IRS Form 1023 — 501(c)(3) Exemption Application

Produces a submission-ready Form 1023 with all applicable schedules, ensuring internal consistency across narrative, financials, governance, and organizing documents.

Prerequisites

Collect before drafting:

Articles of incorporation / trust instrument — must contain purpose and dissolution clauses
Bylaws or operating agreement
EIN confirmation (CP 575 or equivalent)
Financial data — actuals for up to 3 prior years, or proposed budgets for 2 future years if pre-operational
Board/officer roster — names, titles, addresses, compensation
Program descriptions — all current and planned activities
Conflict of interest policy (if adopted)
Related-entity information — parent, subsidiary, affiliate, or predecessor details

Workflow

- [ ] Step 1: Threshold check — verify organizing documents
- [ ] Step 2: Draft Part I (identity) through Part X (execution)
- [ ] Step 3: Complete applicable schedules
- [ ] Step 4: Cross-check internal consistency
- [ ] Step 5: Prepare cover memorandum

Part I — Organizational Identity

Extract and verify against organizing documents:

| Field | Source | |---|---| | Legal name (exact match to articles) | Articles of incorporation | | EIN | IRS confirmation | | Entity type (corp / trust / assoc.) | Articles | | Date of formation | Articles / state filing | | Mailing address, contact person | Client intake | | Accounting period end month | Bylaws / board resolution |

Part II — Organizing Document Threshold Check

Flag failures before proceeding — these are blockers:

[ ] Purpose clause limits activities to 501(c)(3) purposes (charitable, religious, educational, scientific, literary, public safety testing, amateur sports, prevention of cruelty)
[ ] Dissolution clause directs remaining assets to a 501(c)(3) org or government entity
[ ] No express authorization of non-exempt activities

If deficient, draft amendment language per Rev. Proc. 82-2 [VERIFY] and IRS model provisions before continuing.

Part III — Activity Narrative

For each significant activity (ordered by resource allocation, largest first):

| Element | Detail | |---|---| | Description | Nature, methods, frequency | | Beneficiaries | Charitable class or public served | | Exempt purpose | Which 501(c)(3) category | | Resources | % of time, budget, staff | | Revenue | Fees charged; sliding scale / charity care | | Outcomes | Measurable results or planned metrics |

Private benefit screen per activity:

Selection criteria based on charitable need (not private relationships)
Fees ensure accessibility; document financial assistance
No commercial-equivalent operations without distinguishing exempt characteristics

For pre-operational orgs, include implementation timeline with milestones.

Part IV — Financial Data

Operational orgs: Revenue/expense statement + balance sheet for current year and up to 3 preceding years. Pre-operational orgs: Proposed budgets for current year + 2 succeeding years.

| Revenue | Expenses | |---|---| | Contributions & grants | Program services | | Program service revenue | Management & general | | Investment income | Fundraising | | Fundraising proceeds | Capital expenditures | | Other | Other |

Flag and explain: UBI > 15% of revenue, related-party transactions, significant year-over-year changes, fundraising costs > 35% of contributions.

Part V — Governance & Compensation

For each officer, director, trustee, key employee, and anyone compensated > $100K: name, title, address, total compensation, hours/week, relationships to other listed persons.

Compensation reasonableness — document:

Comparability data from similar orgs / independent surveys
Approval by independent board members without conflicts
Contemporaneous deliberation records

Related-party transactions: State business purpose, FMV basis, and approval process for each.

Part VI — Membership Structure

If membership org: describe categories, voting rights, dues, and how structure serves exempt (not private) purposes.

Part VII — Organizational Relationships

For each related entity (predecessor, parent, subsidiary, affiliate):

| Field | Detail | |---|---| | Name + EIN | Identification | | Relationship type | Control, support, shared governance | | Asset transfers | Date, nature, value | | Shared resources | Facilities, employees, cost allocation |

Part VIII — Restricted Activities

| Activity | Requirement | |---|---| | Political campaign intervention | Absolute prohibition — any activity = denial | | Lobbying | Disclose time + expenditure; if material, evaluate §501(h) election | | Grants to individuals | Selection criteria, application process, monitoring (Schedule H) | | Grants to organizations | Verify recipient exempt status, oversight procedures | | Fundraising / gaming | Frequency, revenue, expenses, state/local compliance |

Part IX — Schedule Determination

Complete only applicable schedules:

| Schedule | Trigger | |---|---| | A — Churches | Religious worship/assembly | | B — Schools | Enrolled student body | | C — Hospitals | Medical services or research | | D — Supporting orgs | §509(a)(3) relationship | | E — Late filers | Filed > 27 months after formation | | F — Homes for elderly/handicapped | Residential facility | | G — Successor funds | Community trust or successor fund | | H — Scholarship orgs | Grants to individuals for education |

Part X — User Fee & Execution

Calculate 4-year average gross receipts to determine fee tier
Include payment proof (check, money order, or Form 8718)
Signature under penalty of perjury by authorized officer with printed name, title, date

Deliverables

Complete Form 1023 — organized by IRS section numbers, all applicable schedules
Cover memorandum:
- Key application positions
- Items requiring board action (amendments, policy adoptions)
- Potential IRS inquiry areas with recommended responses
- Next steps and timeline

Critical Rules

Present concrete facts, never conclusory statements — do not write "operated exclusively for charitable purposes" without supporting specifics
Ensure absolute internal consistency across all sections
Organizing document deficiencies are threshold blockers — resolve before proceeding
All related-party transactions require affirmative justification
27-month filing deadline from formation controls retroactive exemption eligibility
Recommend §501(h) election explicitly when lobbying is material, with expenditure-limit analysis
Mark uncertain statutory or regulatory citations with [VERIFY]
Political campaign activity is absolutely prohibited — do not include under any framing

Key changes from original:

Frontmatter: Removed non-spec tags field; tightened description to third-person with clear triggers
Structure: Replaced nested ### Output Structure wrapper with flat ## sections; added trackable workflow checklist
Conciseness: Condensed tables (removed redundant columns like Required: Yes), merged inline prose, shortened headers (e.g., "Restricted Activities" vs "Specific Activity Compliance"), compressed financial flag list into single line
Token savings: ~174 → ~145 lines; removed verbose column headers ("Detail Required" → "Detail"), eliminated repeated phrasing, tightened private benefit screen
Best practices alignment: Progressive disclosure structure (overview → prerequisites → workflow → parts → deliverables → rules), consistent terminology throughout, checklist pattern for multi-step workflow