Establishing & Maintaining a Non-Profit/501(c)(3) Entity

Establishing a Non-Profit Entity:

• Determine entity’s structure – Association vs. Corporation
• Draft, discuss & vote Articles of Organization or Articles of Association and By-Laws
• File Articles and By-laws with MA Secretary of State
• Obtain Tax Identification number from IRS
• Register as 501(c)(3) Tax Exempt Organization by filing Form 1023
• Register with Attorney General’s office if your PTO will do more than $5,000 in fundraising
• Register as tax-exempt entity with MA Dept of Revenue (DOR) (Form TA-1)
• Register for exemption from MA state sales taxes on Form ST-2. (Renewal of tax-exempt purchaser status now occurs automatically as long as the organization is in good standing with MA. The organization will be sent a letter which affirms the renewal for 10 years. Monitor whether you receive your renewal letter and call Mass DOR for a duplicate if needed.)

Maintaining a Non-Profit Entity:

Each Year:

• File form 990 or 990 EZ, including Schedules A and/or B, with the IRS if your gross receipts are over $25,000
• File Annual Report Form PC with the Massachusetts Attorney General’s office (requires copy of Form 990, above)
• Obtain annual Solicitation Certificate from the Attorney General’s office, Division of Public Charities

Ongoing:

• Federal:
  • Monitor UBTI provisions or file UBTI tax
  • Provide receipts to Donors per IRS regulations
• State:
  • Monitor status as a “tax-exempt purchaser” and make sure you have a current Form ST-5 to provide to vendors.
  • Apply for permit and pay Lottery tax (with MA Lottery Commission) for certain gaming events, raffles, etc. as needed
• City:
  • Apply for food permits as required
  • Comply with reporting requirements if contributing money to a ballot question committee

Elimination of the Advance Ruling Process for New Organizations:

In 2008, the IRS and Treasury issued regulations that eliminated the advance ruling process for newly created section 501(c)(3) organizations. Under these regulations, a new 501(c)(3) organization will be classified as a publicly supported charity, and not a private foundation, if it can show that it reasonably can be expected to be publicly supported when it applies for tax-exempt status.

Under the prior regulations, an organization that wanted to be recognized by the IRS as a publicly supported charity instead of a private foundation had to go through an extended two-step process.

An organization no longer needs to file Form 8734 after completing its first five tax years. Moreover, the organization retains its public charity status for its first five years regardless of the public support actually received during that time. Instead, beginning with the organization’s sixth taxable year, it must establish that it meets the public support test by showing that it is publicly supported on its Form 990, Return of Organization Exempt From Income Tax.

Transition rules apply to organizations that have previously received advance rulings.

Corporation vs. Association: Choosing a structure for your entity