Here are the basic legal steps required to form a nonprofit corporation under the law of New York in preparation for obtaining exemptions from New York state tax and federal tax.
1. Consider reserving your organization’s name.
As a preliminary matter, you can search here to see if the name you would like to use has already been taken. If not, you might consider reserving it. The Division of Corporations allows the reservation of names in advance of a corporation’s formation, which you may wish to consider. For a $10.00 fee, you can reserve the name you would like to use for 60 days. Reserving the name might make sense if it is a common name or you are concerned that another party might register the name. You may also wish to consider trademarking your organization’s name at the federal and/or state level.
2. Decide which type of New York nonprofit you would like to form.
In New York, a nonprofit corporation must be organized under the terms of New York’s Not-for-Profit Corporation Law (“NPCL”).
According to the NPCL, a nonprofit corporation must identify itself as one of four types (A, B, C, or D) based on its intended purpose and abide by the regulations applicable to that type. Distinguishing between the different types and selecting the most appropriate type can be non-intuitive, and the choice of type can have important regulatory ramifications, so an attorney’s assistance may be advisable.
3. Apply for any necessary consents and approvals from New York state agencies.
Depending on the type selected, you may be required to obtain the written consent of one or more than one New York state agencies prior to filing a certificate of incorporation with the Division of Corporations. A list of such required approvals is provided in the NPCL at Section 404(b)-(w). For example, organizations with education purposes will likely need to obtain the consent of the New York State Department of Education, and organizations with the purpose of providing day care or programs for the elderly need to obtain the consent of the New York State Office of Children and Family Services.
4. Prepare and file a certificate of incorporation with the Division of Corporations.
Next, you must prepare and file a certificate of incorporation with the Division of Corporations. A copy of any of the required approvals you obtained must be attached.
The Division of Corporations has provided a fillable pdf version of the certificate of incorporation located here, as well as instructions for filling it out, although use of this template is not required.
5. Prepare bylaws.
Once you have filed the certificate of incorporation, prepare bylaws to govern the operation of the corporation. Bylaws are to be adopted at the first meeting of the corporation. LawHelp.org provides a sample set of by-laws for a New York nonprofit corporation here.
6. Attend to organizational requirements.
Once the corporation is formed, apply for a federal Employer Identification Number (“EIN”), even if you do not have employees. The EIN is used as a unique number to identify the corporation to the IRS. The IRS has provided information on how to obtain an EIN which you can apply for on-line here.
New York nonprofits (as well as any nonprofits operating within New York State) must register with the New York Attorney General. For an overview of the registration process, see this guide prepared by the New York Attorney General.
Additionally, you may wish to consider establishing a file of organizational documents, such as the certificate of incorporation, by-laws, minutes of meetings, banking information, and so forth.
5. Seek federal, state, and local tax exemptions
To apply for recognition under Internal Revenue Code (“IRC”) Section 501(c)(3), prepare IRS Form 1023, which is designed to assess an organization’s eligibility for 501(c)(3) tax exemption.
If you are planning to seek a federal tax exemption, you should do so promptly. If you file Form 1023 within the first 27 months of the entity’s existence, and the IRS makes a favorable exemption determination, exemption will be considered retroactive to the original date of incorporation. This will be relevant for the deductibility of any contributions you receive before the approval of exempt status. Additionally, many 501(c)(3) organizations are required to file an annual information return with the IRS called the Form 990. Be sure to determine if your organization is so required and take the steps necessary to ensure it is timely filed. For a guide, prepared by the IRS, to which types of organizations must file a Form 990, see this page.
Under New York law, exemptions from various state and local taxes are available for corporations exempted from federal income tax under Section 501(c)(3), but you must apply for each exemption individually.
- For information regarding exemption from corporate franchise taxes, see N.Y. Comp. Codes R. & Regs. tit. 20, § 1-3.4(b)(6)
- For information regarding exemption from property taxes, see N.Y. Real Prop. Tax Law § 420-a and § 420-b and this page maintained by the New York State Department of Taxation.
- For information concerning exemption from sales taxes, see N.Y. Tax Law § 1116 and this guide from the New York State Department of Taxation.
The New York Attorney General’s office does not provide any guidance on applications for state and local tax exemptions, but in its nonprofit formation guide, directs questions on this topic to the Exempt Organizations Unit of the New York State Department of Taxation, at Building #8 – Harriman Campus, Albany, NY 12227, (518) 457-2782.
The application procedures for these exemptions can vary significantly, however, so attention to the applicable requirements for each is important.
In addition, all New York nonprofits are required to submit annual filings with the New York Attorney General. The nature of the required filing varies based on a number of factors, so be sure to check the applicable rules. For a summary of reporting requirements, see this guide prepared by the New York Attorney General.
Further information is available on these websites:
- Information about name reservation and incorporation in New York: http://www.dos.ny.gov/corps/nfpcorp.html; http://www.charitiesnys.com/pdfs/how_to_incorporate.pdf; http://www.dos.ny.gov/corps/nfpfaq.asp#whatisanfp; http://www.dos.ny.gov/forms/corporations/1511-f-l_instructions.pdf
- Trademarks: http://www.dos.state.ny.us/forms/corporations/0241-a.pdf; http://www.dos.ny.gov/corps/staterecordsfaq.html#howtoreg; http://www.uspto.gov/trademarks/index.jsp
Written by Devin McDougall.