First, is was mentioned yesterday that a group is just beginning the
process of filing 501(c)(3) paperwork.  Please don't reinvent the wheel!
Groups already granted tax-exempt status are required by law to allow
access to their paperwork.  I'm sure that if you send a nice donation to
another group or shelter, you could get them to copy the massive paperwork
and save you *lots* of time!  You may not be able to use all their
information but it should assist immensely.  Try to find an organization
that does a similar function as yours (eg don't ask a shelter for paperwork
if you are a ferret club).
 
All the information in this post is from my professional reference and
personal knowledge.  You should always consult your local legal help for
questions and not rely on this information.
 
Part 1.  Nonprofit status
Nonprofit corporation status is granted by the governing state.  Every
state has its own requirements to which you must abide.  To become
nonprofit, generally you must have an independent Board of Directors (not
family members), have approved Bylaws and Nonprofit Articles of
Incorporation, organize yourself as required by state law (usually a
nonprofit corporation), and file the paperwork with your state which will
include a fee.  I'm not aware of any place where an organization can become
tax-exempt without being nonprofit so this is the first step in becoming
tax-exempt.
 
The word "nonprofit" is a misnomer.  According to my professional
reference*: "A nonprofit corporation is an artificial entity created by
law.  It has no owners.... If it makes a "profit," that excess of income
over expenses cannot be paid to anyone (the way a profit entity could pay
it to its owners or shareholders) but must be used for nonprofit purposes."
 
Advantages: The benefits of being a nonprofit are minimal (exemptions from
certain taxes which most groups wouldn't incur anyway).  You may be able to
attract grants and donations but the donors won't be able to write off the
donation.  People tend to be more supportive of non-profits.  You may
qualify for lower postage rates for professional mailings.
 
Disadvantages: You cannot use any extra income for the benefit of employees
or members of the group nor use income for personal gain.  And you will
have to file paperwork with your state on a regular basis as well as keep
organizational documents.  Remaining a nonprofit organization and not
seeking tax-exempt status creates "interesting accounting issues" requiring
professional help according to my professional reference.
 
*Oregon Nonprofit Corporation Handbook
[Posted in FML issue 2879]