What Is Form 1024: Applying for Tax-Exempt Status

Form 1024, Application for Recognition of Exemption Under Section 501(a), is the application submitted to the Internal Revenue Service (IRS) to request federal tax-exempt status. This form is for nonprofit organizations that do not fall under the charitable category of Section 501(c)(3), which use the separate Form 1023. Filing Form 1024 is the necessary step for certain non-charitable nonprofits to be formally recognized by the IRS and relieved of paying federal income tax. This federal recognition is a distinct process from incorporating as a nonprofit at the state level.

Organizations That File Form 1024

A range of nonprofit organizations uses Form 1024 to apply for tax exemption under various subsections of Internal Revenue Code Section 501(c). Common filers include:

• Local associations of employees organized for charitable, educational, or recreational purposes.
• Labor, agricultural, and horticultural organizations seeking to better the conditions of those in their fields under Section 501(c)(5).
• Business leagues, chambers of commerce, and real estate boards that aim to improve conditions for one or more lines of business under Section 501(c)(6).
• Social clubs, such as country or hobby clubs, organized for pleasure and recreation under Section 501(c)(7).
• Fraternal beneficiary societies that operate under a lodge system and provide benefits to members.

Information and Documents Needed to Apply

Before an organization can submit its application, it must first obtain an Employer Identification Number (EIN), even if it does not have employees. The EIN is a unique nine-digit number that the IRS uses to identify the business entity for tax purposes. This number is a prerequisite for the application.

The application package must include the organization’s set of organizing documents, such as articles of incorporation, a constitution, or articles of association. These documents must define the organization’s specific purpose and structure, and they must be signed and dated. You must also include the organization’s bylaws, which are the internal rules that govern its operations and management.

Applicants must provide a statement of revenue and expenses, as well as a balance sheet, for the current year and for any prior years of the organization’s existence. For new organizations with no financial history, a proposed budget for the next two years is required. This financial disclosure must be detailed, showing all sources of income and expenditures.

The application must also include a detailed narrative describing the organization’s activities. This section requires a thorough explanation of past, present, and planned future activities. The description should be specific, as the IRS uses this information to evaluate whether the organization’s operations align with the requirements for the specific tax-exempt status being sought. Vague or incomplete descriptions are a common reason for delays.

Applicants must complete and attach specific schedules that correspond to the type of organization. For example, a social club applying under Section 501(c)(7) would need to complete Schedule D, which asks for information about membership and income sources. A labor organization would complete Schedule C, providing details about its membership and collective bargaining activities.

The Application Submission Process

The user fee for filing Form 1024 is $600 and must be paid electronically at the time of submission. Failure to pay the correct user fee will result in the application being rejected.

The IRS mandates that Form 1024 be filed electronically through the Pay.gov website, as paper applications are not accepted. An authorized representative must create an account, complete the digital form, and upload all required documents as PDF attachments.

After submission, the organization will receive an electronic acknowledgment from the IRS. The review process generally takes three to six months but can be longer for complex applications. During this time, an agent may request additional information before the IRS issues a final determination letter that either grants or denies the request.