Working with animals is a rewarding way to give back to the community. In Illinois, nonprofits, including animal rescue organizations, receive federal and state tax exemptions under the Internal Revenue Service's 501(c)(3) laws. When starting an animal rescue, those applying for it must first meet the state's requirements for creating a nonprofit organization.
Animal Shelters in Illinois
The Illinois Animal Welfare Act defines an animal shelter as a facility that is owned, operated or maintained by an incorporated nonprofit humane or animal society for the purpose of promoting and providing animal welfare, protection and humane treatment. An animal shelter can also be a veterinary hospital or a clinic licensed under the Veterinary Medicine and Surgery Practice Act of 2004, operated by one or more veterinarians that provides animal welfare, protection and humane treatment in addition to its usual business.
If an organization does not have its own building, but instead keeps animals in foster homes, the state still considers it a shelter under this Act. Illinois defines a foster home as an establishment that takes responsibility for the supervision of animals obligated to an animal shelter or control facility. A foster home cannot have more than four foster animals or two litters under eight weeks old at once. An animal shelter must contract with a foster home via a written agreement.
State Requirements for Nonprofit Corporations
According to Ballotpedia, 39 states require all charitable organizations, including animal rescue groups and those who solicit on their behalf, to register with the state attorney general's office in order to request contributions, whether based in Illinois or elsewhere. Illinois is also one of 32 states that allow nonprofits to register by using its state registration form or the Unified Registration Statement (URS). The URS serves as an alternative to filing separate forms in each cooperating state. It serves a purpose for any nonprofit soliciting regionally or nationally that is subject to multiple state registration laws. The state exempts some groups and organizations from registration, but it isn't automatic; those seeking exemption must apply for it.
Some exemptions in Illinois are:
- Organizations with less than $15,000 of annual contribution.
- Religious and educational groups.
- Membership and political organizations.
- Appeals for individuals.
- Charitable groups receiving money from a registered community chest or united fund if they do not get $4,000 or more from additional sources during any 12 months ending on June 30.
IRS Rules for 501(c)(3) Organizations
According to the IRS, to gain tax-exempt status under Internal Revenue Code Section 501(c)(3), an animal rescue organization must show that it operates solely to prevent animal cruelty. None of the money it earns may go to any individuals or private shareholders. An animal rescue cannot influence legislation by lobbying, nor can it participate in campaign activities in support of or against a specific political candidate. As a charitable organization, it can receive income tax-deductible contributions under IRS Code Section 170.
A nonprofit animal rescue cannot engage in an excess benefit transaction, which provides a direct or indirect economic benefit to or for the use of a disqualified individual with a value exceeding that of the consideration received by the organization. If it does, the individual and the organization managers who agree to the transaction may be assessed an excise tax.
Naming and Staffing a Nonprofit in Illinois
When starting an animal rescue in Illinois, its name cannot conflict with any other registered organization in the state. Applicants can look for names already registered with the Illinois Secretary of State Business Services database. A name may contain words such as corporation, company, incorporated, limited, or an abbreviation of these, as long as they are separate and apart from any other words. A name must end with "NFP," if there is an indication or implication that the nonprofit intends to organize for any other purpose than that stated in its articles of incorporation or in the General Not For Profit Corporation Act of 1986.
A nonprofit in Illinois needs at least one incorporator. It must also have three unrelated directors to meet IRS requirements. The state does not require residency or membership for the directors of a nonprofit. It should define its officer requirements in its articles or bylaws, with one officer serving to certify corporate records. The nonprofit animal rescue should also have a registered agent to receive legal notices on behalf of the organization that is located in Illinois and maintain the organization's office during regular business hours.
Articles of Incorporation and Getting an EIN
Articles of incorporation document the formation of an organization and other necessary information that verifies its existence. Meeting the agency's requirements when filing will help avoid the rejection of an application or having to make amendments later. When applying for nonprofit status, the organization must use Form NFP 102.10: Articles of Incorporation and include additional provisions required for 501(c) tax exemption before submitting the original signed articles to the Secretary of State.
An animal rescue must also apply for an Employer Identification Number (EIN). Nonprofits use these to open bank accounts, apply for 501(c)(3) status, and submit 990 forms to the IRS.
Establish Animal Rescue Bylaws
Every nonprofit has bylaws that serve as the governing document for the organization that shows consistency with its articles of incorporation and with state and federal government laws. A rescue should also have a conflict-of-interest policy that outlines what to do when someone in a critical position has competing interests that could be detrimental to the organization. IRS applications for 501(c)(3) exemption will require approval and adaptation of the organization's bylaws and conflict of interest policy.
Animal rescues applying for 501(c)(3) status use IRS Form 1023 or Form 1023-EZ. Applicants should review the agency's criteria for each to make sure they meet its eligibility requirements. After the agency reviews and approves the animal rescue's application, it will send out a determination letter recognizing their tax exemption status.
- Illinois General Assembly: Professions, Occupations, and Business Operations (225 ILCS 605/) Animal Welfare Act.
- Ballotpedia: Nonprofit Regulation in Illinois
- IRS: Exemption Requirements - 501(c)(3) Organizations
- Bradford Tax Institute: Internal Revenue Code Section 170(b)(1)(A
- IRS: Intermediate Sanctions - Excess Benefit Transactions
- Illinois Secretary of State: Corporation/LLC Search/Certificate of Good Standing Business Services
- Illinois General Assembly: Business Organizations (805 ILCS 105/) General Not-for-Profit Corporation Act of 1986.
- Illinois Secretary of State: Not-for-Profit Corporations Publications/Forms
- IRS: E-file for Charities and Nonprofits
- IRS: About Form 1023, Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code
- IRS: About Form 1023-EZ, Streamlined Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code
Michelle Nati is an associate editor and writer who has reported on legal, criminal and government news for PasadenaNow.com and Complex Media. She holds a B.A. in Communications and English from Niagara University.