A nonprofit may take any of several forms, such as a nonprofit corporation or unincorporated association. However, the common theme is an organization formed to enjoy special income tax treatment under the Internal Revenue Code of 1986.

Section 501 of the code sets forth numerous nonprofit organizations that may be formed to enjoy tax exempt status under federal law. They include entities organized by act of Congress, chambers of commerce, professional football leagues, certain amateur sports competition organizations, fraternal beneficiary societies and cemetery companies.

Religious organizations, hospitals and many other organizations are included under other subsections of Section 501. There are in excess of 200 possible exempt organizations identified in the section.

However, in each of these forms, the purpose of formation and operation of the organization must satisfy the prerequisites set forth for it under the code. For sake of brevity, the balance of this article focuses on organizations formed with a specific purpose as contained in Section 501(c)(3).

These entities include a corporation, community chest, fund or foundation organized exclusively for religious, charitable, literary, educational or other specifically allowable purposes. In this instance, no part of the net earnings may inure to the benefit of any private person.

Furthermore, no substantial part of the activities of the organization may be used to influence legislation or to participate in any political campaign on behalf of, or opposed to, any candidate for public office.

Typically, the organization is initially formed under state law. For example, the Alaska statutes specifically provide for formation of a nonprofit corporation under the Alaska Nonprofit Corporation Act (AS 10.20).

That formation process starts with the execution of articles of incorporation. The articles are then filed with the Alaska Department of Commerce, Community and Economic Development. Legal existence of the corporation commences only with the department's issuance of a certificate of incorporation.

The act has specific requirements for the content of the articles and the ongoing operation of the nonprofit corporation. The articles must contain the following:

Articles may include other provisions not inconsistent with law that are chosen by the organizers. As an example, the articles may include special qualifications for membership in the organization.

With the issuance of a certificate of incorporation, the organizers may proceed with the organizational process. An early step in the process is holding an organizational meeting. At the meeting, the board of directors elects officers and takes other steps to set up the corporation to conduct business.

Before the corporation may hold itself out as a nonprofit, it first must establish its nonprofit status under the Internal Revenue Code. That takes us back to compliance with Section 501(c)(3) of the code.

Under the code, the entity in formation must apply for, and receive acknowledgment from, the IRS of its compliance with the provisions of Section 501(c)(3). The application is accomplished through completion, execution and submission of specific forms to the IRS, along with copies of the corporation's articles and bylaws.

Once the IRS responds with written acknowledgment of the nonprofit status, the organization may hold itself out to the public as a nonprofit corporation. In the meantime, the entity can only hold itself out as having applied for nonprofit status.

The impact of your nonprofit corporation donation on your 2004 federal income tax return depends on your personal tax situation, and is beyond the scope of this article.

If you have any doubts as to the status of a nonprofit organization, ask the prospective recipient for a copy of its current IRS acknowledgment of nonprofit status. Ask specifically whether your donation is tax deductible to you.

Even more fundamentally, should you question the existence of the organization, ask the prospective recipient for proof of the organization's existence and good standing under law. For example, under Alaska corporate law, check with the state commerce department's Internet database (www.commerce.state.ak.us/occ/home.htm, click Search Database under Corporations) as to whether the corporation exists.