• Charles F. Horton III

HOW TO CREATE A NON-PROFIT IN ALABAMA & OBTAIN STATE AND FEDERAL TAX EXEMPTIONS

2020 and 2021 were no strangers to disaster. Such tragedies, however, often bring forth altruism. One might be compelled to start a non-profit as a means to facilitate their desire to assist others and recruit like-minded individuals to their cause. The route that is often taken is what is known as a 501(c)(3) organization, which means it is formed for religious, charitable, scientific, literary, or educational purposes.


If you are considering starting a non-profit in Alabama, several steps must be taken in accordance with Alabama Code, Title 10A, Chapter 3. This includes reserving the name of your organization with the Alabama Secretary of State, choosing the organization’s board of directors members, and holding the initial board of directors meeting. Additionally, certain documents must be drafted including the organization’s By-Laws and Certificate of Formation. These documents typically include the organization’s purpose, duration, mailing address, and methods in which the organization is to operate. Once the Certificate of Formation is to be signed by the board of directors members and filed with the Alabama Secretary of State Office, the non-profit organization has been formed.


If you wish to obtain state and federal tax exemptions, certain additional steps must be taken. For federal exemptions, you must file a Form 1023 with the IRS. This form has 2 variants; Form 1023 being the standard and Form 1023-EZ being the expedited version intended for small to medium-sized nom-profits. In order to be eligible for Form 1023-EZ, you must answer “No” to a series of questions provided by the IRS. See Page 13 for the Full Eligibility Questionnaire. If you are seeking Federal Tax Exemption and believe your non-profit organization would be eligible for Form 1023-EZ, we would be happy to assist you on this matter. However, for the lengthier Form 1023, we recommend consulting an Accountant. Once your nonprofit receives 501(c)(3) tax-exempt status from the IRS, you are automatically eligible for exemption from Alabama's income tax.


Our attorneys are experienced in the creation of non-profit organizations. If you are interested in starting a non-profit organization and achieving Tax-Exemption status, please contact our office at (205) 345-0090 or at contact@traditionslawgroup.com.


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