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 Washington nonprofit corporation. Then you apply for tax-exempt status from the IRS and the state of Washington. Here are the details.
To form a nonprofit in Washington, first you need to form a nonprofit corporation under Washington state law (Chapter 24.03 of the Revised Code of Washington “RCW”). See the Washington Nonprofit Handbook for helpful information.
In Washington, you must have one or more directors on your board.
The name of your nonprofit corporation be the same as or deceptively similar to an existing or reserved corporate name or limited liability company name. It cannot include or end with any of the following words or abbreviations of such words: corporation, company, incorporated, limited partnership, limited liability company, or any other corporate designation. A nonprofit may use club, league, association, services, committee, fund, society, foundation, a nonprofit corporation, or similar name.
To see if your proposed name is available, you can check with the Corporations Division of the Washington Secretary of State’s office or you can search the Corporations Name Search database on the Secretary of State’s website. You can reserve a name which will prevent another nonprofit or business from registering the name while you prepare and file your articles.
See RCW §24.03.045 for more information on name restrictions for nonprofits.
You create your nonprofit entity by filing articles of incorporation for a nonprofit with the Washington Secretary of State. Your articles of incorporation must include basic information such as:
The Washington Secretary of State has a 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. You can file your articles online or complete a fillable articles form and mail it in. As of June 2020, the fee is $50 to file online and $30 to submit a paper application.
The articles form available from the state has the minimal information necessary to create a nonprofit in Washington. It does not include language required by the IRS to obtain 501(c)(3) federal tax-exempt status. To receive tax-exempt status from the IRS, you'll need to have 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 the tax-exempt language required by the IRS in the articles you create.
Before you file your articles of incorporation, you’ll need to have bylaws that comply with Washington 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 Washington. 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, which you will use on state and federal tax filings. You must have an EIN before submitting your tax exemption applications. You can apply online for free via the IRS website.
Depending on your services and your location, your nonprofit might need one or more business licenses or permits. However, you do not need a statewide business license to conduct nonprofit activities. Check with the license administration in your area to determine what the requirements are for your organization.
Finally, to keep your nonprofit in good standing, you must file an Annual Report with the Secretary of State. In the report, you will provide updates on essential information, such as the nonprofit's address and registered agent. As of June 2020, the filing fee for the report is $10.
Now that you have created your nonprofit corporation, you can obtain your federal and Washington 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.
Washington does not have a corporate income tax so you will not be subject to any state income tax. Check with the Washington Department of Revenue for information regarding any other state 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. The Charities Program at the Secretary of State’s office has information and forms about fundraising and registration requirements for nonprofits.