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 Wisconsin nonprofit corporation. Then you apply for tax-exempt status from the IRS and the state of Wisconsin. Here are the details.
Form Your Wisconsin Nonprofit Corporation
To form a nonprofit in Wisconsin, first you need to form a nonprofit corporation under Wisconsin state law (Wis. Stats. Ch. 181).
1. Choose the initial directors for your corporation
In Wisconsin, you must have three or more directors on your board.
2. Choose a name for your Wisconsin nonprofit corporation
The name of your nonprofit must contain the word “corporation”, “incorporated”, “company”, or “limited,” or the abbreviation “corp.”, “inc.”, “co.” or “ltd.,” or comparable words or abbreviations in another language. To see if your proposed name is available, you can check with the Wisconsin Department of Financial Institutions office or you can search the Corporate Records database on its website. See Wis. Stats. §181.0401.for more information on name restrictions for nonprofits.
3. Prepare and file your nonprofit articles of incorporation
You create your nonprofit entity by filing articles of incorporation for a nonprofit with the Wisconsin Department of Financial Institutions. Your articles of incorporation must include basic information such as:
- a statement that the corporation is incorporated under Wisc. Stats. Ch. 181
- your nonprofit’s corporate name
- the mailing address of its initial principal office
- the street address of its initial registered office and the name of its initial registered agent at that office
- the name and address of each incorporator, and
- whether or not the corporation will have members.
The Wisconsin Department of Financial Institutions has a nonprofit articles of incorporation form on its website (Nonstock, not-for-profit corporation, Form 102) which you can use to create your nonprofit corporation. Complete and file your articles following the instructions provided. There is no online filing available; you must mail your articles in as instructed.
The articles form available from the state has the minimal information necessary to create a nonprofit in Wisconsin. 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:
- a statement of purpose that meets IRS requirements
- statements that your non-profit will not engage in prohibited political or legislative activity, and
- a dissolution of assets provision dedicating your assets to another 501(c)(3) organization upon dissolution.
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.
4. Prepare bylaws for your Wisconsin nonprofit corporation
Before you file your articles of incorporation, you’ll need to have bylaws that comply with Wisconsin 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 Wisconsin. Your bylaws do not need to be filed with the state -- they are your internal operating manual.
5. Hold a meeting of your board of directors
Your first board meeting is usually referred to as the organizational meeting of the board. The board should take such actions as:
- electing initial directors (unless they are already named in your articles0
- approving the bylaws
- appointing officers
- setting an accounting period and tax year, and
- approving initial transactions of the corporation, such as the opening of a corporate bank account.
After the meeting is completed, be sure to create minutes that accurately record the actions taken by the board.
6. Set up a corporate records binder
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).
Obtain Your Federal and State Tax Exemptions
Now that you have created your nonprofit corporation, you can obtain your federal and Wisconsin state tax exemptions. Here are the steps you must take to obtain your tax-exempt status:
1. File your Form 1023 federal tax exemption application.
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.
2. Obtain your Wisconsin state tax exemptions.
Once your nonprofit receives 501(c)(3) tax-exempt status from the IRS, you are automatically exempt from Wisconsin’s income tax. For information and filing requirements for exemptions from other state taxes, including sales and use tax and property taxes, check with the Wisconsin Department of Revenue.
3. Other state reporting and registration requirements.
Depending on your activities and the size of your organization, you may need to register with the state before doing any fundraising activities. The Wisconsin.gov website has information and forms related to fundraising and registration requirements for nonprofits.