Legal Question in Tax Law in Pennsylvania

Re: tax exemption and incorporation

To become a tax-exempt corp., you must:

1)Incorporate with the PA Dept of State so that a valid corporation is formed and exists. This requires the filing of Articles of Incorporation with an accompanying docketing statement and filing fee. There are specific Articles forms for a Non-Profit. The incorporation must also be advertised with one the county legal journal and one newspaper of local circulation. Bylaws should also be drafted and established.

2) Obtain a federal EIN # for the corporation from the IRS by filing a FORM SS-4.

3)File FORM 1023 Application for Tax-Exempt Status with the IRS and pay the user fee. There is a form which must accompany the user fee and 1023 application. The user fee is typically based on the anticipated revenue of the company.

Be advised the 1023 Application is a very long application which requires attached financials and asks technical questions. Legal (Tax) counsel is strongly recommended. After the application is filed, it will take several months for the IRS to either grant or deny the request for tax-exempt status.

4)Each year the corp. must file an annual tax return (even though no taxes may be due).

Typical costs (not including attorney fees) for the whole process can be estimated at $1,100 to $1,500 depending on the user fee.

Attorney fees range from $2500 to $5,000 or more assuming no major complications arise.

Our firm represents many non-profits/tax-exempts and we have a Business Dept. with several tax attorneys. Our firm incorporates, files applications, files annual tax returns and provides general advice for other business related concerns.

I hope this has been informative.

Good Luck

Re: tax exemption and incorporation

The process first requires the answer to the question "why do I want to be a non-profit entity?" When that has been clarified, then you must weigh the cost and time necessary to become tax exempt.

Please call me so we can decide the best course of action.

Ronald J. Cappuccio, J.D., LL.M.(Tax)

856 665-2121