What steps must a non-profit organization follow to obtain state tax-exempt status in California?

To obtain state tax-exempt status in California, your non-profit must incorporate, secure federal tax-exempt status, and then file an application with the California Franchise Tax Board (FTB). Here are the steps to follow to receive exemption from California's corporate franchise or income tax. Step 1: File Articles of Incorporation First, you must form a legal entity. File your Articles of Incorporation with the California Secretary of State. Per the California Corporations Code, these articles must include specific language stating the organization's purpose (e.g., charitable, educational) and a dedication and dissolution clause, which ensures assets will be distributed to another exempt organization upon dissolution. Step 2: Obtain Federal Tax-Exempt Status Next, apply for federal tax-exempt status with the IRS, typically by filing Form 1023 for 501(c)(3) status. While you can apply for California status concurrently, it is faster and easier to wait until you receive your federal determination letter from the IRS. Step 3: File for California Tax-Exempt Status Once you have your IRS determination letter, file Form 3500A, Submission of Exemption Request, with the California Franchise Tax Board (FTB). You must attach a copy of your signed Articles of Incorporation and your IRS determination letter. If you do not yet have federal status or are not a 501(c)(3), you must file the more detailed Form 3500, Exemption Application. File this form within 19 months of incorporation to ensure your tax-exempt status is retroactive to your formation date. Step 4: Register with the Attorney General's Registry of Charitable Trusts Within 30 days of receiving your first assets, you must file Form CT-1, Initial Registration Form, with the California Attorney General's office. This is a separate requirement for charitable organizations that operate or solicit donations in California. Important considerations: State tax exemption under Revenue and Taxation Code Section 23701 only exempts your organization from the state corporate income tax. It does not provide exemption from other taxes, such as property, sales, or employment taxes. If your organization owns property, you must file separately for the "Welfare Exemption" with your county assessor's office. Note: Maintaining tax-exempt status requires annual filings. You must file an annual information return with the FTB (Form 199) and the Attorney General (Form RRF-1) to keep your status active and in good standing. This is general information and does not constitute legal advice. For complex situations, consult with a qualified California attorney.