Starting a Nonprofit in Indiana

Overview:

• During the formation of the non-profit organization, there are three separate agencies that will be involved:
  1. The Indiana Secretary of State
  2. The Indiana Department of Revenue
  3. The Internal Revenue Service.
• The requirements of all three agencies must be met to ensure compliance. Each agency also has specific reporting requirements.
• The process of forming a non-profit organization is straightforward. Following is a listing of the agencies and their forms which must be completed. We have also included contact information for each agency.

Indiana Secretary of State

• Articles of Incorporation are filed with the Secretary of State. These articles establish the organization as an official entity and set the basic ground rules by which the organization operates.
• According to Indiana Code 23-17-3-2, the Articles of Incorporation must include:
  • The name of the corporation (which must include “Corporation,” “Company,” “Incorporated,” “Limited,” or an abbreviation thereof)
  • A statement as to whether the corporation will be a public benefit, religious, or mutual benefit corporation
  • The name and address of the Registered Agent
  • The name and address of all the incorporators
  • A statement as to whether the corporation will have members
  • A statement regarding the distribution of assets upon dissolution (IC 23-17-22-5)
• Filing fee: $30.

Indiana Department of Revenue

• The Department of Revenue is responsible for issuing the organization an Indiana Taxpayer Identification Number and issuing authorization for sales tax exemption.
• Both of these are accomplished by filing Form NP-20A.
• There is no charge for filing.

Internal Revenue Service

“Non-profit status is a state law concept. Non-profit status may make an organization eligible for certain benefits such as state sales, property, and income tax exemptions. Although most federal tax-exempt organizations are non-profit organizations, organizing as a non-profit organization at the state level does not automatically grant the organization exemption from federal income tax. To qualify as tax-exempt from federal income taxes, an organization must meet the requirements set forth in the Internal Revenue Code.” (From www.irs.gov/charities)

Employer Identification Number (EIN)

• The IRS is responsible for issuing an Employee Identification Number (EIN) and determining if an organization meets the criteria to be a 501(c)3 tax-exempt organization.
• To obtain an EIN, complete Form SS-4 and submit it to the IRS. The organization will need an EIN even if it has no employees.
• The EIN is roughly the corporate equivalent of a Social Security Number and is used by the IRS for identification purposes. The EIN is not the same as the Indiana Taxpayer Identification Number.
• There is no charge for obtaining an EIN.

1023 Application – 501(c)3 Status

• Obtaining recognition as a 501(c)3 organization is much more involved. The application, Form 1023, is lengthy and approval is not automatic.
• The IRS carefully reviews all applications to ensure that the organization is a bona fide charity. The process can easily take several months before a provisional determination is made.
• Application fee: $750. For organizations that anticipate annual income of less than $10,000 for the next four years, the fee is reduced to $300.

DUNS Number

• The Data Universal Numbering System (DUNS) is operated by Dun & Bradstreet, a commercial company providing business information.
• All federal grants and contracts require that a potential vendor obtain a DUNS number. Many private foundations also use the DUNS number for identification purposes.
• A DUNS number can be obtained at no charge by calling 866-705-5711 or visiting fedgov.dnb.com

Annual Reporting Requirements

After a non-profit organization is legally created, there are ongoing reporting requirements that must be followed for the following agencies:

1. Indiana Secretary of State
2. Indiana Department of Revenue
3. Internal Revenue Service

Reporting Requirements – Indiana Secretary of State

• Indiana non-profit corporations must file an annual business entity report. This report contains information about the board of directors, registered agent, and contact information for the organization.
• There is a $10 fee for filing by mail or $6 for filing online.
• An organization must be current in its business entity reports to be eligible for a state or federal grant.
• Continued failure to file will result in the organization being administratively dissolved – in essence, the organization ceases to legally exist.

Reporting Requirements – Indiana Department of Revenue

• Indiana non-profit corporations must file Form NP-20 with the Department of Revenue. This form is due each year at the same time as the Federal Form 990. Failure to file the NP-20 causes an organization to lose its state sales tax exemption.

Reporting Requirements – Internal Revenue Service

• Any 501(c)3 corporation (other than a house of worship) with income over $50,000 must file Form 990 or 990-EZ on an annual basis.
• For most non-profit organizations, the due date is May 15th.
• There is no fee for filing.
• Form 990 is a public document. By law, an organization must provide a copy upon request. 990s are also available for viewing or download at www.guidestar.org at no charge.

Final Notes

• Incorporating as a non-profit does not automatically result in 501(c)3 status or state sales and income tax exemption. These must be applied for separately.
• To successfully obtain 501(c)3 status, an organization must be able to show a defined charitable purpose and a structure that ensures that the organization benefits the public, not the employees or owners of the organization.
• There is no special structure for faith-based organizations. They are subject to the same incorporation and reporting requirements as any other non-profit. The only significant difference is that churches and other houses of worship are not required to file a 990 federal tax return.
• This list may not be exhaustive for every organization. In particular, organizations that have unrelated business income will have additional reporting requirements and potential tax liability.
• It is each organization’s responsibility to ensure that all necessary registrations, reports, and filings are completed.