Starting a 501(c)(3) in Arizona takes two filings: incorporate with the Arizona Corporation Commission (ACC) for $40, then apply to the IRS for federal tax-exempt recognition for either $275 or $600 depending on your size. The state step creates the corporation; the federal step gives it the tax exemption and the ability to receive deductible donations. Get the language and the timing right on both, and your exemption reaches back to the day the ACC created your entity.
Pick a Name and Lock In Your Charitable Purpose
Your nonprofit’s name has to be distinguishable from every other entity on file in Arizona, and it must include a corporate identifier such as “Corporation,” “Incorporated,” “Company,” or an abbreviation of one. Run it through the ACC’s entity search before you draft anything.
Decide your charitable purpose at the same time, because it drives everything that follows. The IRS grants 501(c)(3) status only to organizations operated exclusively for religious, charitable, scientific, literary, or educational purposes, or for fostering amateur sports, or preventing cruelty to children or animals.1Internal Revenue Service. Exemption Requirements – 501(c)(3) Organizations Your mission statement will appear in both the state Articles and the federal application, so it needs to sit squarely inside one or more of those categories from the first draft.
Draft Articles of Incorporation With the IRS Clauses
The Articles of Incorporation are the document that creates the corporation. Arizona requires them to include the corporate name, a brief description of the intended activities, the name and address of each initial director, the statutory agent’s name and street address, and a statement of whether the corporation will have members.2Arizona Legislature. Arizona Revised Statutes 10-3202 – Articles of Incorporation If your known place of business is different from the statutory agent’s address, list it separately.
The ACC’s standard nonprofit form is not enough on its own. It lacks the restrictive language the IRS requires for 501(c)(3) organizations, so you need to draft custom Articles.3Arizona Corporation Commission. Instructions for Articles of Incorporation – Nonprofit Corporation Two clauses are essential:
- A purpose clause limiting the corporation’s activities to those allowed under Section 501(c)(3).
- A dissolution clause stating that if the organization shuts down, remaining assets go to another 501(c)(3) organization or to a government entity for a public purpose.4Internal Revenue Service. Charity – Required Provisions for Organizing Documents
Both clauses must appear in the Articles themselves, not just in the bylaws. The IRS treats the Articles as the primary organizing document and will reject applications where this language is missing. The Articles should also state that the organization will not engage in political campaign activity and will not devote a substantial part of its activities to lobbying.1Internal Revenue Service. Exemption Requirements – 501(c)(3) Organizations Get the wording right the first time and you avoid amending later and refiling with the ACC.
File the Incorporation Package With the ACC
You file three documents together: the Articles of Incorporation, a Statutory Agent Acceptance (Form M002) signed by your agent, and a Certificate of Disclosure. The Articles carry a $40 filing fee.3Arizona Corporation Commission. Instructions for Articles of Incorporation – Nonprofit Corporation The M002 has no separate fee.5Arizona Corporation Commission. Form M002 – Statutory Agent Acceptance
The Certificate of Disclosure is Arizona-specific and catches founders off guard. It asks whether any director, officer, or incorporator has a felony conviction, certain civil judgments, or involvement in corporate bankruptcies within the past five years.6Arizona Corporation Commission. Instructions for Certificate of Disclosure A “yes” answer does not automatically disqualify anyone, but the disclosure must be honest. Signing a false Certificate is a felony under Arizona law.
When the ACC approves the filing, it issues the corporate charter that officially creates the nonprofit entity.
Publish the Articles Within 60 Days
Arizona law requires the Articles of Incorporation to be published within 60 days after the ACC approves the filing.7Arizona Legislature. Arizona Revised Statutes Title 10 – 10-3203 The ACC’s approval letter tells you where and how to publish.3Arizona Corporation Commission. Instructions for Articles of Incorporation – Nonprofit Corporation Costs vary by newspaper and by the length of your Articles. Keep the Affidavit of Publication the newspaper issues afterward with your corporate records.
Get an EIN From the IRS
Before you can open a bank account or file the federal exemption application, you need an Employer Identification Number. The online application is free and produces the EIN immediately.8Internal Revenue Service. Get an Employer Identification Number You will need the Social Security number or ITIN of a responsible party, usually a founding director or officer. Wait until the ACC has approved your incorporation before applying, or the IRS may delay processing.
Adopt Bylaws and a Conflict of Interest Policy
Bylaws are the internal operating manual: how the board meets, how officers are elected and removed, what counts as a quorum, how records are kept. They are not filed with the ACC, but you will attach them to the federal exemption application.
A Conflict of Interest Policy is not technically required by the Internal Revenue Code.9Internal Revenue Service. Governance and Related Topics – 501(c)(3) Organizations But Form 1023 asks whether you have one, and the IRS reviews it during the application.10Internal Revenue Service. Form 1023 – Purpose of Conflict of Interest Policy Applying without one invites extra scrutiny and follow-up questions. The policy should describe how the board identifies and handles situations where a director or officer has a personal financial interest in a transaction involving the organization.
