for starting a
Nonprofit, Tax-Exempt Corporation in Connecticut
with hyperlinks to the
necessary documents and filing instructions;
where there is no hyperlink there is no prescribed form -
consult a formbook or seek legal advice
NOTE: SOME FORMS HAVE BEEN COPIED BY ME AND
TURNED INTO FILLABLE FORMS; I RECOMMEND THAT YOU CHECK
THE OFFICIAL FORM ON THE APPLICABLE WEBSITE (DRS, IRS) TO MAKE SURE THE
FORM IS CURRENT
(LAST UPDATED 11/14/16; PLEASE NOTIFY ME if you find BAD LINKS
BEFORE YOU START -- SURE YOU WANT TO DO
THIS? Click for a list of factors you may wish to consider. REMEMBER that if you fail to file with the
IRS for 3 years in a row, you LOSE EXEMPTION and start over.
1. INCORPORATION DOCUMENTS; Action by Incorporators. Incorporators
adopt a certificate of incorporation and bylaws, appoint directors and
statutory agent for service. The incorporators may also appoint
officers to serve until the directors' meeting, although it is more
common to have the directors do this at their first meeting, or by
consent. NOTE: churches and other "houses of worship"
as religious corporations using different and fewer
Documents required for incorporators' meeting:
This should contain appropriate language to
permit qualification as tax exempt (be sure to read IRS Publication 557
BEFORE submitting -- not all purposes or activities qualify for
exemption), and is signed by (1) incorporators and (2) a
Connecticut resident as "statutory agent for service," accepting
appointment. You may file using the state
attachments, or skip the state form if your document includes the same
information as the state form requires. A Connecticut business address
is also required. Remember that this document trumps your bylaws. In other
states this may be known as the "articles" of incorporation. Click for a SAMPLE
"MANUSCRIPTED" DOCUMENT in MS word, with
hyperlinks to statutory sections. USE AT YOUR OWN RISK. YOU DO NOT NEED TO USE
THE STATE FORM AT ALL IF YOU USE A MANUSCRIPTED FORM CONTAINING AT
LEAST EVERYTHING IN THE STATE FORM. But, if you use the state
form, you MUST add at least the
appropriate language and will probably want to add other
things included in this sample. (Don't forget to include a
succinct, yet flexible description of your organization's purpose,
overriding goals, motives, etc. Example: to assist
individuals with mental illness and their families and friends, to
advocate for their interests, and to educate the public concerning
mental illness. In the form you'd put this sentence where I have put A,
B and C.) You should really use an attorney, but sometimes that
is not in the budget. (I am not your attorney just because you borrow
the meeting (signed by duly appointed secretary of the meeting) OR unanimous
written consent (signed by all incorporators) stating that bylaws
have been adopted, directors elected, and any other actions
taken. It is my view that incorporators may appoint initial officers
rather than leaving this to the directors. Minutes and consents
are kept with the corporation's records. Directors take action by
(preferably signed by incorporators). Make sure these are
consistent with the certificate! Click for a SAMPLE
MANUSCRIPTED DOCUMENT in MS word. USE AT YOUR OWN RISK. I am not
your lawyer just because you borrow this form. There is no state
or "official" form, and bylaws are kept with the corporation's
records. Bylaws are NOT filed with the secretary of state.
Certificate "trumps" bylaws; what isn't in your documents may be
determined by the Connecticut
Revised Nonstock Corporation Act; some things are required by the
Act even if you put something else in your documents (minimum
Action by Directors. Directors
meet and elect officers (if not already done), authorize application
for tax exemption and select counsel to assist, and any other pertinent
matters (e.g. authorize opening bank account).
Documents required for directors' meeting :
meeting (signed by secretary) OR unanimous written consent
(signed by all directors).
form: Organization and First Annual Report (signed by an
officer). Residential and business addresses required. No P.O.
Boxes are acceptable. The state form is required for this
Step 3. FILING WITH SECRETARY OF THE STATE.
Documents to be filed:
of Incorporation. (State form or your substitute so long
as it includes everything in the state form.) SEE ABOVE regarding the
and First Annual Report. (State form required.) This is
supposed to be filed within 60 days of the Certificate. If you don't
file it, you don't yet exist for tax purposes with the state and the
state will probably not hunt you down for your $250 entity tax if you
don't yet have 501c3 exemption.
