Articles of incorporation for a 501(c)(3) nonprofit

Articles of incorporation are the short document you file with your state to create a nonprofit corporation. Some states call them a certificate of incorporation or a charter. The state cares about who you are and how to reach you. The IRS cares about something else: whether the articles commit the organization to exempt purposes permanently.

That second question is called the organizational test, and it is the most common reason articles have to be amended after an application is filed. Getting the language right before you file with the state saves you an amendment later.

The organizational test

The rule is in Treasury Regulation section 1.501(c)(3)-1(b). An organization is organized exclusively for exempt purposes only if its articles of organization:

1. Limit its purposes to one or more exempt purposes: charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, or preventing cruelty to children or animals; and
2. Do not expressly authorize it to carry on, other than as an insubstantial part of its activities, activities that do not further those purposes.

The regulation adds a third requirement in a separate paragraph: the organization's assets must be dedicated to exempt purposes, so that on dissolution they go to another exempt purpose, a government for a public purpose, or a court-directed recipient, and never to members or private individuals.

"Articles of organization" is the IRS's general term. For a corporation it means the filed articles of incorporation; for a trust, the trust instrument; for an unincorporated association, its articles of association or constitution.

Three points from Publication 557 that surprise founders:

• A limit that appears only in your bylaws does not satisfy the test.
• Statements by officers that you intend to operate only for exempt purposes do not satisfy it.
• Your actual operations being charitable does not cure articles that are too broad.

The purpose clause

The Form 1023 instructions give this example of an acceptable purpose clause:

The organization is organized exclusively for charitable, religious, educational, and scientific purposes under section 501(c)(3) of the Internal Revenue Code, or corresponding sections of any future federal tax code.

You can narrow it to the purposes that fit. "Organized exclusively for educational and charitable purposes within the meaning of section 501(c)(3)" works for a tutoring program. You may also describe your specific purpose, such as relief of the poor or relief of the elderly within the meaning of section 501(c)(3), as long as nothing else in the articles widens it.

The articles of incorporation sample in Publication 557 (Draft A) adds language that many organizations include:

• No part of the net earnings may inure to the benefit of members, trustees, officers or other private persons, although the corporation may pay reasonable compensation for services.
• No substantial part of its activities may be carrying on propaganda or otherwise attempting to influence legislation.
• The corporation may not participate or intervene in any political campaign for or against any candidate for public office.
• The corporation may not carry on activities not permitted to a 501(c)(3) organization or to an organization whose contributions are deductible under section 170(c)(2).

The dissolution clause

The Form 1023 instructions give this example of an acceptable dissolution clause:

Upon the dissolution of this organization, assets shall be distributed for one or more exempt purposes within the meaning of section 501(c)(3) of the Internal Revenue Code, or corresponding section of any future federal tax code, or shall be distributed to the federal government, or to a state or local government, for a public purpose.

Publication 557's Draft A adds a backstop: any assets not disposed of that way go, by order of a court in the county of the principal office, to organizations operated exclusively for those purposes.

Naming a specific recipient. You may name a charity to receive your assets only if the articles require it to be a 501(c)(3) at the time of dissolution and provide an alternative if it is not.

Reliance on state law. In some states, state law itself dedicates a charitable corporation's assets on dissolution, and the IRS will accept that without an express clause. Rev. Proc. 82-2 identifies those states and circumstances. Including the clause anyway makes the IRS review easier, and Publication 557 says so.

What states require

State articles are usually brief. Rules vary by state, but forms commonly ask for:

• The corporation's name.
• A registered agent and registered office in the state, the person and address that receive legal papers.
• The incorporators, the people who sign and file the articles.
• Whether the corporation will have members.
• Sometimes the initial directors and the principal office.

Many state forms are written for every kind of nonprofit, not just charities, and leave no room for the IRS clauses. Check your secretary of state's instructions for how to add them, often as an attachment or additional article, before you file.

Private foundations need more. If you expect to be classified as a private foundation, a nonprofit funded mainly by one family or business, the governing instrument must also address the private foundation rules, either expressly or through state law. Publication 557 covers this.

Common mistakes that trigger IRS questions

Several of these examples come straight from Publication 557. If the IRS finds a problem during review, it can require you to amend the articles with the state; see IRS questions on your application.

Why it matters for your effective date. Publication 557 says that when the IRS requires a substantive amendment to your organizing document, the determination letter is effective as of the date the changes are made, not your formation date. A nonsubstantive fix keeps the normal effective date. Getting the articles right the first time protects the retroactive exemption you are counting on.

Filing the articles with your application

Form 1023. You upload a copy of your articles, including any amendments, that shows certification of filing: evidence that the state filed and approved them on a specific date. It must be an exact copy of what is on file with the state. If you lack a certified copy, the instructions allow a substitute copy with a declaration signed by an authorized officer.

Form 1023-EZ. You do not upload your articles, but you attest that they contain the required purpose and dissolution provisions, and the IRS may ask for them at any time. The Form 1023-EZ guide explains the attestations.

Your formation date is the date the state filed the articles. It anchors the 27-month window for retroactive exemption.

Once the articles are filed, the next documents are your bylaws, and the board adopts both at its organizational meeting. The full sequence is in how to start a nonprofit.

501Nonprofit.com is a private company, not the IRS. This page is general information, not legal or tax advice for your organization. Example organizations and figures are hypothetical.