Once we have received the completed client questionnaire detailing your plans for the proposed organization, it can take three to four weeks to prepare a completed draft that is ready to file with the IRS. Rush services are available but will add to the flat fee quote.
Yes. Clients are also responsible for the fee to file and publish the articles of incorporation in their state, ranging from $50 to $400, and for the IRS filing fee, which is currently $600. If your organization qualifies to file the Streamlined Application for Recognition of Exemption under 501(c)(3) (formerly, Form 1023-EZ), the filing fee is instead $275. Occasionally, we will charge for other expenses such as mailing and package delivery fees. We do not routinely charge for copies, phone calls or other routine administrative expenses for flat fee engagements. These are all included in the flat rate for the start-up package.
We will review the information you provided and confer with you, either in person, over the telephone, or online, to clarify any additional questions you or we may have about your plans. We will then prepare articles of incorporation, bylaws, organizational meeting minutes, governance policies, as well as the required IRS forms. Once drafts have been prepared, they will be sent to you for review and approval prior to filing with the IRS.
Once the application is filed, the IRS typically takes approximately three weeks to acknowledge receipt. The IRS then screens the applications. Those that the IRS determines do not raise issues of fact or law are processed in as little as few weeks up to a few months. However, if the IRS has any issues or concerns, it assigns the application to a reviewer. Once the case has been assigned to a reviewer, obtaining a final result can take an additional several weeks to several months. Once assigned, the reviewer will typically contact us with follow-up questions within a few weeks. The questions are usually clarifications or confirmation of information that has been provided. However, there are some cases that require multiple responses to resolve all of the IRS reviewer’s concerns.
It is possible to expedite the review process if a grant is pending and will be lost unless the new charity sends the funder a favorable IRS determination letter by a certain date. Be prepared to substantiate a request for an expedited review with a letter from the grantor. Letters from members of Congress in support of an Application for Exemption can also be helpful.
If the organization files its Form 1023, Application for Recognition of Exemption, within 27 months of the date the entity is legally formed, and is ultimately successful in obtaining tax-exempt status, the IRS’s determination of exemption will be retroactive to the entity’s date of formation.
Newly formed organizations may need to register to solicit funds (or apply for an exemption) depending on where they are soliciting. Once the organization is registered, until the IRS determination letter is issued, new entities should explain to potential donors that an application for tax-exempt status is pending. Donors who claim a charitable contribution deduction for their gifts before then take the risk of an adverse IRS decision.
Organizations whose status is pending can either defer acceptance of the grant if the grant maker is willing, or find a fiscal sponsor. A fiscal sponsor is a recognized charitable organization that is willing to offer legal and fiscal sponsorship of the project until the organization receives its tax-exempt status. For more information see our blog post on Fiscal Sponsorship v. Fiscal Agency.
If we believe there is a risk that the application will not be approved, we will counsel you as to the risks at the beginning of the representation. To date, we have not had an application denied. This is due, at least in part, to the fact that we do not take a case if we do not believe it will qualify for tax-exempt status.
For those with more time than money on their hands, we recommend self-preparing the application and are happy to recommend resources to assist self-preparers. We are happy to review your application on an hourly basis during which we will review the application and attachments, make comments, and provide suggested language where appropriate.