To start a 501(c)(3) nonprofit in Texas, you incorporate as a nonprofit corporation with the Texas Secretary of State, get an Employer Identification Number from the IRS, apply to the IRS for federal tax-exempt status, and then apply separately to the Texas Comptroller for state tax exemptions. The state filing costs $25 and the IRS application fee is either $275 or $600 depending on which form you use. Expect anywhere from a few weeks to several months overall, driven mostly by IRS review time.
The single biggest thing to get right up front is the wording of your formation document. Fix it now and the rest is paperwork; miss it and you will be amending your certificate and refiling with the state before the IRS will approve you.
Pick a Name and Line Up a Registered Agent
Your nonprofit’s name has to be distinguishable from every other entity on file with the Texas Secretary of State. You can check availability by calling the Secretary of State at (512) 463-5555 or emailing the Corporations Section, but the real determination happens when your formation documents are processed.1Office of the Texas Secretary of State. Name Filings FAQs
Every Texas filing entity has to continuously maintain a registered agent with a physical Texas address. The agent receives legal documents and government notices on the organization’s behalf. It can be an individual Texas resident, an officer of the nonprofit, or a business authorized to provide the service, but the nonprofit itself cannot be its own registered agent. Let this lapse and the state can involuntarily terminate the corporation.2Office of the Texas Secretary of State. Registered Agents FAQs
Set Up Your Board
Texas requires at least three directors. You also need a president and a secretary, and the same person cannot hold both offices.3Secretary of State of Texas. Periodic Report of a Nonprofit Corporation Form 802 Identify your initial directors and officers before filing anything, because their names go on the Certificate of Formation.
Draft the Certificate of Formation With the Right IRS Language
The Certificate of Formation is Texas’s version of articles of incorporation. Two clauses in it decide whether the IRS will later approve your exemption:
- A purpose clause limiting the organization to one or more exempt purposes under Section 501(c)(3), such as charitable, educational, religious, or scientific purposes.
- A dissolution clause stating that if the organization shuts down, its remaining assets go to another 501(c)(3), to the federal government, or to a state or local government for a public purpose.4Internal Revenue Service. Does the Organizing Document Contain the Dissolution Provision Required Under Section 501(c)(3)
The IRS publishes sample wording for both clauses that you can adapt.5Internal Revenue Service. Suggested Language for Corporations and Associations per Publication 557 Leaving either clause out is the most common reason IRS applications stall. The service will either reject the application or ask you to amend the certificate and refile with the state, which adds months to the timeline.
Write Bylaws and a Conflict of Interest Policy
Bylaws govern day-to-day operations: how board meetings work, how directors are elected or removed, what officers do, and how finances are handled. You do not file them with the Texas Secretary of State, but the IRS requires a copy when you apply for tax-exempt status.
The IRS also asks about a conflict of interest policy directly on Form 1023. It is not technically mandatory, but the IRS recommends one and expects to see procedures for board members to disclose conflicts and recuse themselves from votes involving those conflicts.6Internal Revenue Service. Form 1023 – Purpose of Conflict of Interest Policy Applying without one raises a flag.
File the Certificate of Formation With the State
File Form 202 with the Texas Secretary of State, online through SOSDirect or by mail.7Office of the Texas Secretary of State. Filing Options The fee is $25.8Secretary of State of Texas. Business Filings and Trademarks Fee Schedule SOSDirect credit card payments carry a small convenience fee, and online filings are processed faster than mail. When the filing is approved, you receive a file-stamped copy. Keep it; the IRS will want it.
Get an EIN
Once you are incorporated, apply for an Employer Identification Number from the IRS. It is free, the online application at IRS.gov takes about 15 minutes, and you get the number immediately. You need the EIN before you can apply for tax-exempt status, open a bank account, or hire employees.
Apply for Federal 501(c)(3) Status
Federal tax exemption is not automatic. You have to apply, and the IRS will evaluate whether your organizing documents limit you to exempt purposes (the organizational test) and whether your activities actually further those purposes without private inurement, substantial lobbying, or political campaign involvement (the operational test).9Internal Revenue Service. Organizational Test Internal Revenue Code Section 501(c)(3)10Internal Revenue Service. Exemption Requirements – 501(c)(3) Organizations
Form 1023 or Form 1023-EZ
There are two application forms. Form 1023-EZ is the streamlined version, available if your annual gross receipts have not exceeded $50,000 in any of the past three years, you do not project exceeding $50,000 in any of the next three years, and your total assets are $250,000 or less. Any “yes” answer on the eligibility worksheet in the 1023-EZ instructions forces you onto the full Form 1023.11Internal Revenue Service. Instructions for Form 1023-EZ
The full Form 1023 asks for detailed narratives about your planned activities, fundraising, and compensation. You upload your Certificate of Formation, bylaws, and supporting documents as a single PDF up to 15 MB. If your file exceeds that, IRS Customer Accounts Services at 877-829-5500 can help you submit the extras separately.12Internal Revenue Service. Instructions for Form 1023
Both forms file electronically through Pay.gov. The user fee is $275 for Form 1023-EZ and $600 for Form 1023, paid at submission. Confirm the current amounts before filing, because they can change.
