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Nonprofit Formation:
Since 1981, the Community Resource Center (CRC) has assisted a large number of grassroots organizations in incorporating their organizations in Colorado and in pursuing a 501(c)(3) (tax exempt status) from the Internal Revenue Service (IRS). While staff members of CRC are not lawyers, we have compiled practical information that enables those organizations that are incorporating in Colorado and applying for 501(c)(3) status to minimize mistakes and unnecessary delays.
The information in this article is not the beginning of the process. Before any organization is ready to incorporate and seek 501(c)(3) status, it must first bring together people in the community who are interested in its mission, develop a mission, and determine who will serve on its initial board of directors. Only then is the organization prepared to follow the steps described below.
This is an easy process that shouldn’t intimidate anyone. CRC has sample Articles of Incorporation that will meet the test required by the IRS and the relatively new requirements of the Colorado Secretary of State’s office. You can adapt these sample articles to your organization.
The Colorado Secretary of State has introduced a new online filing process that is simple and easy to use. The cost is $50, which can be paid online with a credit card. You can start by going to the Secretary of State’s web site – www.sos.state.co.us. Click on Business Center, then on “File a Business Document,” and then on “File articles of incorporation for a nonprofit corporation.” This will take you to a screen that will walk you through the process, beginning with a search to see if the name you have chosen is available.
Toward the bottom of this online form, you will see the question “Do you wish to attach other statutorily required or optional information?” Check “yes,” and when you have completed the form, you will be allowed to add attachments. At that point, attach the Articles of Incorporation that CRC has provided and that you have adapted to your organization. It is important that you add this attachment, because the Secretary of State’s form does not meet IRS standards. Since you are required to submit your Articles of Incorporation when you apply to the IRS, you will want to have Articles that the IRS will approve.
There are other options for filing your Articles of Incorporation. You also take them to the Secretary of State’s Office or mail them to: Colorado Secretary of State, 1560 Broadway, 2nd Floor, Denver, CO 80202. The cost for incorporating using this method is $125, so you will also need a check in that amount. You can no longer expedite paper filings, so it might take several weeks to get confirmation. The online filing option makes these other options far less attractive.
You can call the IRS and have forms sent to you, but it could take forever (if you receive them at all). The forms are available on-line at: www.irs.gov and then click on “Forms & Publications” underneath the “Search Forms and Publications” box on the left-hand side of the home page. CRC can also provide them for you at our office.
You will need the following forms:
- Form SS-4, the form you will need to file for your federal Employer Identification Number (EIN).
- Form 1023, the form for applying for 501(c)(3) status. This package should also include Form 1023 Guidelines, a packet of instructions that you will use selectively.
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You will need an EIN before you can submit your 501(c)(3) application. There are several ways that you can apply for your EIN:
- You can file online by filling out Form SS-4 at the IRS web site and submitting it electronically. The IRS will email your EIN to you within a matter of seconds. You will need Adobe reader software, which you can download for free. To find the online filing form, simply type in Online Form SS-4 in the top search box on the IRS home page (“Search IRS Site for”).
- You can also fill out Form SS-4 and then call the IRS toll-free number at 800-829-1040 and complete the process and get your EIN on the phone. Or you can fax the form to the IRS office in Philadelphia at 215-516-3990 along with a letter asking to receive an EIN within five days at your fax number. If after five days, you have not received your EIN, you can call the Philadelphia IRS office at 866-816-2065. One caution: the organizational name you use for the EIN must be identical to the one you used on your incorporation papers with the state.
Form 1023 is your application to the IRS. Fill out the application before you read Form 1023 Guidelines; then refer to the guidelines for those questions that you find confusing. Reading the guidelines prior to filling out Form 1023 tends to create doubt and confusion about the application. If possible, obtain an approved 501(c)(3) application from another nonprofit organization. The approved application will give you an idea of the information you must include to complete Form 1023 and the best way to answer the form’s questions. Since the current form has been in use for a relatively short period of time, you may find it difficult to find a nonprofit that has gone through the full process using this form.
The completed application must be accompanied by your approved Articles of Incorporation from the State of Colorado and the bylaws of your corporation. Bylaws are the rules and regulations governing the internal affairs of an organization. They include the method of electing board members and officers, the duties and number of board members, how decisions are made, and how financial records will be maintained. You can get sample bylaws from most established nonprofit organizations or from CRC’s web site. If your bylaws are not completed, you can check the box on page two (Part II, # 5) of Form 1023 that indicates you have not yet adopted bylaws. You will still need to disclose how your organization selects board members and you might be asked to submit your completed bylaws at a later date.
Attach your check for $500 (This is the cost as of May 1, 2005, but it may increase in the future.) to the top form of the application. Upon receipt of the application, the IRS will mail you a letter outlining their process. After 30 to 40 days, you will receive a letter from the IRS asking for additional information or giving your application final approval. It is rare to get final approval in this 30 to 40 day period.
If additional information is requested, respond as soon as possible. You are generally given 20 days to respond. If you do not respond within 20 days, your application can be denied. If you are not able to obtain answers to the questions within the 20-day period, call the IRS at the number given on the letter to work out arrangements. If any of the questions are unclear, you can also call this number for clarification from the IRS officer assigned to process your application.
Once the additional information is provided and the IRS is satisfied, you will receive a letter granting your organization its 501(c)(3) status.
Complications may arise in the process if your organization has been incorporated in the State of Colorado for a period of time during which substantial amounts of money have been raised and expended. If this situation exists, you will be required to include in your 501(c)(3) application a financial history of the organization including up-to-date income and expense statements. You may want to consult an accountant for assistance.
Once your organization has received its 501(c)(3) status from the IRS, you might also want to apply for sales and property tax exemption from the State of Colorado and the county and/or city where your organization is located. Contact the Colorado Department of Revenue in Denver as well as your local revenue department.
Most applications can be completed by staff persons or board members of the applicant organization without the assistance of attorneys or accountants. For a small fee, CRC will guide you through this process, assist you with the forms, and review your applications before they are filed. CRC can also complete your application entirely for a larger fee. For assistance, call CRC at (303) 623-1540 or (800) 516-6284 and ask for Gabriel Guillaume.
CRC also offers a three hour workshop, Nonprofit Start-up Toolkit, on a regular basis. Call CRC to register or get more information, or check out the CRC web site at www.crcamerica.org
655 Broadway, Suite 300, Denver, CO 80203-3426
303.623.1540 
800.516.6284
f: 303.623.1567
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