Wondering how to register a nonprofit in Massachusetts? The process is similar to registering any other type of organization or corporation. You must file the required paperwork, obtain a tax exemption from the IRS, and follow all other required steps with the state.

Establishing a Nonprofit Entity

The first step in setting up a nonprofit organization is determining the business structure. Options include corporation and association. From there, those starting the entity will need to draft articles of organization or articles of association and discuss the terms with all involved parties. The nonprofit may also need bylaws. After you have finalized your articles and bylaws, the next step is filing them with the Massachusetts secretary of state's office. When you have filed the required documentation, you can go through the process to obtain a tax identification number from the IRS.

If your organization meets the requirements for tax exemption, fill out Form 1023 and submit it to the IRS. This step will register your nonprofit as a 501(c)(3) tax-exempt association or organization. For entities that will raise more than $5,000 in fundraising efforts, Massachusetts has a requirement to register with the attorney general's office. In addition to registering as a tax-exempt organization with the IRS, you will need to register on the state level by filing Form TA-1 with the state department of revenue.

The next step is registering for exemption from state sales tax. This is done by filing Form ST-2. If an organization already holds the status of exemption from state tax, the renewal occurs automatically as long as it is in good standing with Massachusetts. This renewal is good for 10 years, and a letter confirming it will be sent to the address on file for the organization. If you need another copy of the letter, contact the state department of revenue.

Maintaining a Nonprofit Entity

After you have registered your nonprofit organization, you will also need to take steps to maintain its status. For any year the organization has gross receipts totaling more than $25,000, Form 990 or 990 EZ must be filed with the IRS. These forms should also include Schedules A and/or B. Massachusetts also requires the nonprofit organization to file Form PC with the attorney general's office each year. This annual report should be included with a copy of Form 990 that is filed with the IRS.

Additionally, the organization will need to obtain its annual solicitation certificate, which is available from the Division of Public Charities in the attorney general's office.

On a federal level, requirements include:

  • Filing unrelated business taxable income (UBTI) tax documents and/or monitoring the provisions around UBTI
  • Providing receipts to any individuals or entities that donated to the organization, per the regulations set forth by the IRS

State-level requirements include:

  • Monitoring the organization's status as a tax-exempt purchaser and ensuring Form ST-5 is current and available to send to vendors
  • Obtaining a permit and paying any required lottery taxes for raffles, gaming events, and other similar events, as required. The taxes must be paid to the state lottery commission.

Depending on which city the nonprofit operates in, certain requirements may apply as well:

  • Applying for any necessary food-handling permits
  • Complying with all city-mandated reporting requirements (only applies if the organization contributes to a committee for ballot questions)

Elimination of the Advance Ruling Process for New Organizations

The Treasury and IRS issued new regulations in 2008, eliminating the process for advanced ruling around 501(c)(3) organizations that had been created recently. Under the regulation, this type of organization is classified as a publicly supported charity, not a private foundation, as long as it can show reasonable expectations for receiving public support upon applying for tax exemption. Under the previous regulations, any organization seeking recognition from the IRS as a charity that receives public support had to complete a complicated process with multiple steps.

After an organization has completed the first five tax years, it will not need to file Form 8734 anymore. Additionally, regardless of how much public support was received during that five-year period, the organization will retain its status as a publicly supported charity. In the sixth tax year, the organization will need to start showing proof that it meets the test for public support on Form 990, which is the Return of Organization Exempt from Income Tax.

If you need help understanding how to register a nonprofit in Massachusetts, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.