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990 EZ Requirement?
State Income Tax
Must file- $0
Sales Tax Exemption
Included with state tax
All organizations (except those classified as churches) are required to file an annual 990 form (990N, 990EZ, 990, or 990PF) to be exempt from Income Tax.
The 990 return is due on the 15th day of the 5th month after the end of the organization’s fiscal year.
Failure to file for 3 consecutive years could cause your organization to lose tax-exempt status.
Nonprofit Corporations Vs. Unincorporated Nonprofits
If you have an unincorporated group of at least three people who are joined for the same nonprofit purpose, you could be considered a Texas nonprofit. Not all nonprofit organizations in Texas are required to file with the state.
Many nonprofits, however, do choose to incorporate with the state. This is done by filing a certificate of formation with the secretary of state in accordance with the Texas Business Organizations Code. This is not the same as filing for tax exemption.
Texas Nonprofit Tax Exempt Form
If you want to apply for tax exemption for your Texas nonprofit, there are a number of steps you need to take.
- Name your nonprofit
- Appoint a Texas registered agent
- Appoint board members and officers
- File your Texas certificate of formation
- Draft bylaws and a conflict of interest policy
- Have at least one organizational meeting
- Get an employer identification number
- Apply for and receive 501(c) or 501(c)3 status
Once you have your IRS determination letter, you can file your Texas nonprofit tax exempt form, which will excuse your organization from having to pay sales tax, franchise tax, or hotel occupancy tax. This form is filed through the state comptroller’s office.
Once your organization is incorporated and operational, you may receive occasional notices from the Secretary of State requesting what’s known as a periodic report. The report requires you to outline basic information about the business, its registered agent, and its members. This report is sent at random times, but you should never have to submit it more than once within a four-year period.
Texas Registered Agent
A Texas registered agent is a designated person to receive any process, notice, or demand submitted to the organization. It can be a person outside of the organization, as nonprofits often change locations, especially when they’re new, so this person at a single address can receive important documents the whole time.
Unincorporated nonprofits don’t have to have a Texas registered agent, but they are allowed to. But for incorporated organizations, it is one of the nonprofit requirements in Texas.
Frequently Asked Questions
There are benefits to both approaches!
An unincorporated nonprofit association is easier to establish and has fewer requirements so long as your organization has at least three members committed to the same nonprofit goal.
However, it’s important to note that nonprofit incorporation affords you greater liability protection. While Texas does offer some liability protection to unincorporated associations, the protection is greater for corporations.
As long as your organization meets the federal criteria for tax exemption, you should be able to achieve section 501(c)(3) tax exempt status through the IRS.
In most cases, you’ll need to file an Application for Recognition of Exemption (Form 1023) with the IRS. This step isn’t required if your gross receipts are less than $5,000, but it can still be to your advantage as many donors are more willing to contribute to your organization if you have an IRS determination letter.
As a Texas nonprofit, you are not automatically exempted from taxation. In order to be recognized by the state as a tax-exempt organization, you have to apply for state tax exemption through the Texas state comptroller’s office (most commonly form AP-204, although other forms exist for religious, educational, and other specific types of charitable organizations). Once your application is approved, you’ll be exempt from the state’s franchise tax and sales tax requirements.
The Texas comptroller’s office maintains a broad list of categories that qualify for tax-exempt status. These include charitable organizations, religious organizations, educational organizations, homeowners’ associations, Chamber of Commerce organizations, volunteer firefighting organizations, agricultural organizations, state and federal credit unions, lodges, emergency medical service organizations, recycling operations, and youth sports organizations.
If you’re looking to start a Texas nonprofit and you need some help understanding the forms, or if you already have one and you want to stay compliant, BryteBridge Nonprofit Solutions can help. We’re experts in the nonprofit process, having helped thousands of organizations across the country.
Let us help you help others. Call now and set up a consultation with our team today.