Tax-exempt compliance support

Tax-exempt compliance support Federal (IRS) — core items to cover: Eligibility & application: Explain organizational and operational tests for common exempt categories (501(c)(3) charitable organizations and other 501(c) types).

Explain Form 1023 (and 1023-EZ eligibility), Form 1024/1024-A for non-501(c)(3) types, and that applications are filed electronically via Pay.gov. Emphasize the 27-month rule: to be exempt from the date of formation, apply within 27 months after the end of the month of formation.

Determination letters & EIN: Applicants must obtain EINs and pay user fees; IRS issues determination letters that are often required by states and funders. Annual federal reporting: Most tax-exempt organizations must file a Form 990-series return (Form 990, 990-EZ, or 990-N/“e-postcard”) each year based on gross receipts/assets thresholds.

Failure to file 3 consecutive years triggers automatic revocation. Public inspection/disclosure rules apply to exemption applications and annual returns.

Unrelated Business Income Tax (UBIT): Tax-exempt organizations remain taxable on income from regularly carried on trade/business activities not substantially related to their exempt purpose. The IRS has Publication 598 and other guidance on UBIT reporting and Form 990-T.

Payroll & employment taxes: Exempt status does not eliminate payroll tax responsibilities. Organizations with employees must follow Form 941, deposit and remit federal employment taxes, issue W-2s, etc.; some exemptions (e.g., FUTA) may apply in narrow situations—confirm with IRS guidance and Publication 15 series.

Compliance guides and training: Use IRS Publication 557 and IRS TE/GE resources (Stay Exempt workshops, Publication 4221 series) as core references for accuracy. Federal (IRS) — core items to cover: Eligibility & application: Explain organizational and operational tests for common exempt categories (501(c)(3) charitable organizations and other 501(c) types).

Explain Form 1023 (and 1023-EZ eligibility), Form 1024/1024-A for non-501(c)(3) types, and that applications are filed electronically via Pay.gov. Emphasize the 27-month rule: to be exempt from the date of formation, apply within 27 months after the end of the month of formation.

Determination letters & EIN: Applicants must obtain EINs and pay user fees; IRS issues determination letters that are often required by states and funders. Annual federal reporting: Most tax-exempt organizations must file a Form 990-series return (Form 990, 990-EZ, or 990-N/“e-postcard”) each year based on gross receipts/assets thresholds.

Failure to file 3 consecutive years triggers automatic revocation. Public inspection/disclosure rules apply to exemption applications and annual returns.

Unrelated Business Income Tax (UBIT): Tax-exempt organizations remain taxable on income from regularly carried on trade/business activities not substantially related to their exempt purpose. The IRS has Publication 598 and other guidance on UBIT reporting and Form 990-T.

Payroll & employment taxes: Exempt status does not eliminate payroll tax responsibilities. Organizations with employees must follow Form 941, deposit and remit federal employment taxes, issue W-2s, etc.; some exemptions (e.g., FUTA) may apply in narrow situations—confirm with IRS guidance and Publication 15 series.

Compliance guides and training: Use IRS Publication 557 and IRS TE/GE resources (Stay Exempt workshops, Publication 4221 series) as core references for accuracy. State compliance (overview & practical guidance) Charity/solicitation registration: Most states require charities that solicit residents to register with the state (usually an Attorney General’s Charities Bureau, Secretary of State, or a Registry of Charities).

Registration is often required before soliciting and usually requires annual renewal and financial reporting. Fees, thresholds (gross receipts or solicitation activity), and filing formats vary by state.

Sales & use tax: There is no universal automatic sales tax exemption for nonprofits. States differ: some allow partial or activity-based exemptions (e.g., donations sold in charity thrift stores, sales to relieve poverty), many require a seller’s permit and/or an exemption certificate and often require prior approval or submission of supporting documentation.

Certificates may expire and must be renewed periodically. Income/franchise/property tax: State income/franchise tax and property tax exemptions are separate processes — many states require a state-level exemption application or evidence of federal exemption; property tax “welfare” or charitable exemptions are administered through county assessors in many states and require distinct applications.

