Remember, tax-exempt is not the same as non-profit.  In fact, in the current business climate there are numerous organizations that, to the disappointment of their owners, are non-profit but are not tax exempt.  Tax-exempt is designation granted by the IRS.

If your organization is not tax-exempt and tax-exempt status is desired, the process starts with the filing of an “Application for Recognition of Exemption” and payment of a fee.  Yes, the IRS charges a fee of either $150 or $500, depending on your estimated gross receipts, to apply for tax-exempt status.  When the exemption is received from the IRS, the organization will be designated as a 501(c)(3) exempt organization.  Kentucky and its local governments recognize the federal exemption from income taxes.

Another plus for an organization obtaining the exemption from federal income taxes is the exemption from Kentucky sales/use tax.  This means an item of tangible personal property, i.e., a soccer goal, purchased by the organization and used by the organization in its exempt purpose, can be purchased free of Kentucky sales/use tax.  Kentucky will not grant this exemption unless the organization has been granted 501(c)(3) exempt status by the IRS. 

If your organization desires to obtain tax-exempt status contact either your organization’s accountant or contact our State Office for more info