EFFECTIVE 10/1/09: $100 filing fees (previously, $65) consisting
(certificate) + $30 (franchise tax) + $50 (annual report) ;
add $50 (was $25) for expedited
service; add $50 (was $25) for certified copy of certificate of
incorporation -- for a total of $200. Click for Complete Fee
NOTE: The expediting fee applies to EACH thing
you want expedited.
Example: You want to file expedited plus you want the certified
copy expedited. Add $100 ($50 each).
Timing: Can obtain confirmation within 48
hours of filing.
4. FilING with Public
Charities Unit of THE DEPARTMENT OF CONSUMER PROTECTION. Before any fund-raising, either file an Exemption
Certificate CPC-54 by mail or ONLINE (for
example, if anticipate fundraising gross revenues of under $50,000, if
a church, or another exemption applies), or a Registration
Initial Registration Form (or register online).
Filing for exemption is free; registration is $50. You can postpone this if not fundraising.
REMEMBER, until the IRS has recognized the organization as exempt, it
should not tell donor that donations are tax-deductible. However, if IRS does
grant recognition on an application that is timely filed (within 27
months of incorporation), deductions WILL BE deductible retroactive to
the date the organization was incorporated.
5. OBTAIN tax ID number FROM
IRS (often needed to open a bank account; needed to
complete exemption application):
If applying by
mail or fax, or if you are an attorney or accountant filing for an
organization you need this in your files: IRS Form SS-4
(application for employer identification number); may be applied for
the instructions. Must be signed by officer,
preferably president, and must include social security number of filer.
Since December, 2001, the form permits a third party to be named to
whom the number, once assigned, may be given if the SS-4 is submitted
by fax/internet. However, this doesn't work if you use the same
address for the organization and the "third party"; also, technically
the IRS will require that the organization have executed IRS Form 2848
(Power of Attorney) naming the
"third party" as power of attorney. See below.
applying online: NO FORM REQUIRED -- use the IRS interview
format. CLICK HERE.
The EIN is "provisional," and the IRS may fax with follow-up questions.
(If you are an attorney or accountant getting the EIN for a client
remember to have an executed SS-4 and 2848 in your files first.)
can call directly and get a number over the phone. A third party cannot
Step 6. APPLY TO IRS FOR
RECOGNITION OF EXEMPTION.
IF THE ORGANIZATION EXPECTS TO HAVE LESS THAN $50,000 INCOME IN EACH OF
THE NEXT 3 YEARS (AND HAS NOT HAD $50,000/YEAR INCOME IN ANY OF THE
PAST 3), HAS ASSETS UNDER $250,000, AND IS NOT A CHURCH, SCHOOL,
HOSPITAL OR CERTAIN OTHER SPECIFIED ORGANIZATIONS, IT IS ALL EXTREMELY SIMPLE AND YOU CAN DO
- THE SIMPLIFIED 1023 EZ PROCEDURE:
(1) read the instructions here. (2)
complete the eligibility checklist on page 11. (3) register for an account
on pay.gov. (4) IRS says: Enter
"1023-EZ" in the search box, AND (5) when the form comes up, fill it
out (you can practice / review ahead of time by looking at a PDF of the
form here), (6)
Submit, paying $400 to pay.gov. Done. Your letter should
- If you can't do the EZ: File
full-fledged IRS Form 1023 Application (signed by President
or other authorized officer). Documents to prepare and file
include 1023, 2848 (if represented by attorney or accountant) and 5768
(if making lobbying election). See below for details/fees.
- Read the instructions first but also the cover sheet -- the rules have
changed but the form did not, so the cover sheet trumps the form.
ALSO: you should
read Rev. Proc 2013-9 which trumps Schedule
E when it comes to organizations formed more than 27 months before
- Consider using the IRS "interactive"
Form 1023. You can't submit it online, but you can fill it out.
- Some tips on filling it
- There is a checklist.
Fill it out! Do what it says!
- Be detailed!
- Answer "NO" to the
question about political activity!
- Remember that "you" means
- Remember that "will you"
means "does the organization plan to" or "is it reasonably foreseeable
that the organization will do it in the not-too-distant future," NOT
"could it ever happen?"
- For help understanding
the "public support" requirements, read "Remember
- FYI: the IRS has a
list of sample
follow-up questions for certain types of activities.
