Under Iowa law, your exemption from state-level income tax is automatic once federal exemption has been obtained. However, there are Iowa taxes beyond income tax which you need to consider as your organization engages in different kinds of transactions. These include sales, use, and property taxes. The Iowa Principles and Practices for Charitable Nonprofit Excellence states, "The charitable nonprofit entity should make application for other state and local tax exempt status, such as property and sales tax (see Iowa Code 427.1(8), Iowa Code 422.45)." (II,D, 4) Take property tax for example. An additional filing is required in order for nonprofits to be exempt. The circumstances under which the nonprofit can gain exemption from property tax are limited. A nonprofit that owns the property from which it runs its business can apply for exemption from property tax. A nonprofit renting real estate is not entitled to any exemption on behalf of the landlord. Nonprofits which generate revenue from the real estate have more difficulty getting property tax exemption and should consider partial property tax exemption if the revenue generating portion of the real estate (such as a museum’s gift shop) can be distinguished from the rest of the facility. The application for property tax exemption is available online. A valuable resource for Iowa nonprofits is Iowa Tax Issues for Nonprofit Entities on the Iowa Department of Revenue's Web site.

Board member status does not preclude one from claiming a charitable deduction for contributions to the organization on whose board an individual serves. Likewise, volunteers and employees are also entitled to charitable deductions for contributions to the organizations they serve. The same rules dictating what qualifies as a “charitable organization” and what qualifies as a “contribution” apply whether or not an individual serves an organization. The regulations about substantiation also apply so that any gift over $250 must be acknowledged in writing by the organization. To avoid any possible perception of self-dealing, an officer or board member besides the donor should sign gift acknowledgements.

No, the general rule is that nonprofits are not exempt from sales tax. Nonprofits that are exempt from federal income tax under 501(c)(3) are automatically exempt from parallel state income tax but not automatically exempt from other state level taxes such as sales, use, and property taxes. See the document Are Iowa nonprofits exempt from sales tax?

Yes there are stricter limitations on gifts to private foundations. Gifts to public charities by individuals have an annual limit of fifty percent of the donor's adjusted gross income. Gifts to private foundations however place that limit at thirty percent of the donor's adjusted gross income. The figures are somewhat different for corporate donors who can deduct ten percent of their taxable income. If the contribution is capital gain property rather than cash, the limitation is then thirty percent for public charities and twenty percent for foundations. The Iowa Principles and Practices for Charitable Nonprofit Excellence states that "Charitable nonprofits must be aware of and comply with Internal Revenue Code provisions (see e.g. I.R.C. section 170)" (VIII E 2). This is to make sure inaccurate information about gifts is not passed on to donors. A good source for these rules is IRS Publication 526 Charitable Contributions

Volunteers may be able to claim a deduction for such expenses only if all of the following are true: the expense was unreimbursed; the expense was directly connected to the services provided to the organization; the expenses are only of the type that the volunteers had because of their service to the organization; the expenses are not personal family or living expenses. However volunteers are not able to claim deductions for the value of their time (i.e. the income they did not earn as a result of the time they spent volunteering). Volunteers may be able to deduct pro bono consulting, provided that they have a bill for the time contributed performing work for which, as professionals, they would normally charge a fee.

Rev. Rul. 55-319 1955-1C.B. 119 holds that a wholly-owned state instrumentality may, under certain circumstances, qualify for exemption from Federal income tax under section 501(c)(3) of the Code. This position is amplified by Rev. Rul. 60-384 1960-2 C.B. 172 which holds that a wholly-owned state or municipal instrumentality that is a separate entity and a counterpart of an organization described in section 501(c)(3) of the Code may qualify for exemption under that section. However Rev. Rul. 60-384 further holds that an instrumentality would not be a clear counterpart of section 501(c)(3) organization if it is clothed with powers beyond those of an organization described in section 501(c)(3). Examples of such powers set forth in the Rev. Rul. are enforcement or regulatory powers exercised in the public interest such as health, welfare, or safety.

Application can be made to the U.S. internal Revenue Service for federal income tax exempt status using either IRS Form 1023 or Form 1023-EZ.

See Instructions for Form 1023.Applications for recognition of exemption on Form 1023 must be submitted online at www.pay.gov, which requires you to register for an account. (The IRS no longer accepts paper applications.)  For an overview of the Form 1023 electronic filing, see About Form 1023, Application for Recognition of Exemption. The required user fee for Form 1023 is $600. The fee must be paid when submitting the form and can be made directly from a bank account or by a credit or debit card. 

The IRS also has the Form 1023-EZ, a shorter version of the Form 1023. To see if your nonprofit is eligible to use the 1023-EZ, See Instructions for Form 1023-EZ. This document contains the Eligibility Worksheet. Also see About Form 1023EZ, Streamlined Application for Recognition of Exemption. The cost to file this form is $275 (gross annual receipts less than $50,000). 

