A tax exempt letter is a letter that establishes an organizations status as a “tax exempt” or charitable entity. When an organization applies for a grant or funding from a private foundation they will usually require this letter to be part of the application process.
What Makes An Organization Tax Exempt?
A not for profit corporation is an organization that was formed to benefit from other than the accumulation of profits. It is not meant to shield companies or people from avoiding income tax. Most types of nonprofit organizations are religious, charitable or educational. After the organization has gone through the not for profit application process the government will award a tax exempt letter usually along with a certificate that proves the status.
What the Letter Should Include
A tax exempt letter needs to include the name and contact information of the organization. Then establish the reason for the tax exempt status such as listing what the organization does that will profit the public. Once this statement is made then you will need to list the ways that you will benefit from the status as well as listing what benefits will not be taken advantage of. You will need to reestablish your organizations status yearly in some states, be aware of the rules in your state for proper status updates.
ABC Incorporated 09-09-09
1234 Oswald St
Anytown, USA 12345
To whom it may concern,
This letter is to inform you of our application for tax exempt status. Our company ABC Inc is a not for profit organization founded in 1919 by a group of individuals trying to help our community. We offer a place for the youth to learn extra skills that will help them in the job market. Giving us tax exempt status will help us to put more of our funds into helping today’s youth. The variety of youth that we can help is wide in range and opportunity. We will use our status to: purchase computer equipment, recruit volunteers and supply our youth facility with many opportunities.
Thank you for the opportunity to apply for exempt status, we will look forward to your reply. If there is any information that you would like about our organization or facilities please do not hesitate to contact me.
President ABC Inc
This is a brief style letter that can be submitted with your application.
What You Will Receive from the Government
You will receive a letter that confirms your tax exempt status and what you are able to use it for. You will likely also receive a form to fill out that you will need to take with you to prove the exempt status to businesses. You will be able to use this form throughout the community to receive the benefits of a tax exempt status. You will not receive a tax exempt number. Your tax exempt number is your EIN or employee identification number.
This briefly explains how to write a letter and what you should include in one. You will also know what to expect from the government agency. There are variances on what some states require so read the requirements carefully.