501(c)(3) Status

Non-for-profit 501(c)(3) status allows your masjid to be tax exempt from property tax and sales tax

More importantly, this status allows the organization to receive tax-deductible donations

The incorporating document are usually filed with your state Department Of State

Howeve, sales tax exemption has to be filed with the state Department Of Revenue (or similar names related to taxation)

You need to incorporate and register with your state

Obtain EIN (Employer Identification Number) from IRS

Very useful webpage

IRS training workshop

Get the following information:

• Exempt purpose: in this case it is religious (if you are starting an Islamic school then your purpose is educational)

• Purpose statement: explain the problem you are trying to solve, your solutions and your expected results

• Financial information: income (or anticipated income), expenses and assets

• Structure: members and boards

• Articles of organization

• Bylaws

• Conflict of interest policy

• Dissolution clause

Decide who will sign the application (usually the president of the organization)

 Decide who is the contact person

Decide if you are going to file by yourself, use an agent or an attorney

File form 1023 with IRS (masjids are not eligible to file for 1023 EZ)

If you appoint an attorney or another agent to file for you, you need to fill form 2848

Answer all the questions carefully and correctly

Ask if you are not sure

Include all the required documents mentioned above

Keep records of all donations, grants and funding received

Keep records of your operational expenses

Non-for-profits are required to file form 990 with IRS annually. However, masjids are exempt from that

Follow the following rules

• • Must be organized and operated specifically for religious, educational, scientific, or other

  • Should not benefit any director or overcompensate/enrich anyone

  • Should not be attempting to influence legislation through any activities

  • Should not interfere in political campaigns or allow a substantial part of your organization's activities to be geared toward influencing legislation

  • Should not be part of any illegal or other activities that violate fundamental policy

  • Make sure your organization operates the way you said it would in your application

Hold regular meetings of the board of directors and take notes.

Run your organization like a business with its own bank account and credit card. Keep all financial transactions completely separate from personal accounts

Avoid earning unrelated business income through your organization. This is income from an activity that is regularly carried on and is not substantially related to your organization’s purpose. Such income is subject to the unrelated business income tax.