How Often Must You Renew a 501(c)(3)?

By Edward A. Haman, J.D.

How Often Must You Renew a 501(c)(3)?

By Edward A. Haman, J.D.

You made the effort to create your nonprofit organization and secure its tax-exempt status with the Internal Revenue Service (IRS) and state tax authority. Now that your organization is a 501(c)(3) organization, you want to be sure that you maintain that status.

Renewal Requirements

As far as the IRS is concerned, the simple answer is: no. Once you've obtained 501(c)(3) status, you do not need to file any kind of document to renew the application. In other words, there is no expiration date on a 501(c)(3) organization. However, there are other actions that need to be taken to maintain its tax-exempt status.

Even though a 501(c)(3) does not expire, it's a good idea to check with the IRS periodically to be sure that the rules have not changed. A number of years ago, there were proposals to change the law to require renewal, but they were not successful.

Nonprofit laws vary from state to state. Be sure to check with your state's business regulation and tax agencies to learn about any requirement for renewing or maintaining your organization's exemption for state tax purposes.

Maintaining Tax Exempt Status

Although renewal of your organization's Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code (Form 1023) is not required, maintaining your organization's 501(c)(3) status requires certain actions. These fall into two categories:

  1. Things you must do
  2. Documents you must file

Things You Must Do

To maintain your organization's tax exempt status, the main task you must do is keep certain records, which you need in order to file required documents with the IRS and any state agencies. Your organization may be nonprofit, but in many ways it is like any for-profit business: just as with any business enterprise, you need to keep adequate accounting records of income, expenses, assets, and liabilities.

You also need to keep appropriate records for employees, such as payroll records and payment of withholding taxes, workers compensation, unemployment taxes, etc. If you hire any independent contractors, you need to keep copies of any Miscellaneous Income (Form 1099-MISC) documents that are provided to them.

Your organization is also required to make copies of certain documents—namely, the Form 1023 exemption application and IRS forms filed for the three most recent years—available to the public upon request. More information about required disclosures can be found on the IRS website.

Documents You Must File

The IRS requires most 501(c)(3) organizations to file Return of Organization Exempt from Income Tax (Form 990) each year. There are different versions of the form for different types of nonprofits, although churches and their affiliated organizations may not need to file. Failure to file Form 990 for three consecutive years automatically revokes the 501(c)(3) status of the organization. If this happens, you need to re-apply for tax-exempt status.

For more detailed information about maintaining your organization's tax exempt status, see Compliance Guide for 501(c)(3) Public Charities (Publication 4221-PC).

This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of author, not LegalZoom, and have not been evaluated by LegalZoom for accuracy, completeness, or changes in the law.

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