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In New Hampshire, the chartered public school is a fully independent
public school created by statute. This is not how charter schools are
created by statute in each state. Here, the public school is a
public instrumentality or government entity. Government entities
need tax exempt status for donors, deductions, and for Employment
Security (to not have to pay payroll taxes). Your charter school's
statutory creation is very similar to the creation of the school
administrative unit.
So how does hour public charter school obtain tax
exempt status from the IRS?
According to a specialist at the IRS, you automatically are exempt from
taxes as a public school and you don't have to apply, fill out any
forms, or pay any processing fee. But you do have several steps to have
your tax exempt status confirmed. Directions provided by IRS on October
22, 2004.
1. Get your EIN ready.
2. Call IRS—the division that handles eax exempt status for
government entities such as public schools (1-877-829-5500).
3. Ask for an "affirmation of government instrumentality letter"
confirming your tax exempt status as a public school & government
instrumentality. Note: "government instrumentality" means you are
created to do some of the work of governing, e.g. operate a public
school as part of the state's public education system." This is a bit
confusing on the IRS end, because usually you ask for "affirmation"
AFTER you have been formed, as in an existing public school. But...after
your charter school is authorized, you also HAVE BEEN formed, and so the
IRS just needs to look up your EIN and see that you have an EIN for a
government entity.
Potential Problem #!: Your EIN number may
be for a voluntarily-formed, non-profit and not for a government
entity/public school. There are different EIN classification systems. If
you have mistakenly been coded as a voluntary not-for-profit
corporation, you need to request a different EIN number and ask that
line 8-a in your EIN application be changed to ”public school” and not
“non-profit organization.”
Potential Problem #2: If your charter
school address has changed since the time you first called IRS for an
EIN (Employer Identification Number), you have to officially change the
school’s address in the IRS database or they cannot respond to you by
mail. There is a special form for this….and you need to keep the address
up to date.
Potential Problem #3: You cannot figure out
how to reach the right human on the IRS phone system. Here is the
routine through the maze of press this and then that: Dial
1-877-829-5500. Then, press “1” to continue in English. Then, to route
your call properly, press "1: for questions about “exempt
organizations." Then press "3" for "all other exempt organization
questions." This should bring you to a human experienced in helping
"government instrumentalities receive an "affirmation of government
instrumentality letter."
See
our How-To Section
to find out how to obtain an
EIN.
Q1: Is the TAX exempt number a different
number from the EIN (employer identification number)?
A1: No, these are the same.
Q2: So what is the instrumentality letter?
A2: If you call for a tax exempt instrumentality letter. There is
no fee. There are no forms to fill out. If you are requested to fill out
the packet of 1023 forms, a form 990, or and 8718 and submit $500, then
you are in the not-for-profit, 501(3)(c) loop, which is not the process
required for government instrumentalities.
The IRS routine to affirm a government instrumentality’s tax exempt
status only requires calling, having the correct EIN for a public
school, and, since there is so much confusion, sending/faxing a letter
of request with a copy of your charter and the pertinent sections of our
law.
You may need this letter with vendors so you are not charged sales tax.
You need to be cleared for tax exempt status to accept contributions or
philanthropic gifts and write letters of thanks explaining that your
organization is tax exempt. It is just a letter from the IRS.
Q3: Our charter school address has been
changed from the time when we first requested an Employer ID Number?
A3: The IRS cannot process your tax exempt affirmation request
with a different address. So your request must include a letter from the
Chair of the Board of Trustees explaining your current address change as
of July 1, 2004. This letter, with the instrumentality letter request,
can be faxed to 513-263-3756.
Below is an example of such a letter:
<Date>
Internal Revenue Service
Tax Exempt Affirmation Department
Washington, DC
To: Whom it May Concern:
I am writing as the Chairman of the Board of Trustees for <name of
school> in <town/city>, New Hampshire.
I want to give notification of our official change of address. As of
July 1, 2004, the current mailing address will be:
<name of school> Charter School
<address>
<address> <zip>
Our Employer Identification Number (EIN) is <insert number>.
We are requesting an government instrumentality tax exemption letter
affirming our tax exempt status. Under New Hampshire law, our charter
school was authorized by the State Board of Education as a fully
independent public school, with an independent governing board,
supported by public funding.
Sincerely,
<signature>
<name>, Chairperson
Board of Trustees
<Name of School>
<address of chairperson>
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