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APPLICATION FOR TAX-EXEMPT STATUS
Discussion
In order to qualify as a VA-affiliated nonprofit organization, NPCs must apply for tax-exempt status under section 501(c)(3) if the IRS Code. In
an application for tax-exempt status, an organization informs the IRS about its intended activities in detail sufficient to persuade the IRS that the revenues derived from those activities should be exempt from taxation. It also selects the preferred 501(c)(3) sub-classification.
If audited, the IRS will compare the application with the nonprofit’s actual activities to evaluate whether the nonprofit is fulfilling its tax-exempt purpose. As a result, the application should be carefully worded to accurately reflect what the NPC will do. If the organization conducts activities that are inconsistent with its IRS-approved tax-exempt purpose, the NPC runs the risk of having its tax-exempt status revoked. The application is a public document (see
BPP section on Openness) and should be stored with other permanent records in a secure location.
To apply for tax-exempt status, go to the IRS web site at http://www.irs.gov and download
Package 1023, Application for Recognition of Exemption. This contains instructions and forms. It is also useful to obtain
Publication 557, Tax-Exempt Status for Your Organization. This will help identify the correct sub-classification within 501(c)(3) tax-exempt status. NAVREF recommends selecting 9c on page 6 of the application. This provides that the NPC is a “medical research organization operated in conjunction with a hospital” and qualifies it for tax exempt status under sub-classifications 509(a)(1) and 170(b)(1)(A)(iii). This is an accurate representation of the NPC’s purpose and NPCs are generally able to meet the support tests relevant to this sub-classification.
A nonprofit must submit an application for tax-exempt status within 15 months of being incorporated. A VA-affiliated nonprofit must actually obtain tax-exempt status within four years of incorporation. A nonprofit may begin
operating as a nonprofit, and accepting grants and donations, as soon as it submits its application for tax-exempt status to the IRS.
Helpful sites
Internal Revenue Service
http://www.irs.gov/
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