Annual/state reporting and corporate filings: Beyond charity registration, nonprofits that are incorporated must file state annual reports or statements of information (Secretary of State filings) and maintain good standing.

Failure to file can result in administrative dissolution or loss of ability to transact business. Nonprofit LLC rules: States vary on permitting nonprofit LLCs.

On the federal side, the IRS historically requires that a nonprofit LLC’s members be tax-exempt organizations (or governmental units) for the LLC to be treated as tax-exempt; state law may also impose special drafting/asset-distribution rules.

Where an LLC is owned by a tax-exempt nonprofit (single-member or wholly-owned), careful structuring (operational/ownership restrictions in organizational documents) and separate accounting are required to protect exempt status and manage UBIT risk.

Notable state-level notes & examples (items to include in state-specific sections) California: CA Attorney General (Registry of Charities) requires registration and annual financial disclosure for charities and professional fundraisers; the California Department of Tax and Fee Administration (CDTFA) explains that there is no general sales/use tax exemption for nonprofits — exemptions are limited and activity-specific; most nonprofits that make sales need a seller’s permit.

CDTFA provides a dedicated publication summarizing rules for nonprofit organizations (Pub 18). Washington: Secretary of State Charities Program requires registration and annual renewals; the office sends renewal reminder letters ~60 days before expiration and provides disclosure and reporting resources.

State-by-state: Many states require registration before solicitation and accept the organization’s federal Form 990 in lieu of some state reporting, but specifics and thresholds vary — direct links to state charity registries and state tax agencies are essential in the blog for readers to follow up. 4) Common pitfalls and best practices (practical guidance for LLC founders / business owners): Do not assume state recognition follows federal exemption: federal 501(c) status does not automatically create statewide sales/property/income tax exemptions — check each state’s process and apply separately where required.

Apply timely: To obtain retroactive federal exempt status to your formation date, apply within the IRS 27-month window or you risk losing retroactivity. Track activity vs. mission: Monitor revenue streams for unrelated business income (UBIT).

Keep separate books for unrelated activities, pay UBIT and file Form 990-T when required. Nonprofit LLC caution: If an LLC will seek 501(c)(3) recognition, ensure members/owners and organizational language satisfy IRS requirements (often all members must be tax-exempt organizations or governmental units); use restrictive operating/transfer provisions; consult counsel before forming.

Maintain an annual compliance calendar: IRS Form 990 due date (5½ months after year end for most organizations), state charity renewal dates, Secretary of State annual reports, sales/exemption certificate renewals, payroll deposit/return schedules.

Missing filings risks penalties and revocation. Good governance & records: Adopt required articles/bylaws language about exempt purposes and asset distribution on dissolution, document conflicts of interest, maintain minutes, fundraising receipts, and donor acknowledgments for substantiation and audits. 5) Recommended authoritative resources to cite in the blog / newsletter (primary sources used): IRS: Applying for Tax-Exempt Status — https://www.irs.gov/charities-non-profits/applying-for-tax-exempt-status IRS: Publication 557 — https://www.irs.gov/pub/irs-pdf/p557.pdf IRS: Annual reporting & filing (Forms 990-series) — https://www.irs.gov/charities-non-profits/annual-reporting-and-filing IRS: Federal tax obligations of nonprofit corporations — https://www.irs.gov/charities-non-profits/federal-tax-obligations-of-nonprofit-corporations CA Attorney General (Registry of Charities & Fundraisers) — https://oag.ca.gov/charities CA Department of Tax and Fee Administration, Nonprofit Organizations (Pub 18) — https://cdtfa.ca.gov/formspubs/pub18.pdf Washington Secretary of State, Charities Program — https://www.sos.wa.gov/corporations-charities/nonprofits-charities/charitable-organizations Council of Nonprofits: State filing requirements — https://www.councilofnonprofits.org/running-nonprofit/governance-leadership/state-filing-requirements-nonprofits Practical guidance on nonprofit LLCs (state variations and IRS constraints) — UpCounsel summary — https://www.upcounsel.com/non-profit-llc Sales-exemption practice note (states often require approval; certificates expire) — Taxually overview — https://www.taxually.com/blog/which-businesses-qualify-for-sales-tax-exemptions

Tax-exempt compliance support Federal (IRS) — core items to cover: Eligibility & application: Explain organizational and operational tests for common exempt categories (501(c)(3) charitable organizations and other 501(c) types).

