If you have an idea to make a difference in the lives of current and former service members of the United States Armed Forces but you’re not sure how to get tax-exempt nonprofit status (or if you’re even eligible!), this is the guide for you.
Where do you get started? What are the steps to get the correct tax-exempt status?
If your organization fits the IRS requirements for 501c19 status, you’re eligible to apply and should follow these 5 steps to make your idea a reality.
Read on to find out:
- What is a 501(c)(19)?
- 501(c)(3) vs 501(c)(19): What’s the Difference?
- Types of Organizations Exempt Under Section 501(c)(19)
- 501(c)(19) Filing Requirements
- 5 Steps to Start a 501(c)(19) Nonprofit Organization
What is a 501(c)(19)?
Section 501(c)(19) refers to tax-exempt organizations that specifically benefit veterans of the US Armed Forces. That means the work of 501(c)(19) nonprofit organizations must focus solely on making life better for veterans or current members of the Army, Marine Corps, Air Force, Navy, Space Force, or Coast Guard.
You might have heard of 501(c)(3) nonprofits, which account for a significant portion of organizations registered under the IRS’s tax exemption codes. Lets get more into the differences between 501(c)(3) and 501(c)(19) organizations.
501(c)(3) vs 501(c)(19): What’s the Difference?
Let’s dig into the difference between 501(c)(3), perhaps the most well-known tax exemption status, and 501(c)(19).
501(c)(3) refers specifically to public charities, private foundations, or private operating foundations. Donations to most 501(c)(3) organizations are deductible for federal tax purposes. Many states allow 501(c)(3) to be exempt from sales tax on purchases and exempt from property taxes.
501(c)(19) veterans’ organizations also have the benefit of allowing their donors to deduct their charitable contributions on their federal income tax returns. However, at least 75% of the organization’s membership has to be made up of war veterans. The IRS defines “war veterans” as “persons, whether or not present members of the United States Armed Forces, who have served in the United States Armed Forces during a period of war.”
The biggest difference, then, is the specific group the organization serves. While 501(c)(3) organizations might serve some veterans, their main goal usually isn’t to serve only veterans. That’s where 501(c)(19) organizations come in!
Types of Organizations Exempt Under Section 501(c)(19)
As mentioned above, in order to qualify for 501(c)(19) exemption status, an organization must attempt to make life better for veterans. But the IRS does get a little more specific about the types of organizations that count under this exemption status:
- a post or organization of past or present members of the US Armed Forces
- an auxiliary unit or society of such post or organization
- a trust or foundation that benefits the post or organization
The IRS gets even more specific about the activities of these organizations, which must be in operation specifically to serve one or more of these purposes:
- Support the overall welfare of veterans.
- Assist disabled veterans and current members of the US Armed forces and their dependents.
- Assist the widows and/or orphans of deceased veterans.
- Provide care (including entertainment!) to hospitalized veterans or members of the US Armed Forces.
- Create and run programs to uphold the memory of deceased veterans and comfort their survivors.
- Sponsor or assist with activities of a “patriotic nature.”
- Provide insurance benefits for members of the organization and/or their dependents.
- Provide recreational activities for members of the organization.
Examples of currently operating 501c19 veterans’ organizations
- Veterans of Foreign Wars (VFW) of the United States. Their mission statement is: “To foster camaraderie among United States veterans of overseas conflicts. To serve our veterans, the military, and our communities. To advocate on behalf of all veterans.”
- Military Officers Association of America (MOAA). On their website, MOAA says the organization “plays an active role in military personnel matters and especially proposed legislation affecting the career force, the retired community, and veterans of the uniformed services. MOAA’s overarching goals are captured in its resolutions, which reflect the views of the entire membership.”
- Veterans of Foreign Wars Auxiliary (Formerly the Ladies Auxiliary VFW). Their goal is “to serve the veterans of this country and our communities in honor of the sacrifices and commitment of every man and woman who has served in uniform.”
501(c)(19) Filing Requirements
The IRS does specify several requirements in order for an organization to be given 501(c)19) tax exemption status.
Here are the main requirements each organization must adhere to:
- The organization must be organized in the United States.
- The membership makeup has to be as follows:
- At least 75% of members must be past or present members of the US Armed forces.
- Otherwise, members should be cadets (in this case, meaning only students in college or university ROTC programs or at Armed Services academies) or spouses, widows, widowers, relatives, or lineal descendants of veterans.