Form 1023 requires a four-year projected budget. It can be helpful to review the Form 990s of similar organizations. For guidance on developing a budget it can be helpful to review the Form 990s of similar organizations. For example, if you are creating a nonprofit animal shelter, look at an Iowa animal shelter's 990 filings. Form 990s can be found on the Candid (formerly GuideStar) website.

The tax code has a number of related terms about government entities and government-related entities. Being a "government unit" is different from being a "governmental instrumentality." Tax proceedings often look to state law to determine if an entity meets a definition of "government entity." Iowa law has an overall definition of governmental entity as any unit of government in the executive, legislative, or judicial branch of government; an agency or political subdivision; any unit of another state government, including its political subdivisions; any unit of the United States government; or any association or other organization whose membership consists primarily of one or more of any of the foregoing.

The IRS will send you a determination letter. IRS Revenue Procedure 2009-4 states that a determination letter is "a written statement issued to a taxpayer by the Service’s EO Determinations or EP Determinations office that applies the principles and precedents previously announced to a specific set of facts." This means the IRS reviewed the facts on the nonprofit's Form 1023 Application for Exemption in light of the law and determined that it can be a 501(c)(3) exempt entity. You will use your organization's  determination letter for many purposes. For instance when approaching a funding agency that would potentially give your organization a grant, you will need the determination letter to establish your organization's 501(c)(3) status. Many funders will not even review a grant application if there is no determination letter accompanying it.

An IRS letter ruling is generally used to get a determination that an organization is exempt under IRC 115. When organizing as a nonprofit corporation an organization seeking exemption under IRC 115 should have dissolution provisions in the articles of incorporation that refer to IR15. See this information on governmental entities from the IRS.

The general rule is that there is no required tax return in Iowa similar to the Form 990. One of the few exceptions is for Iowa hospitals which must file their federal Form 990 with the Iowa Department of Public Health and the Legislative Services Agency (Iowa Code 135.165). Another exception is for charitable trusts which must file their Form 990s with the Iowa Attorney General's office (Iowa Code 633A.5107). If nonprofits have taxable unrelated business income then they must file a Form 1120 with the Iowa Department of Revenue in addition to the federal Form 990-T.

Yes. All nonprofits with 501(c)(3) status, except for churches, must now file some version of a Form 990. The Iowa Principles and Practices for Charitable Nonprofit Excellence states that nonprofits must file the reports required by taxing authorities including, "Annual informational report to US Internal Revenue Service. A 501(c)(3) organization with public charity status must annually file a Form 990 report if its annual gross revenue is $50,000 or more. Churches are not required to file the Form 990 even if the church’s revenue is above that amount. 501(c)(3) entities that are private foundations file Form 990PF. Nonprofits with less than $50,000 gross receipts must file Form 990-N." (II. E. 2) Nonprofits required to file the Form 990 which fail to file it face a penalty of $20 per day up to five percent of the nonprofit’s gross receipts or $10,000, whichever is smaller (IRS §6652(c)).

Iowa Code section 28E.4 provides that:
Any public agency of this state may enter into an agreement with one or more public or private agencies for joint or cooperative action pursuant to the provisions of this chapter, including the creation of a separate entity to carry out the purpose of the agreement. Appropriate action by ordinance, resolution, or otherwise pursuant to law of the governing bodies shall be necessary before any such agreement may enter into force. For details, see this document of the same name.

A separate acknowledgement may be provided for each single contribution of $250 or more, or one acknowledgement, such as an annual summary, may be used to substantiate several single contributions of $250 or more. There are no IRS forms for the acknowledgement. Letters, postcards, or computer-generated forms are acceptable. An organization can provide either a paper copy of the acknowledgment to the donor, or the organization can provide the acknowledgement electronically, such as an e-mail addressed to the donor. It is the donor's responsibility to obtain a written acknowledgement from the recipient organization. Written statements should contain the following information: 1. the name of the recipient organization; 2. the amount of cash contributed by the donor; 3. a description (but not the value) of non-cash contributions; and 4. a. either a statement that no goods or services were provided by the organization in return for the contribution, or b. a description and good faith estimate of the value of goods or services that an organization provided in return for the contribution (see information on quid pro quo contributions below). Note: additional information is required if the goods or services donated were provided in return for entirely intangible religious benefits. When a donor makes a single contribution of $250 or more by payroll deduction, the donor may use both of the following documents as written acknowledgement obtained from the recipient organization: 1. A pay stub, Form W-2, Wage and Tax Statement, or other document furnished by the employer that sets forth the amount withheld by the employer and paid to a charitable organization, and 2. a pledge card that includes a statement to the effect that the organization does not provide goods or services in exchange for contributions to the organization by payroll deduction.

If a landlord rents to a nonprofit organization at no cost or at a rate less than fair market value, the landlord is not entitled to a charitable deduction for rents that could have been received.

No. When one buys a raffle ticket one is buying the chance to win the item up for raffle. Since the fair market value of the chance to win the item up for raffle is equal to the price of the ticket, the transaction is merely a purchase; therefore the purchaser has not made a donation.