Explain Form 1023 (and 1023-EZ eligibility), Form 1024/1024-A for non-501(c)(3) types, and that applications are filed electronically via Pay.gov. Emphasize the 27-month rule: to be exempt from the date of formation, apply within 27 months after the end of the month of formation.

Determination letters & EIN: Applicants must obtain EINs and pay user fees; IRS issues determination letters that are often required by states and funders. Annual federal reporting: Most tax-exempt organizations must file a Form 990-series return (Form 990, 990-EZ, or 990-N/“e-postcard”) each year based on gross receipts/assets thresholds.

Failure to file 3 consecutive years triggers automatic revocation. Public inspection/disclosure rules apply to exemption applications and annual returns.

Unrelated Business Income Tax (UBIT): Tax-exempt organizations remain taxable on income from regularly carried on trade/business activities not substantially related to their exempt purpose. The IRS has Publication 598 and other guidance on UBIT reporting and Form 990-T.

Payroll & employment taxes: Exempt status does not eliminate payroll tax responsibilities. Organizations with employees must follow Form 941, deposit and remit federal employment taxes, issue W-2s, etc.; some exemptions (e.g., FUTA) may apply in narrow situations—confirm with IRS guidance and Publication 15 series.

Compliance guides and training: Use IRS Publication 557 and IRS TE/GE resources (Stay Exempt workshops, Publication 4221 series) as core references for accuracy. Federal (IRS) — core items to cover: Eligibility & application: Explain organizational and operational tests for common exempt categories (501(c)(3) charitable organizations and other 501(c) types).

Explain Form 1023 (and 1023-EZ eligibility), Form 1024/1024-A for non-501(c)(3) types, and that applications are filed electronically via Pay.gov. Emphasize the 27-month rule: to be exempt from the date of formation, apply within 27 months after the end of the month of formation.

Determination letters & EIN: Applicants must obtain EINs and pay user fees; IRS issues determination letters that are often required by states and funders. Annual federal reporting: Most tax-exempt organizations must file a Form 990-series return (Form 990, 990-EZ, or 990-N/“e-postcard”) each year based on gross receipts/assets thresholds.

Failure to file 3 consecutive years triggers automatic revocation. Public inspection/disclosure rules apply to exemption applications and annual returns.

Unrelated Business Income Tax (UBIT): Tax-exempt organizations remain taxable on income from regularly carried on trade/business activities not substantially related to their exempt purpose. The IRS has Publication 598 and other guidance on UBIT reporting and Form 990-T.

Payroll & employment taxes: Exempt status does not eliminate payroll tax responsibilities. Organizations with employees must follow Form 941, deposit and remit federal employment taxes, issue W-2s, etc.; some exemptions (e.g., FUTA) may apply in narrow situations—confirm with IRS guidance and Publication 15 series.

Compliance guides and training: Use IRS Publication 557 and IRS TE/GE resources (Stay Exempt workshops, Publication 4221 series) as core references for accuracy. State compliance (overview & practical guidance) Charity/solicitation registration: Most states require charities that solicit residents to register with the state (usually an Attorney General’s Charities Bureau, Secretary of State, or a Registry of Charities).

Registration is often required before soliciting and usually requires annual renewal and financial reporting. Fees, thresholds (gross receipts or solicitation activity), and filing formats vary by state.

Sales & use tax: There is no universal automatic sales tax exemption for nonprofits. States differ: some allow partial or activity-based exemptions (e.g., donations sold in charity thrift stores, sales to relieve poverty), many require a seller’s permit and/or an exemption certificate and often require prior approval or submission of supporting documentation.

Certificates may expire and must be renewed periodically. Income/franchise/property tax: State income/franchise tax and property tax exemptions are separate processes — many states require a state-level exemption application or evidence of federal exemption; property tax “welfare” or charitable exemptions are administered through county assessors in many states and require distinct applications.

