What is the Life Cycle of an Exempt Organization?

Non-Profit OrganizationsOrganizations that meet the requirements of Internal Revenue Code section 501(a) are exempt from federal income taxation. In addition, charitable contributions made to some section 501(a) organizations by individuals and corporations are deductible under Code section 170.

Here are the five stages in an organization’s life cycle:

  • Starting Out: Creating an organization under state law, acquiring an employer identification number, and identifying the appropriate federal tax classification.
  • Applying for Exemption:  Acquiring, completing, and submitting application forms; how the IRS processes applications; and getting help from the IRS during the application process.
  • Required Filings:  Annual exempt organization returns, unrelated business income tax filings, and other returns and reports that an organization may have to file.
  • Ongoing Compliance:  How an organization can avoid jeopardizing its tax-exempt status, disclosure requirements, employment taxes, and other ongoing compliance issues.
  • Significant Events:  Audits, private letter rulings, and termination procedures.

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