Filing IRS Form 1024 for Tax-Exempt Status
Understand the distinct requirements and procedural steps for organizations using Form 1024 to apply for tax-exempt status with the IRS.
IRS Form 1024, Application for Recognition of Exemption, is the document filed by specific types of organizations to request tax-exempt status from the Internal Revenue Service. The form provides the IRS with comprehensive information to determine if an organization’s purpose and activities align with exemption requirements under the Internal Revenue Code. A successful application allows an organization to operate without paying federal income tax on its receipts and can provide other benefits, such as exemption from certain state taxes.
Organizations That File Form 1024
A specific subset of nonprofit organizations uses Form 1024 to seek tax-exempt status. These include labor, agricultural, and horticultural organizations under IRC Section 501(c)(5), which are dedicated to bettering conditions for members in their respective fields.
Other filers include business leagues, chambers of commerce, and real estate boards under IRC Section 501(c)(6), which aim to improve business conditions. Social and recreation clubs under IRC Section 501(c)(7) also use this form to show their activities are for members’ pleasure and recreation. Charitable, religious, and educational organizations seeking exemption under Section 501(c)(3) do not file Form 1024; they must file Form 1023.
Additional groups use Form 1024, including fraternal beneficiary societies under 501(c)(8) and domestic fraternal societies under 501(c)(10). Each classification has distinct requirements regarding its purpose, membership, and income that must be detailed in the application.
Information and Documents Needed to File
Before beginning the application, an organization must obtain an Employer Identification Number (EIN). An EIN is a unique nine-digit number the IRS uses to identify business entities, and it is a prerequisite for filing Form 1024. Organizations can apply for an EIN online through the IRS website.
The application package must include the organization’s governing documents. This means a conformed copy of its articles of incorporation, constitution, or trust instrument. A conformed copy is one that matches the original document and all amendments, accompanied by a signed declaration of its accuracy. The organization must also submit a copy of its bylaws.
The application requires a detailed narrative describing the organization’s past, present, and future activities. This description must demonstrate that the organization’s purposes align with the tax-exempt category it is applying for. The narrative should explain all programs, services, and fundraising activities.
Financial data is another requirement. Organizations must provide statements of revenue and expenses for the most recent three years, or for their period of existence if shorter. The application also requires a proposed budget for the next two years, detailing anticipated income and expenditures. This information helps the IRS understand the organization’s financial structure.
The Application Submission Process
A mandatory user fee must be paid for the IRS to process the application. The current user fee is $600, is subject to change, and must be paid electronically through the government’s portal, Pay.gov.
The entire Form 1024 application package must also be submitted electronically. The process involves creating an account on Pay.gov, locating Form 1024, and completing the digital form. All supporting documents must be combined into a single PDF file that does not exceed 15 megabytes and uploaded as part of the submission.
After Filing Your Application
After submission, the application enters the IRS review process and is assigned to an Exempt Organizations specialist for a detailed examination. The agent reviews all provided information to determine if the organization meets the legal requirements for the requested tax-exempt status.
During the review, the IRS agent may request additional information or clarification regarding the organization’s activities, finances, or governing structure. Responding to these inquiries promptly is important to avoid processing delays.
The timeframe for a final decision can take several months, depending on the case’s complexity and the IRS’s workload. The process concludes with the issuance of a determination letter, which states whether the IRS has granted or denied the request. If approved, the letter will specify the Internal Revenue Code section for the classification and the effective date of its exemption.