IRS Publication 557: Tax-Exempt Status for Your Organization

What is IRS Publication 557?

IRS Publication 557 is a document published and by the Internal Revenue Service (IRS) that explains the rules to be followed by an organization in order to obtain and maintain tax-exempt status.

IRS Publication 557 guides taxpayers as to the required forms and documents, the appeals process if tax-exempt status is denied, and reasons why exempt status may be revoked. This document is updated regularly, with any new rules or changes highlighted at the beginning.

Understanding IRS Publication 557

Tax-exempt organizations must file certain documents to maintain their status, and IRS Publication 557 explains those requirements, as well as requirements for filing and disclosure requirements for taxpayers who donate to exempt organizations. The publication also provides information about organizations falling under section 501(c)(3).

IRS Publication 557 may not, however, include information needed for the management of your specific tax-exempt organization. Organizations including corporations organized under acts of Congress, teachers' retirement fund associations, mutual insurance companies, employee-funded pension trusts, withdrawal liability payment funds, or religious and apostolic associations are covered by other documents.

IRS Publication 557 includes a reference chart that details what section of the Internal Revenue Code applies to an organization qualifying for tax-exempt status and the forms that must be filled out in order to apply.

Example of a Tax-Exempt Organization

Let's say that you want to apply for tax-exempt status for your corporation under 501(c)(3) of the tax code. If so, IRS Publication 557 would provide you valuable information, such as the rule that your corporation must be organized and operated exclusively for religious, charitable, scientific, public safety, literary, or educational purposes; to foster national or international amateur sports; or to prevent cruelty toward children or animals.

The publication directs you to submit Form 1023-EZ if your organization is small, with assets of $250,000 or less and annual gross receipts of $50,000 or less. If your organization doesn't meet the size requirements for filing form 1023-EZ, you will then have to apply for tax-exempt status using either Form 1028 or Form 8871. If you use either of these forms, then your application should include a copy of the organizing documents from when the organization was created, signed by the principal officers.

The application should also include a detailed, written description of the organization's activities, including the means and extent of fundraising, and what standards and goals you will apply to the organization's activities. You should also include any financial statements your organization produces for the current year, and the three preceding years, before filing the application.