Annual/state reporting and corporate filings: Beyond charity registration, nonprofits that are incorporated must file state annual reports or statements of information (Secretary of State filings) and maintain good standing.

Failure to file can result in administrative dissolution or loss of ability to transact business. Nonprofit LLC rules: States vary on permitting nonprofit LLCs.

On the federal side, the IRS historically requires that a nonprofit LLC’s members be tax-exempt organizations (or governmental units) for the LLC to be treated as tax-exempt; state law may also impose special drafting/asset-distribution rules.

Where an LLC is owned by a tax-exempt nonprofit (single-member or wholly-owned), careful structuring (operational/ownership restrictions in organizational documents) and separate accounting are required to protect exempt status and manage UBIT risk.

Notable state-level notes & examples (items to include in state-specific sections) California: CA Attorney General (Registry of Charities) requires registration and annual financial disclosure for charities and professional fundraisers; the California Department of Tax and Fee Administration (CDTFA) explains that there is no general sales/use tax exemption for nonprofits — exemptions are limited and activity-specific; most nonprofits that make sales need a seller’s permit.

CDTFA provides a dedicated publication summarizing rules for nonprofit organizations (Pub 18). Washington: Secretary of State Charities Program requires registration and annual renewals; the office sends renewal reminder letters ~60 days before expiration and provides disclosure and reporting resources.

State-by-state: Many states require registration before solicitation and accept the organization’s federal Form 990 in lieu of some state reporting, but specifics and thresholds vary — direct links to state charity registries and state tax agencies are essential in the blog for readers to follow up. 4) Common pitfalls and best practices (practical guidance for LLC founders / business owners): Do not assume state recognition follows federal exemption: federal 501(c) status does not automatically create statewide sales/property/income tax exemptions — check each state’s process and apply separately where required.

Apply timely: To obtain retroactive federal exempt status to your formation date, apply within the IRS 27-month window or you risk losing retroactivity. Track activity vs. mission: Monitor revenue streams for unrelated business income (UBIT).

Keep separate books for unrelated activities, pay UBIT and file Form 990-T when required. Nonprofit LLC caution: If an LLC will seek 501(c)(3) recognition, ensure members/owners and organizational language satisfy IRS requirements (often all members must be tax-exempt organizations or governmental units); use restrictive operating/transfer provisions; consult counsel before forming.

Maintain an annual compliance calendar: IRS Form 990 due date (5½ months after year end for most organizations), state charity renewal dates, Secretary of State annual reports, sales/exemption certificate renewals, payroll deposit/return schedules.

Missing filings risks penalties and revocation. Good governance & records: Adopt required articles/bylaws language about exempt purposes and asset distribution on dissolution, document conflicts of interest, maintain minutes, fundraising receipts, and donor acknowledgments for substantiation and audits. 5) Recommended authoritative resources to cite in the blog / newsletter (primary sources used): IRS: Applying for Tax-Exempt Status — https://www.irs.gov/charities-non-profits/applying-for-tax-exempt-status IRS: Publication 557 — https://www.irs.gov/pub/irs-pdf/p557.pdf IRS: Annual reporting & filing (Forms 990-series) — https://www.irs.gov/charities-non-profits/annual-reporting-and-filing IRS: Federal tax obligations of nonprofit corporations — https://www.irs.gov/charities-non-profits/federal-tax-obligations-of-nonprofit-corporations CA Attorney General (Registry of Charities & Fundraisers) — https://oag.ca.gov/charities CA Department of Tax and Fee Administration, Nonprofit Organizations (Pub 18) — https://cdtfa.ca.gov/formspubs/pub18.pdf Washington Secretary of State, Charities Program — https://www.sos.wa.gov/corporations-charities/nonprofits-charities/charitable-organizations Council of Nonprofits: State filing requirements — https://www.councilofnonprofits.org/running-nonprofit/governance-leadership/state-filing-requirements-nonprofits Practical guidance on nonprofit LLCs (state variations and IRS constraints) — UpCounsel summary — https://www.upcounsel.com/non-profit-llc Sales-exemption practice note (states often require approval; certificates expire) — Taxually overview — https://www.taxually.com/blog/which-businesses-qualify-for-sales-tax-exemptions