Rules for nonprofit organizations in Washington state are similar to rules for other business organizations. Nonprofits are required to register with the Department of Revenue and comply with certain tax rules. Tax exemptions are available in some circumstances from the Department of Revenue. Nonprofits that intend to solicit charitable donations must register with the Charities Program of the Secretary of State. Nonprofits that incorporate must comply with the Washington Nonprofit Corporation Act.
Washington Nonprofit Corporation Act
To create a nonprofit corporation under the Washington Nonprofit Corporation Act, the corporation must file appropriate articles of incorporation with the secretary of state. Nonprofits can be formed for any lawful purpose except acting as a labor union, cooperative organization, bank or insurance company. A nonprofit that wants to be classified as a 501(c)(3) tax-exempted organization, must file an application with the Internal Revenue Service requesting 501(c)(3) status, and the articles of incorporation filed with the secretary of state must include specific language that meets IRS requirements. IRS Publication 557 provides sample language to use in the articles.
Department of Revenue Registration
A Washington state nonprofit is not automatically exempt from state taxes and must comply with state tax registration requirements, even if the nonprofit is exempt from federal taxes. State tax registration requirements include obtaining a Unified Business Identifier, which is typically done when the nonprofit incorporates. The UBI number is also used by the Department of Revenue as the nonprofit’s tax registration number. A nonprofit must pay business and occupation tax on its gross revenues, as well as pay sales tax on services and goods it purchases from retailers. Tax exemptions are available for qualified nonprofits, but the exemption must be applied for and approved by the Washington state Department of Revenue.
Tax exemptions for Washington state nonprofits are available for property taxes –– both real estate and personal property. To qualify for the exemption, the nonprofit must own the property and use the property for an exempt purpose, such as a church, cemetery, nursing home or social service agency. Applications for property tax exemptions are submitted to the Washington state Department of Revenue. Approved tax exemptions must be renewed by March 31 each year. Nonprofits that engage in periodic fund raising only, are exempt from business and occupation tax, as well as from collecting sales tax.
Charitable Donations Solicitations
A nonprofit must register with the Washington Secretary of State's Charitable Program if it raises more than $50,000 per year in charitable donations. Certain nonprofits qualify for an exemption from registration, such as those operating as a political organization or church. Registration must be done prior to fundraising and, as of October 2011, the initial filing fee is $60 with annual renewals at $40. Nonprofits that use the services of a commercial fundraiser must file a Fundraising Service Contract Registration Form with the secretary of state. A copy of the fundraising contract and a $20 filing fee must be filed with the form.