Before applying to the IRS for Section 501(c)(3) status, it is important to understand how the agency looks at various aspects of a non-profit's organization and operation. Decisions made during the earliest stage of a non-profit's formation can have a significant impact on whether it will be recognized as tax exempt.
But preparing your organization for IRS scrutiny is complicated by the fact that the agency's process for determining who gets Section 501(c)(3) status is multilayered, nuanced, and often obscure to the outside world. This can leave applicants confused as to what the IRS expects and why it asks particular kinds of questions.
For these reasons, the DMLP has prepared a detailed Guide to the factors that the IRS has historically considered when determining whether to recognize a tax exemption for journalism and publishing non-profits. This Guide can help both journalism organizations considering Section 501(c)(3) status and the attorneys who help to prepare their applications. You can download the Guide in PDF format here:
Guide to the Internal Revenue Service Decision-Making Process under Section 501(c)(3) [PDF, 30 pgs.]
Alternatively, the link below will take you to a chart that maps out the structure of the IRS analysis. This chart lays out the questions that the IRS might ask, from its most general lines of inquiry down to more specific considerations. Each question on the chart is linked to an online section of this Guide that provides detailed information about the kinds of information that the IRS considers at that particular stage. Simply click on a question on the chart to go to the corresponding Guide page; a link at the bottom of each Guide page will return you to the chart.
GO TO THE CHART (PDF)
NOTE: This is not a flowchart. The IRS might or might not ask particular questions in your particular case. In addition, although there are some issues that might automatically disqualify you from a tax exemption, the IRS will normally balance various factors in a situation-specific manner that defies meaningful breakdown into a "yes/no" decision tree. Therefore, it is not possible to follow through the chart and determine on your own whether you will qualify for a tax exemption. Instead, the chart is intended to help you understand the reasons why the IRS has previously ruled that various organizations have (or have not) been deemed tax-exempt, so that you can take those issues into account when structuring your own non-profit and applying for an exemption.
You can also simply begin browsing the online version of the Guide.
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OTHER RESOURCES:
What is Section 501(c)(3) status, and does it make sense for your organization?
Introduction to the 501(c)(3) application process
Successful 501(c)(3) applications
The DMLP wishes to thank the following individuals for their invaluable advice in connection with the development of this Guide: Andrew F. Sellars, Staff Attorney, Digital Media Law Project; John Sharkey, Intern, Digital Media Law Project (Harvard Law School, Class of 2013); Marion R. Fremont-Smith, Senior Research Fellow, Hauser Center for Nonprofit Organizations, Harvard University; David S. Ardia, Assistant Professor of Law, UNC School of Law, and Faculty Associate, Berkman Center for Internet & Society; Marcus S. Owens, Member, Caplin & Drysdale, Chartered; Eric Newton, Senior Adviser to the President, Knight Foundation; and Lori McGlinchey, Senior Program Manager - Transparency and Integrity Fund, Open Society Foundations.
