casemark/form-1023

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:

1. Articles of incorporation / trust instrument — must contain purpose and dissolution clauses
2. Bylaws or operating agreement
3. EIN confirmation (CP 575 or equivalent)
4. Financial data — actuals for up to 3 prior years, or proposed budgets for 2 future years if pre-operational
5. Board/officer roster — names, titles, addresses, compensation
6. Program descriptions — all current and planned activities
7. Conflict of interest policy (if adopted)
8. 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

1. Complete Form 1023 — organized by IRS section numbers, all applicable schedules
2. 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

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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