Background: State Tax Exemptions for Nonprofits
It is a common misconception to believe that simply by creating a nonprofit corporation or by obtaining
501(c) tax-exempt status, the nonprofit is automatically exempt from state corporate income and franchise
tax. This is not necessarily the case. Gaining tax-exempt recognition from the state sometimes requires
submitting documentation or a separate application to the Department of Revenue.
How it Works
Our nonprofit state tax exempt service begins with a consultation.
- The first step is for us to understand in which states your nonprofit operates. This footprint will tell
us in which states you have an opportunity to gain nonprofit state tax exemption.
- Next, we will review the taxation of each state. The tax code may permit exemption for nonprofits from
corporate income tax, franchise tax, or other taxes. We offer a separate service for nonprofit sales and use tax exemption, but can file all
state tax exemptions together if you prefer. This approach often saves time and fees.
- Next, we need to scrutinize the application process of each state. We will determine if we are dependent
on IRS 501(c) recognition prior to filing for state tax exemption. The complexities of when to
file and the best method to file vary by state, and it is opportune to file as early as possible
and in the method that avoids government processing delays and mistakes. You do not need to have IRS
501(c) recognition prior to hiring our service. We take care of navigating this process.
Following your consultation, we will have an agreed upon strategy for obtaining state tax exemptions. Our
attention turns to preparing the necessary documentation to obtain tax exemption in each state. You will
have the opportunity to review each application before it is filed with the government. We file each
application and follow-up with the appropriate state agencies to ensure timely approval and exemption
recognition. You will receive documentation of approval, including any new or re-issued state tax
identification numbers, for your records.