Glossary of Terms
Application for Recognition
The process of submitting Articles of Incorporation,
By-Laws and other legal documents and forms to the IRS for its approval of
the Foundation as a 501(c)(3) organization. When approval is given, the IRS
will issue a Letter of Determination, letter 1045.
Articles of Incorporation
The "Articles" are considered the charter document of the corporation and
are filed with the Secretary of State to form the corporation. The Articles
must be written specifically to State Statutes and describe how the
corporation intends to operate. Articles are public documents.
By-Laws
The By-Laws set forth the operating rules and procedures of the corporation
and must be filed with the Articles of Incorporation when the corporation
applies for its federal 501(c)(3) status. The By-Laws describe the officers
& their election, membership, financial procedures and reporting. The
By-Laws describe how the organization will operate internally. By-Laws are
not public documents, but may be requested by donors.
Corporate Annual Report
Each State has different reporting requirements and fees; typically,
however, there is a requirement to file an annual corporate report that
lists the officers, mailing address and perhaps, some financial information.
The filing deadline is often based on the fiscal year of the corporation or
it may be calendar year. Each State's web site will describe their specific
requirements. Incorporation status may be lost if these specifics are not
met.
Corporation
An entity that acquires legal existence after complying with the State's
incorporation procedures and formalities. It is a separate entity that gives
officers, directors and members the benefits of limited liability.
Determination Letter # 1045
A document issued by IRS that approves the organization as a non-profit,
tax exempt entity under Section 501(c)(3) of the federal code. These are
typically issued for four years with conditional approval.
Employee Identification Number
A number (EIN) issued by IRS to identify the corporation and/or foundation.
It is similar to personal Social Security numbers and is obtained from IRS.
Some States use the same number for their identification.
First Meeting Minutes
A legal document that describes how the first meeting of the organization
was held and how the officers were elected. It also describes all actions of
the Board regarding the adoption of the By-Laws, establishment of bank
accounts, and compensation of officers (if any). These minutes describe how
the organization was first established. This document is rarely used in some
States.
IRS Tax Return 990
An annual tax return filed with IRS for each foundation that has 501(c)(3)
status and each club or organization that has 501(c)(4) status. Each must
file Form 990 (or Form 990 EZ), but only those with over $25,000 gross
receipts need to include financial data on the return.
Section 501(c)(7)
The IRS status for recreational and social organizations; contributions
to these organizations are not tax deductible. Typically, these
organizations do not qualify for State exemptions.
Section 501(c)(4)
The IRS status for civic leagues and social welfare organizations;
contributions to these organizations are not tax deductible. Typically,
these organizations do not qualify for State exemptions.
Section 501(c)(3)
The IRS status for charitable organizations and foundations that have
qualified and have been determined by the IRS to meet all their
requirements. Contributions to these organizations are tax deductible on
Federal tax returns & will be usually be exempt from State taxes.
State Identification Number
Some States may use the federal EIN number as identification of the
organization within the State. Other States may issue an identification
number separate from the federal identification.
Tax Exempt in State
A status provided by some States that exempts non-profit organizations
from paying sales or use tax on tangible property. Those organizations who
are declared tax exempt need not pay sales tax on taxable items they
purchase; they must still collect and forward sales tax on taxable items
they sell. This "Tax Exempt" status does not mean that donations to that
organization are tax deductible on federal tax returns.
Tax Exempt, Federal
A status under IRS code section 501(c)(3) which makes non-profit
corporations exempt from payment of corporate income taxes. In addition,
donations and contributions from donors are tax deductible on federal tax
returns. It also makes the organization eligible for donations from other
organizations, For example, grants from large corporate Foundations to Club
or Civic Foundations.
