"For some time now, I have wanted to create a nonprofit organization to benefit homeless children in my city.
I have found several people willing to contribute their time to this effort, and have set up an association using legal forms I found on the Web.
Unfortunately, I have hit a snag with the IRS. I filled out and filed Form 1023 requesting tax-exempt 501(c)(3) status for my organization, but they keep asking me for more information. They also want me to rewrite my association documents. I am beginning to think they just don't like the idea and are trying to throw up roadblocks until I get tired and walk away.
How can I break the logjam with the IRS and get this organization up and running? I can't ask for donations from anyone until I can show them I have tax-exempt status."
It's harder than ever before to get tax-exempt status from the IRS. You are asking the government for the right not to pay taxes, and (perhaps) also for the right to accept donations that people can deduct on their taxes. Given the government's current precarious financial state, it should come as no surprise they are not issuing "get out of taxes free cards" lightly.
To get tax-exempt status for your organization, you need more than just a good heart and a worthy mission. You have to have a business plan (yes, a business plan) that is sound, professionally written, and that demonstrates to the IRS that your mission is more than "just a dream". Your plan must also persuade the IRS that your organization is more likely than not to achieve its goals (the same as a for-profit company that is seeking funds from investors).
Here are the steps you should have performed before you contacted the IRS.
--Put together your board. Your association members no doubt share your vision. But that's not enough. You need to create an "executive committee" of people that will make the organization happen. At the very least, you will need:
--a good lawyer who is willing to contribute his time (ask your local bar association or SCORE chapter for a list of local lawyers who have assisted other charitable organizations "pro bono", or who have indicated a willingness to do so);
--a good accountant who can help you with the IRS paperwork (ask your state CPA association for referrals) -- the application forms are extremely complicated, and if you fill out even one box incompletely, your application will be automatically "bounced";
--someone who knows how to apply for government grants and has demonstrated an ability to raise funds from federal, state and local agencies dedicated to helping the homeless; and
--someone who knows how to raise funds from wealthy individuals and other potential donors.
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