How much does it cost to apply for 501(c)(3) status?

The IRS user fee is $600 for Form 1023 and $275 for Form 1023-EZ, paid on Pay.gov when you file. State formation fees are separate; North Carolina charges $60 for nonprofit Articles of Incorporation (Form N-01).

Can our organization use Form 1023-EZ?

Only if you answer no to every Eligibility Worksheet question: gross receipts of $50,000 or less in each of the next 3 and past 3 years, assets of $250,000 or less, and not applying as a church, school or hospital, not an LLC and not formed abroad. Otherwise use the full Form 1023.

Does a church have to apply for 501(c)(3) or file Form 990?

No. The IRS says churches that meet the 501(c)(3) requirements are automatically treated as exempt and do not file annual 990-series returns. Many apply anyway for a determination letter, and churches with employees still have payroll filings.

What does a small nonprofit file each year, and when?

Form 990-N if gross receipts are normally $50,000 or less; Form 990-EZ if receipts are under $200,000 and assets under $500,000; otherwise Form 990. It is due on the 15th day of the 5th month after year-end, May 15 for calendar years, and Form 990-N cannot be extended.

What happens if we don't file Form 990 for several years?

After three consecutive years without filing, including Form 990-N, exemption is automatically revoked as of the original due date of the third return. There is no appeal; the organization must apply for reinstatement.

Are North Carolina nonprofits exempt from sales tax on purchases?

No. North Carolina nonprofits pay sales tax at purchase. Qualifying organizations get a refund account ID on Form E-585NPA and file Form E-585 twice a year: January to June by October 15, and July to December by April 15 of the next year.

Start a 501(c)(3): Form 1023-EZ, Form 990 and NC Rules

The short answer

To form a 501(c)(3), first create a nonprofit entity under state law (in North Carolina, Articles of Incorporation on Form N-01), get an EIN, then file Form 1023 ($600 user fee) or the shorter Form 1023-EZ ($275) online with the IRS. Form 1023-EZ is only for small organizations: projected gross receipts of $50,000 or less in each of the next 3 years, no year over $50,000 in the past 3 years, and assets of $250,000 or less; churches, schools and hospitals cannot use it. Once exempt, you file Form 990-N, 990-EZ or 990 every year by the 15th day of the 5th month after year-end (May 15 for calendar years), and three straight years of missed filings revoke the exemption automatically. In North Carolina, also check whether you need a charitable solicitation license, and claim back sales tax paid on purchases twice a year.

Who this applies to

Chinese community groups that want to formalize: hometown and alumni associations, Chinese-American associations, Chinese school parent associations, PTA-like parent groups, sports and arts clubs; new or long-established Chinese churches; and groups raising money for disaster relief that want to give donors deductible receipts.

It also applies to groups that have existed for years but never filed a 990-series return, or are not sure they are still on the IRS list of exempt organizations.

Step 1: Form the organization and get an EIN

You need a legal entity and an EIN before applying for federal exemption.

Entity type: a 501(c)(3) can be a nonprofit corporation, an unincorporated association or a trust. Most groups choose a nonprofit corporation for liability protection. In North Carolina you file Articles of Incorporation (Form N-01) with the Secretary of State; the state fee is $60.

Key clauses: the purposes must be limited to religious, charitable, educational or other 501(c)(3) purposes, and on dissolution remaining assets must go to another 501(c)(3) or a government for a public purpose. The IRS will ask you to amend documents missing these.

EIN: apply free on Form SS-4, including online. Then open a bank account in the organization's name rather than collecting donations in a personal account.

Parent organization? If your group is a chapter of a national or state organization, ask whether the parent has a group exemption that already covers you.

Step 2: Form 1023 or Form 1023-EZ

Small, simple organizations can use the 1023-EZ; churches, schools and larger groups use the full 1023. Both are filed only online through Pay.gov.

Who can use Form 1023-EZ

Under the Eligibility Worksheet in the 1023-EZ instructions, a "yes" to any of these makes you ineligible: projected gross receipts over $50,000 in any of the next 3 years; gross receipts over $50,000 in any of the past 3 years; total assets with a fair market value over $250,000. Organizations seeking status as a church, school or hospital, 509(a)(3) supporting organizations, organizations formed abroad or with a foreign mailing address, and LLCs also cannot use it. You keep the worksheet; you do not submit it.

Fees and timing

Current IRS user fees: $600 for Form 1023 and $275 for Form 1023-EZ, paid on Pay.gov. If you file within 27 months after the end of the month you were formed and are approved, exemption is retroactive to formation; later filings are generally effective from the submission date unless you use the full Form 1023 to ask for an earlier date.

Churches and very small organizations

The IRS says churches (including synagogues, temples and mosques) that meet the 501(c)(3) requirements are automatically treated as exempt and need not apply, and organizations other than private foundations with gross receipts normally of $5,000 or less need not file Form 1023. Many still apply because an IRS determination letter reassures donors, banks and partners.

