Nonprofit Formation Memorandum Paper

Nonprofit Formation Memorandum

Date: November 11, 2016
To: Knowledge Tree
From: Kayla Brown
Subject: Filing for the 501(c)(3) redemption status

Summary of Facts o Knowledge Tree is currently in the process of forming as a nonprofit entity that will provide local primary schools in the Northern Nevada area with the tools to develop their own community gardens and incorporate educational field trips to promote the understanding of sustainability. o The entity is classified as a nonprofit and not a charity. Charities generally include churches, medical research organizations, governmental units, or any other entities who strive to serve the community at large. Knowledge Tree aims to serve school children, and therefore is considered a nonprofit.
♣ The organization must engage only in activities that pursue its purpose. Essentially, activities should align with the nonprofit’s mission.
♣ Please note: if your organization dissolves at a future date, assets must be distributed to the government, which will contribute to activities for a social purpose. o Operational Test
♣ To achieve the classification of “operated exclusively,” the organization must primarily engage in activities that “accomplish exempt purposes specified in section 501(c)(3).” o Exempt Purposes
♣ Exempt purposes are defined as “charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, and preventing cruelty to children or animals.” o Additionally, the organization may not perform activities that will benefit the private interests of any individuals or stakeholders. o Furthermore, the organization may not engage in political or legislative activities. o After a formal evaluation, Knowledge Tree passes these tests and will clearly operate under an exempt
This form will provide the IRS with detailed information regarding the overview of your activities and detailed financial information. Essentially, this form allows the organization to prove to the IRS that they are still operating as a nonprofit and deserve to continue to be tax exempt. o Not every nonprofit is required to file Form 990, but I would highly recommend the completion of the form even for organizations who might not be required to complete it. Form 990 illustrates the transparency and accountability of nonprofit organizations. o Form 990 must be filed by the fifteenth day of the fifth month following the end of the organization’s accounting period. Please contact me as it gets closer to this date, and I will gladly meet with your organization to walk through the completion process of Form 990 so that going forward into the years you will confidently and successfully file the form to retain your tax exempt status.

Thank you for your confidence in my advising abilities and I look forward to our continued partnership.