2. Is a nonprofit corporation exempt from taxes?
A Texas nonprofit corporation is not automatically exempt from federal or state taxes. To become exempt, it must meet certain requirements and apply with both the IRS and the Texas Comptroller of Public Accounts
3. How does a nonprofit organization, including a nonprofit corporation, become tax-exempt?
Exemption from federal taxes is determined by the IRS
. IRS Publication 557, “How to Apply for Recognition of Exemption for an Organization,” describes the rules and procedures for requesting exemption. Questions about federal tax-exempt status can be directed to:
Dallas, Texas 75242
(214) 767-6023 [Customer Service]
Exemption from Texas state taxes is determined by the Texas Comptroller of Public Accounts . Questions can be directed to:
Texas Comptroller of Public Accounts
Exempt Organizations Section
(800) 531-5441 or (512) 463-4600
4. How do I form a “501(c)(3)” corporation?
Filing a Certificate of Formation with the Secretary of State creates a nonprofit corporation. Designations such as 501(c)(3) relate to federal tax provisions only.
If you need information regarding those provisions or how they might affect a Certificate of Formation, you should contact your own tax counsel or the Internal Revenue Service. The Secretary of State’s Form 202 meets minimum state law requirements but does not include any additional statements that the IRS might require for tax-exempt status.....
6. What is a registered agent? What are the agent’s duties? Where may a registered office be located? Can the Secretary of State be the registered agent of a corporation, limited liability company, or limited partnership?
A registered agent is an individual Texas resident, domestic entity, or foreign entity that has qualified or registered to transact business in Texas that is responsible for receiving service of process or official notices addressed to an entity.
An entity’s registered office must be a physical address where the registered agent can be served with process during business hours. It cannot be a post office box that is part of a commercial mail or message service unless that commercial enterprise is the registered agent or the registered office is in a city with a population under 5,000.
The Secretary of State cannot serve as an entity’s registered agent.
9. Can one person be the sole director and officer of a nonprofit corporation?
The Texas Non-Profit Corporation Act and the Texas Business Organizations Code require a nonprofit corporation to have at least three directors, one president, and one secretary.
The same person cannot be both the president and secretary. Officers and directors must be natural persons.
12. Who has authority to investigate the activities of a nonprofit corporation?
The Attorney General has statutory authority to (1) investigate charities that operate as nonprofit corporations, and (2) inspect the books and records of all corporations, including nonprofit corporations.
The Secretary of State has no such authority.
The IRS can revoke a nonprofit corporation’s tax exemption for violations of federal tax laws.
13. Are the books and records of a nonprofit corporation available for inspection?
The Texas Non-Profit Corporation Act and the Texas Business Organizations Code require nonprofit corporations to maintain financial records and minutes of certain proceedings and make them available to members for examination and copying. The board of directors is required to prepare or approve an annual financial report. In general, all records, books, and annual reports must be available to the public for inspection and copying.
These provisions do not apply to (1) corporations that solicit funds only from their members; (2) corporations that do not intend to solicit and do not actually receive contributions in excess of $10,000 during a fiscal year from sources other than their members; (3) proprietary schools; (4) religious institutions; (5) trade associations or professional associations whose principal income is from dues and member sales and services; (6) insurers; (7) charitable organizations concerned with conservation and protection of wildlife, fisheries, or allied natural resources; or (8) alumni associations.
Under certain circumstances, a nonprofit corporation’s books and records are available to the public under the Texas Open Records Act (chapter 552 of the Government Code). Section 552.003(1)(A) of the Open Records Act defines “governmental body” to include the “part, section, or portion of an organization, corporation, commission, committee, institution, or agency that spends or that is supported in whole or in part by public funds.” For more information on the Open Records Act, contact the Attorney General.
14. Does a nonprofit corporation file IRS Form 990 with the Secretary of State?
No; however, under certain circumstances, a nonprofit corporation files Form 990 or 990-PF with the Charitable Trust Section of the Texas Attorney General.