Seeking Start Up Legal Assistance from MCR

MCR provides limited assistance to nonprofits applying for new tax-exempt status or reinstatement of lost tax-exempt status on a case by case basis through its pro bono legal assistance program.

An organization qualifies for assistance if the organization serves or benefits a low-income community and does not have access to or cannot afford legal counsel. However, we consider a number of factors such as the community and population the organization serves, whether the organization can afford an attorney on its own, the capacity of an organization to work with an attorney, and the type of legal work involved. We cannot guarantee that we will be able to find an attorney to help, but we will strive to find a volunteer if your organization qualifies.

The IRS has created a simplified version of its application for tax exempt status called Form 1023-EZ. This application is much shorter than the Form 1023. Organizations with gross receipts of less than $50,000 annually may be able to use the form 1023-EZ.  If your organization meets this requirement, we suggest that you review the form yourself here. Additional information and resources can be found at the links below.

IRS Guidelines and Resources for Starting a Nonprofit

Should you and your incorporating board be interested in nonprofit start up assistance, we will need the following information from you. We will not evaluate your application for placement unless these materials are provided to us:

  • Evidence that the organization will be serving a low-income population/ community (such as statistics of target area)
  • Articles of incorporation and By-laws
  • List of person serving or willing to serve as Board members and evidence that they’ve  met at least once (such as board meeting minutes with signatures)
  • A business plan or narrative that includes the organization’s mission, goals, timelines  for achieving the goals, description of programs and services, market analysis, and plans to hire staff and/or recruit volunteers (Refer to sample business plan and required narrative description from Part IV of the 1023 application)
  • 3-year budget and financial projections outline, including detailed expenses and revenues. (See required financials from Part IX of the 1023 application)
  • Detailed fundraising plan identifying specific committed and potential sources of funding
Next steps: Send the completed application to MCR. Upon receipt of a complete application, we will schedule an intake call to begin the referral process

 

Understanding Nonprofit Status and Incorporation

Starting a new, independent nonprofit is like starting a business. When an organization decides it is best to form a nonprofit to meets its goals, a lot of hard work and planning must be done before its can begin its work.

The first step in launching a new organization (and potential nonprofit) is not applying for federal, tax exempt status as a 501(c )(3) organization. The first step is organizing a group of people with a shared goal to develop activities that achieve that goal.

What is a nonprofit organization?

An organization is simply a group of people with a shared goal that comes together to develop activities to achieve that goal. Once the shared goals of a group of people are established (for example: increasing the number of homeless shelters in a city), the group can decide how to go about achieving its goals by creating programs and services.

If an organization’s goal is to achieve a charitable purpose, such as serving a public need like bridging a gap in community services, it may make sense for the group to form a nonprofit organization.

Incorporation as a nonprofit

Incorporation is a word that describes the legal formation of a group or entity under the law.

For example, a group may be incorporated as a for-profit business or as a nonprofit organization. A nonprofit organization is simply an organization that has been incorporated as a legal entity to achieve a charitable purpose. The charitable purpose of an organization is described by the organization in its Articles of Incorporation. A new organization is legally formed when it files organizational Articles of Incorporation in the state where it plans to operate and the articles are accepted by state authorities.   

Nonprofits that are only incorporated under state law are called domestic nonprofits. A nonprofit incorporated under state law is only considered a nonprofit organization the state where the nonprofit operates.

Nonprofits incorporated under federal law are formed under the 501 code of the Internal Revenue Services and have many designations. Most nonprofits are formed under the 501 (c )(3) designation. A nonprofit organization that is federally tax exempt is incorporated under federal law and has been recognized by the Internal Revenue Service (IRS) as having a charitable purpose by carrying out activities that are in the public interest for a charitable purpose.

Nonprofit status and local and property taxes

Nonprofits, whether domestic or federally recognized, are not automatically exempt from local or municipal taxes, including property taxes. Local authorities often require nonprofits to apply for specific exemptions from local tax laws and may limit the scope of the tax exemptions. For example, a nonprofit 501c3 organization that is exempt from federal taxes often must still apply to local authorities for exemption from property taxes in the city where it operates.

For more information on forming a new nonprofit organization, see our Key Steps In Forming a New Nonprofit. If you decide that you are interested in applying for tax exempt status, we strongly encourage you to visit this easy-to-follow 10-minute eLearning course on starting a nonprofit. This will walk you step-by-step through the process of applying for tax-exempt status.