How to Become Tax Exempt in PA for Nonprofits

To become tax exempt in Pennsylvania as a nonprofit, file Form REV-72 with the Department of Revenue and show that your organization meets the state’s legal standards for tax-exempt status. Most applicants need to secure federal 501(c)(3) status first, and every nonprofit outside a narrow set of categories (churches, volunteer fire companies, schools, government agencies) must prove it qualifies as an “institution of purely public charity” under a demanding five-part test. The application is free, can be submitted online through the myPATH portal, and rises or falls on the strength of your documentation.

Start With Federal 501(c)(3) Status

Pennsylvania’s REV-72 asks for a copy of your IRS determination letter, so the federal application usually comes first.¹ To qualify under Section 501(c)(3), your organization must be organized and operated exclusively for exempt purposes, no earnings can benefit any private individual, and it cannot devote a substantial portion of its activities to lobbying or take part in any political campaign.²

Your articles of incorporation also have to pass two tests. They must limit your purposes to those recognized under 501(c)(3), and they must include a dissolution clause directing that if the organization ever closes, its assets go to another exempt organization or to a federal, state, or local government for a public purpose.³ If your articles don’t already contain that language, amend them before you file. Sample dissolution wording appears in IRS Publication 557.⁴

You’ll file either Form 1023 (the full application, with a $600 user fee) or Form 1023-EZ (a streamlined version for smaller organizations, at $275).⁵ You’ll also need a Federal Employer Identification Number (EIN), which every nonprofit must have even without employees. Apply online through the IRS website or by filing Form SS-4.

The IRS encourages, but does not require, adopting a conflict of interest policy before you apply. The policy sets a procedure for situations where a board member’s personal financial interests might clash with the organization’s mission, including disclosure and recusal from the related vote.⁶ Having one on file strengthens both the federal application and your eventual Pennsylvania filing.

The Five-Part Purely Public Charity Test

Churches and volunteer fire companies only need to complete Part 1 of the REV-72, which covers basic identifying information.⁷ Educational institutions, religious organizations, and government agencies qualify with additional documentation. Everyone else, from hospitals to social service agencies to community groups, must prove they meet the “purely public charity” standard.

The Department of Revenue evaluates that standard against two overlapping frameworks: the judicial test from Hospital Utilization Project v. Commonwealth (the “HUP test”)⁸ and the statutory criteria in Act 55, the Institutions of Purely Public Charity Act.⁹ All five elements must be satisfied. Failing even one results in denial.

Charitable purpose. Your organization must exist primarily to relieve poverty, advance education or religion, prevent disease, accomplish a governmental or municipal purpose, or serve another recognized charitable goal.¹⁰
No private profit motive. All revenue must go back into the mission. The HUP court put it plainly: the organization “must not go beyond self-support.”⁸
Free community service. The organization must donate or provide a substantial portion of its services for free or at reduced cost.
Charity to a genuine class of people in need. Services must benefit a “substantial and indefinite class of persons who are legitimate subjects of charity,” meaning people who cannot provide for themselves what the organization offers.¹⁰
Government burden relief. The organization must provide services the government would otherwise need to fund or deliver itself.

Prepare to demonstrate each element with historical data, financial records, and concrete examples of how your programs operate. Vague mission statements won’t hold up. The state wants evidence of actual operations, not aspirations.

Documents to Assemble Before Filing REV-72

Once you have your IRS determination letter, gather these before you start the state application:

IRS determination letter confirming your 501(c)(3) or other exempt status.
Articles of incorporation, including your dissolution clause and stated charitable purposes.
Bylaws showing your governance structure.
Your most current income and expense statement with all sources and categories listed. A new organization can substitute a proposed budget.¹
Your most recent IRS Form 990, if your organization files one.¹
Your Federal EIN.

The application asks for a narrative describing your organization’s primary activities and how they meet a charitable need. This is where reviewers spend the most time. Be specific: who you serve, how many people you reach, what you provide for free or at reduced cost, and how your work takes a burden off government services. The five-part test drives every question on the form, and your narrative should address each element directly.

You’ll also list officers and directors and their compensation, so the state can confirm no one is receiving an outsized private benefit. Expect questions about fundraising methods, any fees you charge, and the ratio of program spending to administrative costs. Organizations where most money flows to overhead face hard questions.

How to Submit the Application

You can file the completed REV-72 and supporting documents through myPATH, the Department of Revenue’s online portal.¹ The online route gives you faster tracking and a digital record. If you prefer paper, mail everything to:

PA Department of Revenue
PO Box 280901
Harrisburg, PA 17128-0901¹¹

If mailing, complete all sections in black ink and check that every required attachment is included. Missing documents are the most common reason applications stall. There is no filing fee.

