How to file for 501(c)3 non-profit status
You file for non-profit status so that income to your humane organization (donations, adoption fees) do not have to be declared (and taxed!) as income. Donors get a tax exemption when they make donations to your group - so they will donate more generously. In Massachusetts, the Mass Dept of Agriculture currently REQUIRES that you hold non-profit status and register your entity with them, or they will regard you as a commercial PET SHOP, which must be licensed - or stop your humane activities.
In broad outline, the steps are these:
1) Find an accountant who will file your IRS form 1023 for a price you can afford. I know someone in the Boston area who's done several of these, and he charges between $225 and $300, which is probably a discounted rate. You may be able to get this service for free (perhaps you have an accountant on your board), but it will save you in the long run if they have experience doing this and know where the pitfalls are.
2) form a non-profit corporation to do business (and fundraise) in your state
3) file for federal (IRS) recognition of your non-profit status - you'll want an accountant for this.
4) let the state know that you have federal recognition, so that you will be exempt from state sales taxes as well.
Timeline: If you do your part expeditiously, it takes 2-3 months of total waiting time for the government (state and federal) wheels to turn.
Costs: It costs approximately $600: $350 in filing fees, and $250 for a friendly and sympathetic accountant.
Future Maintenance: Once you've got your 501(c)3 status, you'll need to file a short annual tax form (the 990EZ) with the IRS and the state, as well as filing a roster of your officers (called your Annual Report) with the MA Division of Public Charities.
There's an excellent workbook to get you started - by Anthony Mancuso.
Written for non-lawyers, "How to Form a Non-Profit Corporation". He walks you through the decisions (not many), supplies boilerplate Bylaws needed for the federal application. He also discusses when it makes sense to go through this process - and when it doesn't.
In more detail (specific to Massachusetts):
1) you come up with a unique name for your group - and there's an online database for you to ensure that it's a unique name (if there's another humane organization with the same name in the state, your corporate filing will be rejected. If there's a non-animal related business with the same name that wouldn't be confused with your org, you might get away with it. )
2) File your Articles of Organization with the state. This notifies the state of your intention to start a non-profit corporation, the charitable and fund-raising activities that you intend to pursue, and the people who will be responsible. There's an online version of the Articles of Organization to fill out, and a $35 filing fee.
Once you do this, you will be able to get a business checking account in your business name (however you won't be considered non-profit until you get federal approval (step 5). The state (MA) has a website for non-profit corporations, out of the Secretary of State's office. Many of the forms for changing your name, officers, purposes, are located here. Don't sweat these forms and decisions too much (but read Mancuso) - it's not necessary to bare your soul to the bureaucracy, and most choices you're making can be changed later with the appropriate form and filing fee!
2a) Once your state corporate filing is done and accepted (a few weeks), you'll file an online request for a "certified copy". You'll need this stamped official copy to send in with your federal filing. It will come in the mail in a week or so, and there's a small fee.
3) In the meantime, you can get your Employer ID number (EIN). Fill out the online form (you'll need your officer's addresses), and the system will generate a number. That will be your "non-profit number" when you complete this process. Be sure to PRINT THE FORM before the final step - or you won't have a copy.
3a) Go over the boilerplate By-Laws, adding your corporate name, and check that the provisions are adequate (for now). Print out a copy.
3b) open a business checking account. Any donations made to your corporation while your federal application is pending will be tax deductible retroactively, as long as they were made within a year of approval. Once your non-profit status is approved federally, you may want to change to a bank that offers free accounts to non-profits.
4) Bring your
By-Laws,
certified copy of your Articles, and
your EIN
your checkbook (to pay the $300 filing fee) and
a bank statement showing your corporate bank balance (you are disclosing this to the IRS)
to your chosen accountant. He will file the IRS Form 1023 (all 28 pages) for federal recognition of your non-profit status. The filing fee is $300 if you think you'll take in less than $10,000 per year. The accountant will also charge for his/her services (or perhaps you'll get a good deal, or perhaps you'll enlist an accountant for your board!).
Accountants are more experienced dealing with the IRS, and the financial side - I think it's preferable to use an accountant versus a lawyer. Especially one who's done it before.
5) Best case, you'll wait 30-45 days for IRS approval, if your accountant knows what s/he's doing and there aren't any flags raised, otherwise you'll go back and forth with questions/clarifications, but then you'll get approval - called your Determination Letter. This is what you show people who want you to verify your non-profit status.
6) Register your now-federally-recognized corporation with the MA Dept of Revenue, for exemption from state sales tax.
7) Register your organization with Mass Dept of Agriculture if you intend to adopt animals to the public.
You're done!
