Client often needs a nonprofit enterprise. Client can form an enterprise which has a manifest charitable, religious, or mutual benefit purpose, or if tax-exempt status is necessary to attract funds. Many activities, however, can be carried on by a for-profit or nonprofit entity, such as scientific research enterprises, private schools, or hospitals. Private family foundation trusts avoids the arbitrary 49-percent restriction of Corp C §5227(a) that would prevent a board from being composed solely of family members if even one member of the family is to be employed by the foundation.

 

Charitable corporations, (a) are required to file reports with the Attorney General under Govt. C §12583 (b) have annual revenue in excess of $ 2 million and (c) must prepare annual financial statements that are audited by an independent certified public accountant in conformity with generally accepted accounting standards.

1. To Incorporate in California

   a. Submit Articles of Incorporation to:

   Business Programs Division
   1500 11th Street
   Sacramento, CA 95814
   Attn: Document Filing Support Unit
   Information: (916) 657-5448
   Web Site: www.sos.ca.gov/
   Filing Fee: $30

   b. Within 90 days of filing the Articles of Incorporation, submit Form SI-100 (Statement of Information) to:

   Secretary of State
   Statement of Information Unit
   P.O. Box 944230
   Sacramento, CA 94244-2300
   Information: (916) 657-5448
   Web Site: www.sos.ca.gov/
   Filing Fee: $20*

   Note:

   Failure to file by the due date may result in the assessment of a $50 penalty.

2. To Obtain 501(c)(3) Tax-Exempt Status

   Submit Form 1023, Application for Recognition of Exemption to:

   Note new address:
   Internal Revenue Service
   P.O. Box 12192
   Covington, KY 41012-0192
   Information: (800) 829-1040
   Forms: (800) 829-3676
   Web Site: www.irs.gov/charities
   Filing Fee: $750 ($300 if revenues less than $10,000/year)

   Note:

   User fees will increase for all applications for exemption (Forms 1023, 1024, and 1028) postmarked after January 3, 2010: $ 400 for organizations whose gross receipts are $10,000 or less annually over a 4-year period $ 850 for organizations whose gross receipts exceed $10,000 annually over a 4-year period $ 3,000 for group exemption letters. For more information on filing fees and for information on the IRS' new web initiative "Cyber Assistant", see the IRS website.

3. To Obtain California Income Tax Exemption

   Submit Form FTB 3500A with a copy of the IRS Determination Letter to:

   Exempt Organizations Unit MS F120
   Franchise Tax Board
   PO Box 1286
   Rancho Cordova, CA 95741-1286
   Information: (916) 845-4171
   Web Site: www.ftb.ca.gov/
   Filing Fee: $0

   Note: If the effective date of federal tax-exemption differs from the incorporation date of the organization, than it should file Form FTB 3500 to obtain California tax-exemption with an effective date that is the same as the date of incorporation. For more information, consult the Franchise Tax Board's website and FAQ.

4. To Obtain California Sales and Use Tax Exemption

   Nonprofit purchasers generally are not exempt from sales and use taxes. However, some charitable organizations that qualify for California's “welfare exemption” and are involved in selling or donating items used principally to assist purchasers/donees in distressed financial condition may qualify for exemption from sales taxes on purchases made for these purposes.

   To apply for exemption, the organization should request a “review of eligibility” by submitting Bylaws, Articles of Incorporation, IRS 501(c)(3) determination letter, a copy of the California Franchise Tax Board's tax-exempt qualification letter, and a letter describing the practices and activities of the organization to:

   Compliance Planning & Evaluation
   Board of Equalization
   PO Box 942879
   Sacramento, CA 94279-0044
   Information: (800) 735-2922
   Web Site: www.boe.ca.gov/
   Filing Fee: $0

   For more information on sales of specific items, or by specific types of nonprofit organizations that are exempt from California sales and use taxes, refer to California's "Publication 18".

5. To Register with the California Attorney General

   Within 30 days of receiving assets for the charitable purposes for which organized, submit Form CT-1 (Registration Form) with Articles of Incorporation, Bylaws, IRS 501(c)(3) determination letter, most recent IRS Form 990, and a statement describing the primary activity of the organization (a copy of the statement of purposes from the IRS 1023 application will suffice) to:

   State of California
   Office of the Attorney General
   Registry of Charitable Trusts
   Sacramento, CA 94203-4470
   Phone: (916) 445-2021
   Fax: (916) 444-3651
   Web Site: www.caag.state.ca.us/
   Filing Fee: $0

   Corporations organized and operated primarily as hospitals, schools or religious organizations are exempt from filing, but must furnish information substantiating such status to the above address.

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Phone: (818) 714-1789 

Fax: (818) 530-4367 

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