Check that 501(c)(3) is right: a members-only social group may fit 501(c)(7), and an advocacy group 501(c)(4). Gifts to those are not deductible, and the application is different.

Step 3: The annual 990-series return

Except churches, nearly every exempt organization files every year; size decides the form.

Form 990-N (e-Postcard): gross receipts normally $50,000 or less.

Form 990-EZ: gross receipts under $200,000 and total assets under $500,000.

Form 990: gross receipts of $200,000 or more, or total assets of $500,000 or more. Private foundations file Form 990-PF.

Due date: the 15th day of the 5th month after year-end, May 15 for calendar-year groups. Form 8868 gives an automatic 6-month extension for Forms 990 and 990-EZ; Form 990-N cannot be extended.

Churches: churches, their integrated auxiliaries and conventions of churches do not file annual returns, though churches with employees still run payroll.

Automatic revocation: three consecutive years without filing, including 990-N, revokes exemption automatically, effective on the original due date of the third return. There is no appeal; you must apply for reinstatement.

Donor receipts: for any single gift of $250 or more, the donor needs a written acknowledgment stating whether anything was given in return.

Step 4: North Carolina items

In North Carolina, check the charitable solicitation license, and claim back sales tax you paid.

Charitable solicitation license

Anyone soliciting contributions directly in North Carolina generally needs a license from the Secretary of State's Charities Division, renewed every year with a fee scaled to contributions. G.S. 131F-3 exemptions most relevant to our clients are solicitations for a religious institution, and organizations that receive less than $50,000 in contributions in a calendar year and do not compensate any officer, trustee, organizer, fund-raiser or solicitor. The small-organization exemption is requested in writing and reviewed annually by the Department.

Sales tax: pay now, claim a refund twice a year

North Carolina does not exempt nonprofits from sales tax at purchase. Qualifying nonprofits, most commonly 501(c)(3)s, claim a semiannual refund of state and local sales tax paid. Apply first on Form E-585NPA for a refund account ID beginning with "72," then file Form E-585: January to June by October 15, and July to December by April 15 of the next year. Claims filed more than 3 years after the due date are barred. Items such as electricity, telecommunications, motor vehicles and alcoholic beverages do not qualify. If the group sells goods or food, it generally must register separately and collect sales tax.

A simple example

Simplified, with assumed numbers.

A Chinese association in Cary incorporates in 2026 (Form N-01, $60) and gets an EIN. It expects about $40,000 a year of dues and donations for the next 3 years, has about $10,000 of assets and no paid staff, so it files Form 1023-EZ on Pay.gov and pays $275.

Once approved, it uses a calendar year and files its 2026 Form 990-N by May 15, 2027. Because it receives less than $50,000 of contributions and pays no one, it requests an exemption from the North Carolina solicitation license and cooperates with the annual review.

It spent $8,000 on supplies in the second half of 2026. Assuming a combined local rate of 7.25%, it paid about $580 of sales tax and can claim it on Form E-585 by April 15, 2027.

Common mistakes

Assuming state incorporation means tax-exempt. Federal 501(c)(3) status, and donor deductions, depend on the IRS.

Skipping the filing because income is small. Small groups still file 990-N; three missed years mean automatic revocation.

Collecting donations in a personal account. It mixes funds and complicates later filings.

Assuming every Chinese school can use the 1023-EZ. An organization applying as a school (regular curriculum, faculty and students) is ineligible under the worksheet.

Showing an exemption certificate at the register in North Carolina. Nonprofits pay the tax and claim it back.

What to do and when

Month of formation: file Form N-01, adopt bylaws, get an EIN, open a bank account.

Within 27 months of formation: file Form 1023 or 1023-EZ so exemption reaches back to formation.

Every May 15 (calendar year): file Form 990-N, 990-EZ or 990, or extend Forms 990/990-EZ on Form 8868.

Every April 15 and October 15: file Form E-585 for the July to December and January to June periods.

Before fundraising: obtain a North Carolina solicitation license or exemption, then renew or support the annual review.

How YCL can help

We help churches, Chinese community associations, parent groups and charities form North Carolina nonprofit corporations, obtain EINs, file Form 1023 or 1023-EZ, and file Forms 990-N, 990-EZ and 990 every year. We also handle North Carolina solicitation license or exemption requests and Form E-585 refund claims. See our nonprofit tax return service.

If your organization's exemption has already been automatically revoked, we can help reconstruct past filings and apply for reinstatement.

YCL Accounting & Consulting is a multi-state CPA firm serving clients across the U.S. in English and Chinese, led by co-founder Gloria (Chenchen) Liu, CPA. You can start with a free 15-minute consultation.