501(c)(3) Application Checklist

The Sequence That Most New Organizations Get Wrong

The 501(c)(3) application process has a mandatory sequence. You cannot file with the IRS before you incorporate with your state. You cannot operate as a tax-exempt organization before the IRS grants your determination letter. Getting the sequence wrong creates problems that are time-consuming to fix — and some errors (like missing required language in your articles of incorporation) require amending state documents before the IRS will accept your application.

This checklist walks through the sequence in the correct order. Do not skip ahead.

Phase 1: State Incorporation (Must Complete Before IRS Filing)

The 501(c)(3) determination is a federal tax exemption. Before you can apply for it, your organization must exist as a legal entity under state law. For most nonprofits, that means incorporating as a nonprofit corporation in the state where you’ll primarily operate.

Pre-Incorporation Decisions

• State of incorporation selected. Incorporate in the state where you’ll primarily operate. There are rarely tax advantages to incorporating in Delaware or other states for nonprofits — and operating in a state where you’re not incorporated creates additional registration requirements.
• Organization name reserved. Check your state’s business name database. Most states allow you to reserve a name for a fee before filing.
• Registered agent identified. Every incorporated entity must have a registered agent in the state of incorporation — a person or service that accepts legal documents on behalf of the organization. This must be a physical address (not a PO box).

Articles of Incorporation

The articles of incorporation are the founding document filed with the state. The IRS reviews them carefully. These errors disqualify applications:

Required IRS language — the two provisions you must include:

1. Exempt Purpose Clause: The articles must limit your organization’s purposes to one or more of the exempt purposes in IRC 501(c)(3): charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, or preventing cruelty to children or animals.

Required language (exact wording or equivalent): “This corporation is organized exclusively for charitable [and/or educational, religious, scientific] purposes within the meaning of Section 501(c)(3) of the Internal Revenue Code.”

2. Dissolution Clause: The articles must specify that upon dissolution, the organization’s assets will be distributed to another 501(c)(3) organization or to a governmental unit. Assets cannot go to members, founders, or directors.

Required language (exact wording or equivalent): “Upon the dissolution of this corporation, its assets remaining after payment of, or provision for payment of, all debts and liabilities of the corporation shall be distributed to a nonprofit fund, foundation, or corporation which is organized and operated exclusively for charitable [and/or educational, religious, scientific] purposes and which has established its tax-exempt status under Section 501(c)(3) of the Internal Revenue Code.”

Many state nonprofit corporation acts have model articles that include this language automatically. Check whether your state’s model includes it before assuming it does.

Checklist:

• Exempt purpose clause included in articles
• Dissolution clause included in articles
• No provision allowing private inurement (profits flowing to insiders)
• Articles filed with state and filing fee paid
• State-issued certificate of incorporation received

Initial Organizational Documents

• Bylaws drafted and adopted. Bylaws govern how the organization operates. They must address: purpose, membership (or lack thereof), board composition and powers, officer positions, meeting requirements, quorum, voting rules, and amendment procedures. The IRS does not require bylaws to be filed with the application, but will request them if the application is questioned.
• Conflict of Interest Policy adopted. The IRS expects 501(c)(3) organizations to have a conflict of interest policy. Form 1023 asks specifically whether you have one. While not legally required, not having one is a red flag. The IRS provides a sample policy in the Form 1023 instructions.
• Initial board meeting held. The first board meeting (often called the organizational meeting) formally adopts the bylaws, elects officers, adopts the conflict of interest policy, and establishes bank accounts. Document it with written minutes.
• Employer Identification Number (EIN) obtained. Apply online at IRS.gov. Takes minutes. Required before filing Form 1023 or opening a bank account.

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