply for an EIN via the IRS website. An EIN is a unique tax number for your nonprofit, which you will use on your state and federal tax filings, exemption application, bank accounts, and other government filings. The application is free, and you will receive your EIN immediately after submission.
Utah does not require nonprofits to obtain statewide business licenses. However, depending on your location and services, you might need one or more licenses or permits. Check with the licensing office in every town and county where your nonprofit will operate to determine what the requirements are for your organization.
Each year, you must submit an annual report/renewal form to keep your nonprofit in good standing with the state. You may renew your nonprofit online via the Division of Corporations and Commercial Code website. The state will send you a renewal reminder before the due date, which will be the end of the month of your initial registration. For example, if you registered your nonprofit on October 3, your annual due date will be October 31.
Now that you have created your nonprofit corporation, you can obtain your federal and Utah 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. Check the Utah State Tax Commission website for information and filing requirements for franchise, sales and use, and property tax exemptions.
Depending on your activities and the size of your organization, you may need to register with the state before doing any fundraising activities. Check the Utah Division of Consumer Protection website for information and rules about fundraising and registration requirements for nonprofits.