Navigating the complex and ever-changing legal landscape of non-profit organization is daunting for even the most seasoned executives. And, for those based in Chicago, it can especially feel like a labyrinth that presents numerous hurdles in the way of securing 501(c)(3) status.

Whether you are leading an organization yourself, or a team member leading the filing process, obtaining 501(c)(3) status is a critical component of achieving success. In this comprehensive overview, business leaders based in Chicago will gain an intricate understanding of the application process and gain insight into what is necessary to be able to claim the coveted designation.

What is a 501(c)(3) Status?

501(c)(3) status is granted by the Internal Revenue Service (IRS) in the United States and specifies that an organization is classified as a charity or non-profit. It indicates that the organization is exempt from federal income tax—an immensely attractive distinction that gives those presenting themselves as an organization or cause in search of philanthropic donations or funding even greater credibility.

This allows organizations to present themselves as a business with a social conscience for maximum appeal, and by becoming a 501(c)(3) the organization ensures that it meets the necessary criteria to be categorized as such. It also allows corporations that donate to such causes to be in receipt of certain tax deductions.

Status Requirements

The requirements to attain 501(c)(3) status vary depending on the type of non-profit organization, but there are certain main criteria that must be met as a prerequisite.

Firstly, all non-profit organizations must be run “exclusively for purposes that the law recognizes as charitable” and they must not function to enrich any individual. Any assets of the entity must also be held and used “exclusively for charitable, religious, educational, scientific, or literary purposes” as verified by the IRS.

Application Process

In order for a non-profit organization to move ahead with filing for 501(c)(3) status, it is essential for the organization to first be registered as a corporation. A corporation can be registered with the state in the case of Illinois, the Secretary of State is responsible for overseeing this.

Houston attorney Gregory Norton explains how to file for 501(c)(3) status.

“The IRS must be notified by filing an application for recognition of exemption form 1023,” Norton says. “This must be done before the organization can receive tax-deductible donations or apply for grants.

“The IRS form 1023 application packet includes instructions from the IRS, incentives for having the organization granted exempt status, and financial statements which demonstrate the charitable and non-profit nature of the applicant organization.

“In the United States, there are also additional state-level requirements that must be met before an organization can proceed with filing the 1023 form with the IRS — for example in Illinois, a Form 1120, State of Illinois Corporation Income and Replacement Tax Return, must be completed and filed by a certain deadline.

Consulting and Support

For non-profits based in the US, securing 501(c)(3) status can be a complex responsibility. With various filing requirements to adhere to, time-sensitive task deadlines, and re-filing obligations that have to be met in the event of changes to the business or organization, having the right external support can be invaluable.

Accessing the right information and expertise is imperative in guiding an organization along what can otherwise be a long and laborious journey. With experienced legal professionals on hand to offer non-profits with the necessary resources and advice, achieving the status is attainable.

UpCounsel is the ideal platform for executive-level non-profit business leaders in Chicago who are navigating the complexities of the 501(c)(3) application process. With a network of experienced attorneys who have provided invaluable guidance to businesses and organizations of all sizes, UpCounsel offers a reliable and cost-effective service for those seeking high-quality legal advice.

From experienced attorneys, to client reviews of recent work, UpCounsel is a comprehensive resource for those looking to establish the legitimacy that comes with 501(c)(3) status.


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