SURE YOU HAVE CHECKED the list on "Office
of Foreign Assets Control" to make sure your organization
includes no "specially designated nationals" or "blocked persons" who
may be viewed as those who are or aid terrorists and make sure that any
grant, etc. procedures address this issue.
represented by a third party, generally an accountant or attorney, file
Form 2848. It can
be a good idea to fax this ahead. If you are in the northeast fax to
855-214-7519. If not check the 2848
instructions. P.S.: IRS says fax numbers can change
without notice; For updates, go to https://www.irs.gov/uac/about-form-2848
and search under “Recent Developments.”
- If organization is making an
election under section 501(h) to have its lobbying measured by a
specific set of numerical guidelines, file IRS Form 5768.
Fee: $850 for Form 1023, $400 for
1023EZ ($400 for Form 1023 if expect income to be $10,000 or less
annually) Send a
bank check or certified check to speed up handling. CHECK
TO MAKE SURE YOU SEND TO THE
CORRECT ADDRESS -- the form itself has the wrong address.
Timing: usually must be filed within 27
months of incorporation in order for tax exemption to apply
retroactively to incorporation date. (Exceptions apply for very small
organizations and in limited circumstances - see instructions.)
However, obtaining a determination with the standard Form 1023
submission used to take 3-6 months or more, although the IRS typically
would acknowledge receipt and promise to respond in 100 days. At
that point, the IRS may send a request for further information
requiring response within a short period of time. If reply is not
received, IRS may inactivate request. Application may be
reactivated if requested within 90 days. You can contact
the IRS by phone, but be prepared for a long wait.
NOTE: EVEN IF YOU DON"T HEAR FROM THE IRS, you still have to
comply with the annual filings required for a recognized
charitable organization. See
the IRS page "while
REGISTER WITH CT DEPARTMENT OF REVENUE SERVICES.
REG-1, application for tax registration number. (You may be
able to register on-line -- but you will have to send the IRS
letter separately so the old way may be just as good.) Phone
number and social security numbers of 3 officers required. Must attach
IRS letter (or explain that it is pending, and then follow up later
with the IRS letter.) Read
unless likely to engage in sales.
Timing issues: none. However:
if you incorporate and then wait a while to file for exemption, this
may become step 6 rather than step 7.
ct SALES tax exemption is automatically available for payments made by
organization's check or credit card: use Form CERT-119 and attach the IRS exemption letter. For
other exemptions, see the DRS page.
STEP 9. TOWN HALL: CT PROPERTY
TAX EXEMPTION is important if the organization owns real
estate or any significant TANGIBLE PERSONAL PROPERTY including office
equipment, computers, etc. The organization must file Form M-3 or more
recent version of M-3 or something similar (check with LOCAL assessor to make sure this
form is appropriate and current -- towns can use different forms)
November 1st of the year it owns property in the town where it would
otherwise be subject to tax and then quadrennially (computed with 1965
as the first year: 2009 was the most recent quadrennial filing,
then 2013, and so on.) In many towns, the property will not
be exempt until the tax year following
STEP 10. KEEP IN GOOD STANDING AND
RETAIN EXEMPTION. See the accompanying COMPLIANCE LIST. In
particular: the IRS will monitor filings of Form 990 / 990-EZ to see
whether you continue to qualify as a "public charity." This is
determined using a rolling average of your sources of support over five
years, the current year and four prior years, as reported on the
990. This gets confusing, so read "Remember Your Fractions." If
you "fail" the test, the 501(c)(3) exemption is unaffected, but status
as a private foundation may cause additional filing requirements and
the imposition of an excise tax on net investment income, plus a fine
of up to $20 / day for failure to file the informational return
required of private foundations, Form 990-PF. Therefore, it is very important to follow
up. If not required to file 990 or 990-EZ you must file the 990N -- failure to
file for three years = loss of exemption.
Need help? If you are
unable to afford an attorney (fees usually run $2,000 to $5,000+,
perhaps less if you are doing the 1023EZ yourself and just need help
incorporating) you may be able to obtain help from an accountant
volunteer with Community
Accounting Aid & Services, Inc. (sponsored by the CT Society of
Certified Public Accountants). If you are an
organization with a large budget and a big problem but no money for
legal fees, contact the Pro
Bono Partnership. Good luck!
THIS INFORMATION IS NOT PROVIDED AS LEGAL
ADVICE AND CREATES NO ATTORNEY-CLIENT RELATIONSHIP.
PLEASE CONSULT YOUR OWN LEGAL AND FINANCIAL ADVISORS.