Processing times are very different. Form 1023-EZ reviews often finish within a few weeks to a couple of months. Form 1023 averages around six months, and stretches to nine or twelve months are not unusual, especially when the IRS sends follow-up questions.
File Within 27 Months
File Form 1023 or 1023-EZ within 27 months of the date your organization was legally formed in Texas and the IRS will recognize your exempt status retroactively to your formation date.13Internal Revenue Service. Application Filed Late Miss that window and your exemption generally starts only from the date you filed, leaving a gap where donations are not tax-deductible and the organization itself may owe income tax.
While your application is pending, you can operate as if you are exempt, including filing Form 990 instead of an income tax return. Donors do not have advance assurance their contributions are deductible during this period. If the IRS approves the application, those contributions become retroactively deductible; if it denies the application, they do not.14Internal Revenue Service. Contributions to Organization With IRS Application Pending
Apply Separately for Texas Tax Exemptions
Federal 501(c)(3) status does not by itself exempt you from Texas franchise tax or sales tax. Submit Form AP-204 to the Texas Comptroller of Public Accounts with a copy of your IRS determination letter. The name on the IRS letter must match the legal name on your Certificate of Formation. If the determination letter is more than four years old at the time you apply, include a current IRS verification letter as well.15Texas Comptroller of Public Accounts. 501(c)(3), (4), (8), (10) or (19) Exemptions
Some organizations with specifically charitable, educational, or religious purposes may qualify under a different form (AP-205, AP-207, or AP-209). Check the Comptroller’s website for which form fits.16Texas Comptroller of Public Accounts. Form AP-204 Texas Application for Exemption
Keep Your Status Once You Have It
The determination letter is not the finish line. Two ongoing obligations matter most in year one and beyond.
Annual Form 990. Which version you file depends on size: Form 990-N (the e-Postcard) for organizations that normally have gross receipts of $50,000 or less, Form 990-EZ for gross receipts under $200,000 and total assets under $500,000, and the full Form 990 at or above either threshold.17Internal Revenue Service. Instructions for Form 990 Miss three consecutive years and the IRS automatically revokes your exempt status, effective the due date of the third missed return, regardless of size or whether you had any income. Reinstatement means a new application and a new user fee.18Internal Revenue Service. Automatic Revocation of Exemption
Texas periodic report. The Texas Secretary of State may require Form 802, listing current directors and officers, no more than once every four years.19Office of the Texas Secretary of State. Form 802 – Instructions for Periodic Report – Nonprofit Corporation If you get a notice and ignore it, the state sends a second notice; if you still do not file within 120 days of that second notice, the corporation is involuntarily terminated. Also keep your registered agent and registered office information current, and update it promptly when it changes.
A 501(c)(3) also has to make certain documents available for public inspection on request: the exemption application with supporting documents, the IRS determination letter, and the three most recent annual returns. Names and addresses of individual donors do not have to be disclosed, except by private foundations.20Internal Revenue Service. Public Disclosure and Availability of Exempt Organizations Returns and Applications – Documents Subject to Public Disclosure
What It All Costs
The unavoidable government fees are modest:
- Certificate of Formation (Form 202): $25 to the Texas Secretary of State.8Secretary of State of Texas. Business Filings and Trademarks Fee Schedule
- EIN: free.
- IRS application: $275 for Form 1023-EZ or $600 for Form 1023.
- Texas state tax exemption (Form AP-204): no filing fee.
Handled yourself, total government fees run roughly $300 to $625. Registered agent services typically cost $35 to $150 per year. Nonprofit attorneys can charge from a few hundred to several thousand dollars depending on complexity. Many founders of straightforward organizations handle the filings on their own using the IRS’s published instructions and sample language; organizations with multiple programs, significant assets, or unusual funding models are usually worth the legal help.