- These two groups (past or present members of the Armed Forces and cadets and spouses/relatives) should make up 97.5% of the organization’s total membership.
- The organization’s activities must adhere to the list given in the previous section of this guide. Things like promoting the welfare of its members, assisting disabled war veterans, and sponsoring and participating in patriotic events.
- No part of the organization’s net earnings can benefit any private shareholder or individual.
If your organization fits these requirements, read on to learn how to start an official 501(c)(19) nonprofit organization.
5 Steps to Start a 501(c)(19) Nonprofit Organization
Starting a 501c19 could be tricky if you aren’t aware of the steps well. In the following sections, we give you every detail of the process – forms to fill, applications to file, getting tax-exempted status, etc. for a successful and smooth start!
1. Create your organization
You’ve reviewed the criteria for getting 501(c)(19) status and you’re excited to start your organization to make life better for veterans. Excellent! The first step toward your goal is to establish a nonprofit organization with the following elements:
- A board of directors. You’ll want to choose directors who are as passionate as you are about serving veterans and current members of the US Armed Forces. Most likely, your directors will be veterans and spouses of veterans.
- A concrete mission and mission statement. How will you serve these communities? What unique services can your organization offer?
- Bylaws to establish how your organization will run. How is the leadership power distributed? What’s the process for decision-making?
Once you have these items ready, you can move onto the next steps.
2. File articles of incorporation
Sometimes referred to as the certificate of incorporation or corporate charter, the article of incorporation is a legal document you file with the Secretary of State in the state your organization will primarily operate in. The articles contain basic business information and serves to legally establish your organization with the state.
Check for your state’s specific requirements to make sure you have everything in order before you submit.
3. Get an Employer Identification Number (EIN)
The IRS requires every business and organization to register for an EIN to identify your organization on a variety of documents, including Form 1024, which you’ll submit in the next step!
You can apply for an EIN with the IRS’s online application. Here are some things to keep in mind:
- The person who submits the application should be the responsible party for your organization—meaning the entity or person who has primary control.
- Your session will time out after fifteen minutes of inactivity.
- You should take some time to review the information needed on the online application before you plan to submit it.
With your EIN in hand, you’re ready to file your Form 1024.
4. File form 1024 for tax-exempt status
Your organization is almost ready to start helping veterans and active service members. When it comes time to file your Form 1024, here are some things to keep in mind:
- Be sure you have the right version of the form. There are a few different versions, but for a 501(c)(19) nonprofit organization you want to fill out Form 1024, which can be found here. You’ll mark the box by “M” for 501(c)(19) in Part I.
- Take your time! This 22-page form asks you for a lot of information. Be sure to carefully review the instructions to be sure you have the necessary information.
- Double-check the IRS user fee list to see if you’ll be required to pay a fee to apply for exemption status.
- Submit your form! You can submit online at pay.gov or through the mail at:
Internal Revenue Service
P.O. Box 12192
Covington, KY 41012-0192
Remember that any time you’re dealing with the IRS, it pays to do things right the first time. Ensuring you have all the necessary information on your form 1024 means a quicker turnaround time to establish your exemption status.
5. File form 990 annually
To stay in good standing at a 501c19 exempt organization, you must abide by the annual filing requirements to show that your veterans’ organization is operating with good financial practices.
To do this, you’ll need to file form 990 annually. This provides the IRS with updates on your organization’s activities and finances. Form 990 should also be publicly available so that anyone can see how your nonprofit is being run.
There are 3 versions of form 990, so you’ll need to review the financial status requirements for each to determine which best fits your nonprofit.
Once you decide which version you need to use, review the instructions and be sure to fill out all required schedules.
Over To You
Now that you know a little more about what it means to be a 501(c)(19) nonprofit organization, you can decide if your organization fits the requirements.
Ultimately, the goal of offering tax exemption is to help organizations that do important work for their communities. Improving the lives of our former and current service members and their families is very important; hence, your organization deserves to be rewarded with the status.
Be sure to check out our nonprofit blog for more nonprofit management tips, including state-by-state guides for how to start a nonprofit. You might also look into our comprehensive guide to registering a 501(c)(3) nonprofit organization to compare the types of exemption statuses.
Feel free to check out Donorbox, a powerful recurring donation system, that will help you on your way to becoming a successful nonprofit.