Efficient and Effective Legal Representation

Making your nonprofit a tax-exempt organization

On Behalf of | Jan 3, 2019 | Small Business Law |

Nonprofit organizations perform many essential functions and services for disenfranchised individuals in Wisconsin. In order to better serve their communities, many nonprofits focus on achieving tax-exempt status, which allows them to operate without worry of shelling out their donated funds during tax season. However, to become tax-exempt, an organization must first qualify under one of five categories.

The Internal Revenue Code recognizes five different categories for which an organization may qualify for tax-exempt status. These categories are found in section 501(c)(3) of the tax code and are generally fairly broad, although this does not mean that the IRS automatically approves every organization that fits a description. These five categories are as follows:

  • Groups with a charitable purpose
  • Religious groups
  • Scientific organizations
  • Groups with literary purposes
  • Educational Organizations

Even if a nonprofit organization falls into one of these categories, it must still follow a relatively lengthy and sometimes expensive process in order to qualify. The process is not over after becoming tax-exempt either. Organizations must adhere to a set of standards, including abstaining from expressing particular political viewpoints and operating without pecuniary gains. Careful oversight is essential for successfully managing a nonprofit and maintaining a tax-exempt status.

Although the process can seem quite overwhelming at first, nonprofit organizations generally benefit from achieving tax-exempt status. When taxes are taken out of the equation, these organizations can better utilize their funds and assets for the benefit of those in need. Still, it can be a complicated process that is often more easily navigated when pursued alongside and experienced Wisconsin attorney.