What does a 501(c)(3) application cost? Suppose you are interested in establishing a 501(c)(3) non-profit organization. In that case, this application is necessary but may not know the costs and fees. Let’s explore this question and review general information about the application process.
According to Based on ContractsCounsel’s marketplace data, the average cost of a 501(c)(3) application is $597.50.
How Much Does a 501(c)(3) Application Cost?
A 501(c)(3) application is an application for recognition by the IRS for tax-exempt status. Once a nonprofit organization has been established as a corporation by filing articles of incorporation, the organization can then file for tax-exempt status with the IRS.
Most organizations will use IRS Form 1023 for their 501(c)(3) application. Completing Form 1023 is a daunting task because this packet is between 50 and 100 pages long and can take over 100 hours to complete. The application fee is $600 as of 2021. It is non-refundable and there are no available waivers. If the paperwork isn’t filled out and filed correctly, it could be a major loss.
Suppose you are not familiar with tax paperwork. In that case, it is recommended that you hire an attorney to help you fill out Form 1023 for your 501(c)(3) application. A small business lawyer or nonprofit lawyer will know how to complete and file this complicated form correctly, so you don’t lose money over a mistake.
How to File a 501(c)(3) Application
There are several steps required to file a 501c3 application. These steps involve various forms, fees, and deadlines.
- Step 1: Incorporate your business. Before filing a 501(c)(3) application, you must first have your company recognized as a corporation. This involves filing articles of incorporation and filing form SS-4 to receive an employer identification number (EIN).
Step 2: Complete Form 1023.
Form 1023 is the Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code. This application is 28 pages long, but after attachments and required documentation, it is common for this application packet to be 50-100 pages long. A complete Form 1023 application packet will include:
- The current completed version of Form 1023 found on the IRS website
- Application fee
- Signature of the authorized individual
- An EIN
- A statement of receipts and expenses
- A copy of the Articles of Incorporation that meets the requirements of a conformed copy
- A detailed narrative of the company’s proposed activities
- A copy of the corporation’s bylaws
- Step 3: Filing. Most organizations must file their 501(c)(3) application by the end of the 27th month after they were legally formed to be recognized as tax exempt from the date of its creation. If a company files after the deadline, it will be tax-exempt from the date of the application.
- Step 4: Determination Letter. After the application is received and reviewed by the IRS, if the company meets all the requirements for tax exempt status, the IRS will issue a letter recognizing the organization's exemption status. This document is essential and should be kept with the company’s permanent records.
If you plan to apply for tax-exempt status, you can go to the IRS website for more information and in-depth instructions.
Who Needs a 501(c)(3) Application?
Only certain nonprofit companies are eligible for tax-exempt status. The most common organizations that need a 501(c)(3) application are charitable organizations, educational organizations, and religious organizations.
To be eligible for a 501(c)(3) application, the company must be organized as a corporation, trust, or unincorporated organization. In addition, the articles of incorporation must limit the company’s purposes to fit the requirements under IRS section 501(c)(3), and the company must permanently dedicate its assets to exempt purposes.
A substantial portion of the organization's activities must further the exemption purpose. Some activities like participating in political campaigns, lobbying activities, and operating for the benefit of private interests are entirely prohibited.
Finally, to be eligible for tax-exempt status, the organization’s articles of incorporation must include one or more exempt purposes, which can be:
- Fostering a national or international sports competition
- Preventing cruelty to children or animals
- Testing for public safety
Examples of 501(c)(3) Application Projects
501(c)(3) Application Preparation
Preparing a 501(c)(3) application is a challenging task that includes pages of paperwork, supporting documents, and hours of work. As a result, it is common for a nonprofit to hire a nonprofit attorney who has experience preparing Form 1023 and the 501(c)(3) application.
An attorney experienced with 501(c)(3) application can assist you in organizing your application and ensuring there are no mistakes. This will make the filing process smoother, and you won’t lose your filing fee due to a preventable error.
501(c)(3) Application Filing
Once the application is filed, the IRS may contact the organization for additional information or documents. Hire an attorney to prepare your 501(c)(3) application. The attorney will usually also communicate with the IRS and provide any additional requested documents.
501(c)(3) Application Cost
Suppose you choose to hire an attorney to prepare the 501(c)(3) application for your nonprofit. In that case, the attorney will charge for the time they spent on your application, communication with you and the IRS, and any additional fees that law firms typically charge.
ContractsCounsel’s marketplace data shows the average 501(c)(3) application cost to be $597.50 across all states.
501(c)(3) Application Filing Cost
The 501(c)(3) application filing cost is $600 as of 2021. Additional fees include filing fees for the articles of incorporation and legal fees if you choose to hire an attorney to assist in the application process.
ContractsCounsel’s marketplace data shows the average 501(c)(3) application filing cost to be $597.50 across all states.
How Do Lawyers Charge for a 501(c)(3) Application?
Lawyers who assist with application preparation and filing can charge their clients in various ways.
Hourly Rates for a 501(c)(3) Application
Hourly rates are a standard fee structure for most lawyers. When an attorney bills by the hour, they will charge a client a set rate for each hour spent working on a project or case. The client will be responsible for all filing fees and additional fees that the application may require. This fee agreement ensures that lawyers are compensated for all time spent working on a particular task.
ContractsCounsel’s marketplace data shows the average hourly rate for a nonprofit lawyer range from $200 - $350 per hour.
Flat Fee Rates for a 501(c)(3) Application
A flat fee rate is another option for a hired lawyer to prepare and file a 501(c)(3) application. An experienced lawyer knows the approximate time it will take to complete this type of project, so they can estimate a total flat rate fee to be paid upfront.
Sometimes the lawyer will include filing fees in this flat rate price, and sometimes the client will be responsible for additional costs. Therefore, the client must understand what is covered by the flat fee rate.
ContractsCounsel’s marketplace data shows the average flat fee rate for a 501(c)(3) application is $597.50.
Government Fees for a 501(c)(3) Application
The filing fee for a 501(c)(3) application is $600 as of 2021. In most cases, an attorney will require the client to pay this filing fee outside of their legal services bill. There are no waivers for the filing fee.
Get Help with a 501(c)(3) Application
Do you need help with a 501(c)(3) application? If so, post a project in ContractsCounsel’s marketplace to receive flat fee bids from contract lawyers to handle your project. All lawyers on the ContractsCounsel’s platform are vetted by our team to make sure you are provided with top tier service.