Forming a Nonprofit Corporation in Washington State

A Washington nonprofit corporation is not necessarily tax-exempt for federal, or for state and local property, business & occupation or sales tax purposes. A Washington nonprofit corporation is one that is formed under the Washington Nonprofit Corporation Act, which permits a broad range of purposes but does not permit the issuance of stock.

A Washington nonprofit corporation must satisfy additional conditions to qualify for exemption from tax at the federal, state or local level.

Steps to take before forming a corporation

• Determine whether corporate status is appropriate.
• Adopt a mission statement.
• Define the programs and population to be served.
• Determine whether the organization will have members.
• Identify initial directors.
• Determine sources of funding.
• Prepare a budget for the first three years.
• Determine whether the organization will seek federal tax exemption under section 501(c)(3) or any other provision of the Federal Income Tax Code.
• Will the organization be involved in legislative lobbying or political campaigns?
• If section 501(c)(3) status is contemplated, will the organization be a public charity or private foundation?
• Identify and reserve a name for the corporation.

Prepare iinitial documents

• Articles of incorporation
• By-laws

File with Washington Secretary of State

• Form the corporation by filing the Articles of Incorporation with the Washington Secretary of State.
• File electronically or obtain forms on-line from the Washington Secretary of State.
• File Master Business Application with Washington State Department of Licensing (additional fee applies for electronic filing).
• Master Business Application provides registration with:
• Washington Department of Revenue (state B&O and sales tax).
• Washington Department of Labor and Industries.
• Employment Security Department.
• If Master Application is filed before hiring employees, the organization must re-file when employees are hired.

Apply for Federal tax exemption

• Obtain a Federal Employer Identification Number (EIN). This can be accomplished instantly on-line from the IRS website.
• File Application for Federal tax-exempt status.
• 501(c)(3) organizations file IRS Form 1023 (exemptions from filing apply for churches, their integrated auxiliaries and organizations that normally have gross receipts less than $ 5,000).
• Most other tax-exempt organizations file IRS Form 1024.

City and County registrations

City registrations

• Master Business License covers required registrations in some Washington cities
• Some Washington cities (including Seattle) require separate business and tax registrations.
• For Seattle registration, go to the City of Seattle website.

County property tax filings

• In Washington, real and personal property taxes are administered at the county level.
• Most 501(c)(3) organizations are eligible for real and property tax exemptions, but exemption is not automatic.
• Submit application for real and personal property tax exemptions by March 31(or within 60 days of acquiring real property if later) to obtain exemption for the following year.
• Exemption must be renewed annually.

For a summary of taxes and tax exemptions applicable to 501(c)(3) organizations in the Washington State Legislature website (prepared as of May 1, 2006).

Additional applications and registrations that may be required

Charitable solicitation. If soliciting contributions from the public in Washington State, an organization must register with the Washington Secretary of State Charities Program.

An organization may need to register in additional states if soliciting donations outside the state of Washington. For a list of state offices go to National Association of State Charity Officials.

Washington Charitable Trust Act. Washington’s Charitable Trust Act applies to nonprofit corporations (and other organizations) that are either formed to administer a charitable trust, or hold assets that can only be used for charitable, religious, eleemosynary, benevolent, educational or similar purposes. In these cases, the corporation is required to register with the Secretary of State if it holds income-producing assets in excess of  $250,000 and all or part of the principal or income is presently available for charitable purposes. Registration is not required if all of the assets must be expended for charitable purposes within one year.

Washington State Gambling Commission.  If a Washington nonprofit corporation (or other charitable organization) plans to  hold a raffle, bingo, or other gaming event as a fundraiser, it may be required to notify, or obtain a license from, the Washington State Gambling Commission. Go to Washington State Gambling Commission.

Federal and state lobbying laws. Organizations that engage in any lobbying activity should determine whether and how any federal and state lobbying laws, including registration requirements, apply.