What
about the federal tax exemption?
Next,
you should decide if you wish to apply for federal tax-exempt
status. Not all nonprofits are tax exempt. Only certain kinds of
charities, schools, religious organizations, hospitals, research
institutes, and others fall into this category.
Registering/incorporating
as a nonprofit with the appropriate state agencies does not
guarantee that the IRS will confer tax-exempt status on your
organization.
In
particular, either the Certificate of Incorporation or the
bylaws:
|
1.
Must contain a proper dissolution clause.
|
|
2.
Must specify the organizational purposes (in
compliance with Section 501(c)(3) of the Internal Revenue
Code). |
If
your charity qualifies for Federal tax exemption, you generally
are exempt from Connecticut Sales and Use Tax.
What
about the IRS forms?
In
order to file for federal tax exemption, first review
IRS
Publication 557 (How to Apply for Recognition of Exemption for
an Organization). Obtain IRS
forms and publications from the IRS
website or by calling 1-800-829-FORM (3676). Forms may also be obtained at the IRS offices in
Bridgeport, Danbury, Hartford, New Haven, Norwalk, Norwich and
Waterbury. Note that these offices are for walk-ins only; no local
mail or phone service is provided at these locations.
To
apply, you must complete and submit
Form 1023
within 15
months of organizing; be sure to attach certified copies
of your Certificate of Incorporation and your corporate
bylaws (the Secretary of the State charges an additional $25 to provide the required certified copies of the Certificate
of Incorporation; your organization’s secretary certifies
the bylaws). The bylaws must be signed by a corporate officer or
by a person possessing power of attorney for the corporation,
attesting under penalty of perjury to the validity of the document.
Additionally,
you will be required to:
|
1.
File two copies of Form 872-C. |
|
2. File Form 8718 and a user fee of $500 (or $150 if you expect
that your organization’s gross receipts will average not
more than $10,000 during its first two years). |
|
3.
Obtain Form SS-4, since all applicants must
list a Federal Employer Identification Number (FEIN); the
form contains instructions for acquiring a FEIN by
telephone or by mail. |
In
2-4 months, you will receive correspondence at your corporate
address (1) confirming your tax-exempt status (a determination
letter with instructions for annual filings), (2) denying such
status, or (3) requesting further information before a ruling is
made. If you have any questions, call the IRS Customer Account Services at
(877) 829-5500 and ask for the Exempt Organizations Customer Service Unit.
Does
federal exemption automatically guarantee state and local
exemptions?
Although
organizations that are exempt from federal tax generally will be
exempt from state tax, exemption is not automatic. To apply for:
|
1.
State corporate business tax exemption - Submit
a copy of your IRS determination letter along with
a completed Application for Tax Registration Number
(REG-1) to:
|
Taxpayer
Services Division |
|
Department
of Revenue Services |
|
25
Sigourney Street |
|
Hartford,
CT 06106
|
|
1-800-382-9463 |
|
|
2.
State sales tax exemption - Call the
Taxpayer Services Division of the Department of Revenue
Services (at the above number) for instructions. Exemption
from sales tax is available for qualifying purchases made
by the organization. Even if an organization is exempt
from federal tax and state sales tax, it still must
collect sales tax on anything it sells and remit it to the
state. Contact the Connecticut Department of Revenue
Services (at the above address or phone number) to obtain 1995
Legislative Changes Affecting Exempt Purchases by Exempt
Organizations (SN95-10) and Certificate -119 (Cert-119). All
Connecticut tax-exempt organizations must use Cert-119 for
purchases as of January 1,1996. |
|
3.
Property tax exemption - Check with the
Assessor’s Office in the city or town in which you
incorporate; even though your organization may be exempt
from federal and state taxes, it may still be subject to
property taxes. |
What
about lobbying?
Organizations
may only do a limited amount of lobbying, and in no event should
they attempt to influence the outcome of any election.
Any public charity may attempt to influence legislation so
long as "no substantial part of the activities" of the
organization are for these purposes. Charities may also elect to
come under the "expenditure" test where lobbying
expenditures are limited to a percentage of total exempt purpose
expenditures.
What
about solicitation?
If
you intend to do any fundraising or other solicitation (direct or
indirect) of money, credit, property, financial assistance or
other things of value, then you must register as a
charitable organization prior to any fundraising. Contact:
| Department
of Consumer Protection Public Charities Unit |
| c/o
Office of the Attorney General |
| PO Box 120 |
| Hartford,
CT 06141-0120 |
| Tel:
860-808-5030 |
| Web:
www.state.ct.us/dcp/ |
For
fundraising or other solicitation, two authorized officers of the
corporation must sign the form and certify that the statements are
true. There is a $20 registration fee. Organizations must file
annual financial reports, with a $25 filing fee. Organizations
with annual gross receipts in excess of $200,000 also must file an
independent public accountant's audit.
Some
organizations may be exempt by law from the registration and
financial disclosure requirements of the
Solicitation of
Charitable Funds Act, for example, an organization receiving
less than $50,000 in contributions annually that does not compensate any person primarily to conduct solicitations. Those organizations are required, however, to claim their exemption
on a form available from the Department of Consumer Protection.
Contact the Public Charities Unit (above) for additional
information.
Paid
fundraising counsel or solicitors acting on behalf of charitable
organizations must also register with the Department of Consumer
Protection.
How
is your status maintained?
Nonprofit
and tax-exempt organizations must:
|
1.
File IRS Form 990 within 4½
months after the end of your fiscal year, with the
Internal Revenue Service, Ogden, UT 84201-0027.
|
|
2.
File an annual report with the Connecticut
Secretary of the State on or before the last business day
of the month in which the Certificate of Incorporation
was originally filed.
|
|
3.
File an annual report with the Public Charities
Unit (above) within 5 months after the end of your fiscal
year, if you are registered for fundraising. |
|
