How Does A Nonprofit Organization Become A Tax-Exempt Organization In California?
Being a nonprofit organization is not the same as being a tax-exempt organization. The two concepts are related, but are not the same. Almost all tax-exempt organizations are nonprofits, but not all nonprofits are tax-exempt.
To be considered a tax-exempt nonprofit organization in California, a nonprofit organization must meet certain legal and regulatory requirements. If met, the Internal Revenue Service and Franchise Tax Board may grant recognition of tax-exempt status after the submission of proper applications and filing fees.
Most tax-exempt organizations under the federal law are those that are described in Internal Revenue Code 501(c)(1)-(27). Most charitable organizations (that is, organizations that operate primarily for charitable, educational, scientific, or religious purposes) must seek recognition of tax-exempt status from the IRS. Requirements vary depending on the type of tax-exemption sought, but most charities must start by submitting Form 1023: Application of Recognition of Exemption Under 501(c)(3) of the Internal Revenue Code to the Internal Revenue Service.
Typically, once recognition is granted from the IRS, a California nonprofit will submit Form 3500, Exemption Application or Form 3500A, Submission of Exemption Request to the Franchise Tax Board for its approval.
If you are interested in learning more about the process for gaining tax-exempt status in California, please contact Susan E. Bishop at (408) 369-0800