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Tax Information

Tax-Exempt Status for Chapters

IPMA-HR has been granted a tax-exempt status by the U.S. Internal Revenue Service (IRS). Because individual Chapters are separate and autonomous bodies from the National Association and because IPMA-HR is not responsible for any liabilities that a Chapter incurs, a Chapter does not automatically receive a tax-exempt status from the IRS. However, Chapters willing to follow the necessary steps to obtain the same tax status are eligible to do so.

A tax-exempt status as a charitable organization, pursuant to Section 501 (c)(3) of the IRS Code, can be obtained either as a private foundation or as a public charity. Chapters should note that a public charitable organization has less restrictive operational and reporting requirements than a private foundation. However, to obtain such a status, it usually is necessary to demonstrate broad-based sources of receipts that all Chapters should be able to provide in detail. More specific information for obtaining tax-exempt status may be found in the IRS publication 557 “Tax-Exempt Status for Your Organization.” To comply with the necessary requirements for obtaining a tax-exempt status, the following steps must be taken:

  1. Check organization documents (i.e., articles of incorporation and/or Chapter bylaws) to determine whether they sufficiently state the necessary charitable purposes, use of assets, and distribution of assets upon dissolution. Those Chapters that are not corporations should have similar provisions in their respective organizational documents.
  2. Obtain and complete IRS Form 1023.
  3. Submit both above to the local Internal Revenue Service office for a determination.

Because IPMA-HR already has obtained a favorable determination letter as to its tax-exempt status as a public charitable organization, by adopting purposes like those stated in the bylaws of the Association, Chapters should be following the organizational requirements for obtaining tax-exempt status. In the request for a determination letter, mention that the Chapter is an independent Chapter affiliated with IPMA-HR, an organization that has a tax-exempt status. This type of statement might expedite the IRS determination process as to the Chapter organization because the national office of the IRS has already favorably decided for the National organization.

There are at least two advantages of obtaining exempt status:

  • The organization can solicit contributions from individuals who may deduct them as charitable contributions
  • Except for unrelated business income, receipts from income-producing activities related to the exempt purposes of the organization should not be taxable income. This may be especially important to Chapters that conduct and earn a profit from independent seminars.
Tax-exempt status does not relieve a Chapter from filing Form 990 even if its income is less than $25,000.28. It is strongly suggested that legal counsel be obtained to help a Chapter prepare the necessary organizational documents, IRS application, and to check whether the Chapter is compliant with all other organizational reporting requirements pursuant to the applicable state laws.