What Happens After You Apply

If your application is approved, the Department of Revenue issues a Sales Tax Exemption Number that begins with “75.”¹² You’ll receive a formal approval letter and an exemption certificate to use when making qualifying purchases. The exemption number is not a sales tax license. It only authorizes tax-free purchases for your organization’s exempt activities.

If your application is denied, you can appeal to the Board of Appeals. File your petition online through the Department of Revenue’s Online Petition Center, or mail it to the Board of Appeals at PO Box 281021, Harrisburg, PA 17128-1021. Your denial notice specifies the deadline. Miss it and you lose the right to challenge the decision. If you disagree with the Board of Appeals decision, you can escalate to the Board of Finance and Revenue.¹³

Using Your Exemption Certificate

Having an exemption number doesn’t make every purchase automatically tax-free. When buying goods or services for the organization, present a Pennsylvania Exemption Certificate (Form REV-1220) to the vendor. For purchases of $200 or more, you must also provide the Exempt Organization Declaration of Sales Tax Exemption (Form REV-1715) alongside the REV-1220.¹²

The exemption covers tangible goods and services used to carry out your exempt purpose. It does not cover everything. For most exempt nonprofits, these purchases remain taxable:

Materials and labor for building, improving, or repairing real property, though routine maintenance supplies are exempt.
Anything purchased for use in a commercial operation unrelated to your charitable mission.
Equipment bought to maintain buildings or land.¹²

Misusing the exemption certificate, whether by the buyer or seller, is punishable by fine and imprisonment.¹² Using the exemption number to make personal purchases or to buy goods for an unrelated side business is exactly what triggers enforcement.

Keeping Your Exemption in Good Standing

Approval isn’t permanent. Pennsylvania requires exempt organizations to report all changes to their structure, mission, or operations to the Department of Revenue within 10 days of the change, in writing.⁷ That includes changes to leadership, activities, funding sources, or anything else that could affect whether you still meet the five-part test. If the Department later finds you’ve drifted from your exempt purpose, or that you failed to report a significant change, it can revoke the exemption and hold you responsible for sales tax on purchases made after you stopped qualifying.

Your federal obligations continue too. Tax-exempt organizations file an annual information return with the IRS, and the version depends on size. Organizations with gross receipts of $50,000 or less can file Form 990-N (the e-Postcard). Those with gross receipts under $200,000 and total assets under $500,000 can use Form 990-EZ. Everyone above those thresholds files the full Form 990.¹⁴ Failing to file for three consecutive years results in automatic revocation of federal tax-exempt status, which in turn jeopardizes your Pennsylvania exemption since the state application depends on that IRS determination letter.

Watch for unrelated business income as well. If your organization earns money from activities unrelated to its exempt purpose, such as running a gift shop, renting out unused space, or selling advertising, that income may be subject to Unrelated Business Income Tax. Any organization with $1,000 or more in gross income from unrelated business activities must file Form 990-T. If the estimated tax owed for the year reaches $500 or more, the organization must make quarterly estimated tax payments.¹⁵ Being exempt from income tax on charitable activities does not protect revenue from side ventures that have nothing to do with the mission.

Property Tax Exemption Is Separate

Sales tax exemption and property tax exemption are two different things in Pennsylvania. Getting one does not automatically give you the other. Property tax exemptions are handled at the county level through your local assessment office, not through the Department of Revenue. You’ll apply separately for each property, and the same purely public charity standard generally governs eligibility. The Pennsylvania Constitution limits real property tax exemption to “that portion of real property of such institution which is actually and regularly used for the purposes of the institution,” so if your nonprofit owns a building but rents part of it out commercially, the rented portion likely won’t qualify. Deadlines and procedures vary by county. Contact your county’s property assessment office directly for the specific requirements.

1
Commonwealth of Pennsylvania. Apply for Non-Profit Sales Tax Exemption
2
Internal Revenue Service. Exemption Requirements – 501(c)(3) Organizations
3
Internal Revenue Service. Organizational Test Internal Revenue Code Section 501(c)(3)
4
Internal Revenue Service. Does the Organizing Document Contain the Dissolution Provision Required Under Section 501(c)(3)
5
Internal Revenue Service. Form 1023 and 1023-EZ: Amount of User Fee
6
Internal Revenue Service. Form 1023: Purpose of Conflict of Interest Policy
7
Commonwealth of Pennsylvania. Application for Sales Tax Exemption REV-72
8
Justia. Hospital Utilization Project v. Com.
9
Pennsylvania General Assembly. Institutions of Purely Public Charity Act
10
Pennsylvania General Assembly. Institutions of Purely Public Charity Act – Section 5
11
Pennsylvania Department of Revenue. Mailing Addresses
12
Commonwealth of Pennsylvania. Pennsylvania Exemption Certificate REV-1220
13
Commonwealth of Pennsylvania. Tax Appeals
14
Internal Revenue Service. Instructions for Form 990
15
Internal Revenue Service. Unrelated Business Income Tax