Law & Tax
Frequently Asked Questions about Law & Tax
Yes, it's called Tech Soup. The site is designed to assist nonprofits with their technology needs.
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. Both are available on the I.R.S. website.
The Form 1023-EZ can only be filed if the nonprofit anticipates less than $50,000 in gross receipts in any of the next three years. An eligibility worksheet can help you determine if you are eligible to file the 1023-EZ. The Form 1023-EZ can only be filled electronically but a form can be printed out for review. Instructions are available. The filing fee is $275. You should receive a decision within a few months.
If you must file the full Form 1023, it can be downloaded from the I.R.S. website. Instructions for this form are also available. An interactive Form 1023 helps ensure that you have the necessary documentation. The filing fee is $400 for nonprofits for which gross receipts have not or will not exceed $10,000 per year for four years. The fee is $850 for nonprofits with annual gross receipts that exceed or will exceed $10,000 per year over a four-year period. Form 1023 can be filed only on paper. It might take six months to hear back on final exemption.
In Iowa, exemption from state income tax is automatic once federal exemption is received.
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 Guidestar website.
Nonprofit corporations in Iowa are created under Iowa Code 504, the Revised Model Nonprofit Corporation Act ("RMNCA") which became effective in Iowa on January 1, 2005 for new corporations. Nonprofit corporations are created by filing articles of incorporation signed by the incorporators with the Iowa Secretary of State at Business Services Division, Lucas Building, First Floor, Des Moines, Iowa 50319. The articles of incorporation should be accompanied by a filing fee of $20 with checks made payable to "Secretary of State." The required provisions of the articles of incorporation are the corporate name, a registered office and registered agent, incorporators, members, and dissolution. To get tax exemption under 501(c)(3) there must also be in the articles of incorporation a purpose statement, limitations on political activity, and a prohibition on private inurement.
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.
A nonprofit corporation is a legal entity that can engage in nonprofit activities in Iowa. In many ways it can function like a for-profit corporation. For instance it can purchase land, hire employees, have a bank account, borrow money, and have board meetings. But unlike for-profit corporations a nonprofit corporation cannot operate for profit and distribute earnings to investors as a for-profit does. Nonprofit corporations in Iowa are described in a statute in Iowa Code 504. The Iowa Secretary of State's office governs the creation and regulation of nonprofit corporations in Iowa. Management of liability through incorporation is one of the easier risk management techniques available to nonprofits. This incorporation is only one of a number of processes available to protect board members from liability described in Iowa Code 504, others being immunity, indemnification, and insurance.