The general rule is that unless a tax treaty applies, your donations are only tax deductible if you make your donations to a charitable organization that is created or organized under United States law. There are more complex rules if the gift is made through a private foundation.

A donor should not attach the written acknowledgement from the recipient organization to the donor's individual income tax return. Instead the donor must keep the written acknowledgement to substantiate the contribution.

Tax law provides that it can be a state or local government unit. Income earned by a state, a political subdivision of a state, or an integral part of a state or political subdivision of a state is generally not taxable in the absence of specific statutory authorization for taxing such income. Rev. Rul. 87-2, 1987-2 IRB 4, 1987-1 C.B. 18. The IRS guidelines quoted above, Rev. Proc. 95-48, refer to government affiliate status for a “wholly owned instrumentality of a state or a political subdivision thereof, for employment tax purposes.”

In order to be considered tax exempt under IRC 501(c)(3) your organization's purpose must be one of the following: religious, charitable, scientific, testing for public safety, literary, educational, amateur sports, prevention of cruelty to children, prevention of cruelty to animals, or conservation and environmental activities. If your organization is going to be an Iowa Nonprofit Corporation, the purpose must also be lawful according to Iowa Code 504.301.

Tax exemption under IRS code §501(c)(3) has two primary benefits: 1) the donor making a donation to the nonprofit gets a tax deduction, and 2) there is no income tax on related earned income. This is true for purposes of federal income tax and Iowa income tax. Other benefits include the ability to issue tax-exempt bonds for capital projects, qualification for tax-exempt retirement plans (403(b)), and special postal rates.

Section 3 of Revenue Procedure 95-48 is clear that government affiliates do not need to file the annual information return Form 990. However an entity having unrelated business income must still file Form 990-T to report that taxable income even though it does not file Form 990. A more complete answer on filing requirements can be found here.

The most important recent statement on government affiliates is IRS Revenue Procedure 95-48 which lists factors used in determining if an entity can be an exempt government affiliate. For more information see Internal Revenue Service Revenue Procedure.

Every US and foreign charity that qualifies under Internal Revenue Service Code section 501(c)(3) as tax-exempt is a private foundation unless it demonstrates to the IRS that it falls into the public charity category. According to The Foundation Center, a private foundation is a nongovernmental, nonprofit organization having a principal fund managed by its own trustees or director.  Generally, a private foundation is a fund of private wealth established for charitable purposes. The principle function of most private foundations is to make grants to other nonprofit organizations, qualified individuals, and government entities. On the Form 1023 application for exemption Part X, you  work through factors to determine if the nonprofit can get public charity status. Generally, tax treatment for a private foundation is less favorable than for a public charity.

There are a number of ways that a 501(c)(3) moves from private foundation to public charity status. If the nonprofit is a church, school, or hospital, or tests for public safety, it will be a public charity.  The nonprofit can also get its funding or support primarily from the general public, receiving grants from individuals, government, and private foundations. If one third of the organization's support comes from these public sources, it passes the "public support test". There are a variety of such support tests. For more information about them, see page 32, Qualifying as Publicly Supported in IRS Publication 557 - Tax Exempt Status for Your Organization. On the Form 1023 application for exemption Part X, you work through factors to determine if the nonprofit can get public charity status. After receiving exemption, Form 990 filers will then use Schedule A to calculate that fiscal year's public support.

A donor may only take a contribution deduction to the extent that the donor's contribution exceeds the fair market value of the goods or services the donor receives in return for the contribution. This means that recipient organizations must provide written disclosure statements to donors who make a payment exceeding $75 when that payment is partly for contribution and partly for goods and services provided by the recipient organization. This type of contribution by a donor in exchange for goods or services is known as a quid pro quo contribution.

An Employer Identification Number, or EIN, is needed whether your nonprofit has employees or not. It is also referred to as a TIN, or Taxpayer ID Number. When a bank account is opened for a nonprofit, the bank uses the EIN as an identifying number for the account. The EIN is also required to obtain tax exempt status, as stated on the first page of Form 1023. If a nonprofit organization has employees, the EIN is used on such required filings as IRS Form 941 Employers Quarterly Return. There is no filing fee for the EIN application. You may apply for it online. To apply, see Apply for an Employer Identification Number (EIN) Online.

Form 1023 is used to file for recognition as a tax-exempt charity with the IRS. A shorter version of the form, the 1023-EZ, may be used if the nonprofit anticipates less than $50,000 in gross receipts in any of the next three years. The forms must be submitted online as the IRS no longer accepts paper applications. 

For the Form 1023, see:

• About Form 1023, Application for Recognition of Exemption
• Instructions for Form 1023

For the Form 1023-EZ, see:

• About Form 1023-EZ, Streamlined Application for Recognition of Exemption
• Instructions for Form 1023-EZ (includes eligibility worksheet)