Decide How You Will Qualify as a Public Charity
Every 501(c)(3) is classified as either a public charity or a private foundation. If the IRS does not classify your organization as a public charity, it defaults to private foundation status, which carries a 1.39% excise tax on net investment income, stricter self-dealing rules, and mandatory annual payouts.11Office of the Law Revision Counsel. 26 USC 4940 – Excise Tax Based on Investment Income
Most new nonprofits want public charity status. The most common route is the public support test: roughly one-third of your funding must come from the general public, government grants, or other public charities over a rolling five-year period.12Internal Revenue Service. Determine Your Foundation Classification New organizations get an automatic grace period and are not required to demonstrate that they pass the test until the sixth year of operation. Your Form 1023 still has to explain why you expect to qualify, so map out your fundraising strategy before you file.
File Form 1023 or 1023-EZ With the IRS
Which Form You Use
The IRS offers two application paths. The streamlined Form 1023-EZ is available if you project annual gross receipts of $50,000 or less in each of the next three years and hold total assets of $250,000 or less.13Internal Revenue Service. Instructions for Form 1023-EZ The eligibility worksheet at the end of the 1023-EZ instructions lists additional disqualifying criteria, so read it carefully even if the numbers work.
Everyone else files the full Form 1023.14Internal Revenue Service. About Form 1023 The full form asks for a narrative description of your planned activities, projected budgets covering two to five years, compensation details for officers and key employees, and copies of your Articles, bylaws, and Conflict of Interest Policy. The narrative gets the most scrutiny. The IRS wants to see how each program advances your charitable mission, who benefits, and how you deliver it.
Fees
Both forms are submitted electronically through Pay.gov. The user fee is $275 for Form 1023-EZ and $600 for the full Form 1023.15Internal Revenue Service. Form 1023 and 1023-EZ – Amount of User Fee Both fees are non-refundable even if the application is denied.
The 27-Month Deadline
Timing controls whether your exemption is retroactive. File within 27 months of the date you incorporated with the ACC and your tax-exempt status reaches back to your formation date. File later and the IRS may only recognize your exemption from the date it receives your application.16Internal Revenue Service. Application Filed Late Donations received in the gap period may not be deductible for the donors, which can damage credibility with your earliest supporters.
What to Expect Back
Form 1023-EZ is typically processed within a few weeks. The full Form 1023 can take six months or longer, especially when the IRS asks follow-up questions. Approval comes as a determination letter confirming your 501(c)(3) status and its effective date. Keep the letter permanently. You will use it for state tax registrations, grant applications, and donor verification for years to come.17Internal Revenue Service. Public Disclosure of Determination Letters
Arizona Taxes and Solicitation
Federal 501(c)(3) status does not exempt your organization from Arizona’s Transaction Privilege Tax (TPT). Arizona has no blanket TPT exemption for nonprofits. Exemptions exist only for narrow categories, mostly qualifying hospitals, qualifying health care organizations, community health centers, and rehabilitation programs for people with disabilities.18Arizona Department of Revenue. Exemption Letter Required If you fit one of those categories, you may need an exemption letter from the Arizona Department of Revenue and will provide vendors with a completed Arizona Form 5000 to claim exemption on a given transaction.19Arizona Department of Revenue. Arizona Form 5000 – Transaction Privilege Tax Exemption Certificate For most 501(c)(3) organizations, TPT applies to purchases the same as for any other buyer.
Charitable solicitation is easier here than in most states. Arizona has no general charitable solicitation registration requirement. A 2013 law repealed the old Secretary of State filing, so most nonprofits can solicit donations without registering with any state agency.20Arizona Secretary of State. Veterans Charities Organizations Organizations soliciting in the name of veterans’ organizations are the exception and must still register with the Secretary of State.
Keep the Exemption With Two Annual Filings
ACC Annual Report
Every Arizona nonprofit corporation files an annual report with the ACC. The fee is $10.21Arizona Corporation Commission. Business Services FAQs Missing it is one of the most common early mistakes, and the consequences are serious: the ACC can administratively dissolve the corporation, which pulls the legal foundation out from under your federal tax exemption.
IRS Form 990 Series
Every 501(c)(3) files an annual information return, no matter how small. The form depends on gross receipts:
- Form 990-N (e-Postcard) for organizations with annual gross receipts normally $50,000 or less.
- Form 990-EZ for organizations with gross receipts under $200,000 and total assets under $500,000.
- Form 990 for organizations above those thresholds.
Miss the filing for three consecutive years and the IRS automatically revokes your tax-exempt status.22Internal Revenue Service. Automatic Revocation of Exemption for Non-Filing – Frequently Asked Questions No warning, no hearing, no grace period after the third missed year. Reinstatement requires filing a new exemption application and paying the user fee again, and in most cases exemption is reinstated only from the date you reapply, not retroactively.23Internal Revenue Service. Reinstatement of Tax-Exempt Status After Automatic Revocation