State Tax Exemption, the Form 990 Family and Public Inspection

Most new groups think of tax exemption as one thing they get once. It is really several separate exemptions, each with its own rulebook and its own office. The IRS letter from lesson 05 settles federal income tax. Idaho's income tax mostly copies that answer. Idaho's sales tax ignores it. The county assessor and the board of county commissioners make their own decision about the building. And the IRS letter comes with a yearly filing duty that, if forgotten, undoes the whole thing. This lesson walks through each tax in turn, then the federal annual returns, then the public's right to read them.

Idaho income tax: following the federal answer

Idaho does not run its own exemption application for income tax. Idaho Code 63-3025B(1) exempts organizations described in section 501 of the Internal Revenue Code, plus a short list of others: fraternal beneficiary societies under the lodge system, certain mutual hail, casualty and fire insurance associations, and federal land banks. The Tax Commission's nonprofit income tax page says the same thing in plain terms: organizations the IRS has granted exempt status are also exempt from Idaho income tax. Register with the Secretary of State, apply to the IRS, and the state follows.

The statute has exceptions that matter. Exemption is denied when the federal exemption is denied under sections 502, 503 or 504 of the Internal Revenue Code (feeder organizations, prohibited transactions, certain lobbying groups) or under section 6033(j), which is automatic revocation for not filing. So the three-year non-filing trap covered later in this lesson costs a group its Idaho exemption too. And subsection (4) says unrelated business income, as the Internal Revenue Code defines it, is subject to Idaho income tax.

Unrelated business income in Idaho

The IRS defines unrelated business taxable income as income from a trade or business that is regularly carried on and is not substantially related to the group's exempt purpose. The IRS UBIT page says a group with $1,000 or more of gross income from an unrelated business files Form 990-T, and pays estimated tax if it expects the tax for the year to be $500 or more. Lesson 07 covers what counts as unrelated business in fundraising.

On the Idaho side, the Tax Commission tells exempt groups to file an Idaho income tax return "based on your entity type" and pay Idaho tax on the unrelated business income they report on the federal 990-T. For a nonprofit corporation, the entity type is a corporation, and the Tax Commission's business income forms page lists Form 41, the Corporation Income Tax Return. A trust files Form 66. Two smaller rules come along. Idaho Code 63-3025C says the corporate minimum tax does not apply to a corporation not organized for profit that is not required to pay federal tax on unrelated business income under section 511. And Idaho Code 63-3082 charges a $10 tax on every person required to file an income tax return. A nonprofit with no unrelated business income files no Idaho income tax return at all.

Idaho sales and use tax: the exemption most groups do not have

This is the rule that surprises new treasurers. The Tax Commission's nonprofit sales tax guide puts it in one line: "Sales to and purchases by nonprofits in Idaho are taxable unless an exemption applies." A 501(c)(3) letter does not create a sales tax exemption. A food bank, a museum or a volunteer fire department may buy without tax because the Legislature named them. An advocacy group, a watershed council, a neighborhood association or a PTA pays sales tax at the register like anyone else.

Who may buy exempt

The main list is in Idaho Code 63-3622O, last amended in 2025. The Tax Commission's exempt nonprofits page sorts the buyers into two groups.

Buyer	What it may buy without tax	Conditions in the statute or guidance
Nonprofit hospitals	Everything taxable	Licensed nonprofit hospitals; nursing homes do not qualify
Nonprofit educational institutions	Everything taxable	Excludes schools teaching mainly business or music and similar subjects, and excludes auxiliary groups such as parent-teacher associations (63-3622O(2))
Museums	Everything taxable, and admissions are exempt	A public institution or a 501(c)(3) that keeps and exhibits objects on a permanent basis and serves the public regularly (63-3622O(2)(o))
Volunteer fire departments and qualifying senior citizen centers	Everything taxable	Must be 501(c)(3) organizations; fire departments serve residents on a not-for-profit basis
Licensed emergency medical service agencies	Everything taxable	Licensed by the Idaho military division
Centers for independent living	Everything taxable	At least 51 percent staffed or governed by people with disabilities
Canal companies and forest protective associations	Everything taxable	Nonprofit canal companies that only maintain dams and canals; forest associations under contract with the state
Named organizations	Everything taxable	Idaho Foodbank Warehouse, American Red Cross, Blind Services Foundation, Advocates for Survivors of Domestic Violence and Sexual Assault, free children's dental clinics, and a list of named health organizations on the Tax Commission page
Food banks and soup kitchens	Food and goods used to grow, store, prepare or serve food	Licensed motor vehicles and trailers excluded
Nonsale clothiers	Clothing bought to give away	Not jewelry, linens or other home goods
Churches	Food for meals sold to members	All other purchases taxable
Most advocacy groups, clubs, associations and other 501(c)(3)s	Nothing	Pay sales tax, and use tax when an out-of-state seller did not charge Idaho tax

An exempt buyer gives the seller a completed Form ST-101, the Sales Tax Resale or Exemption Certificate, and the seller keeps it on file. Partly exempt buyers such as churches and food banks owe tax on everything outside their category, and owe use tax when an out-of-state seller ships to them without charging Idaho tax.

When a nonprofit must collect sales tax

The other half of the rule is the one advocacy groups trip over at their first fundraiser. The Tax Commission's page on sales a nonprofit makes says nonprofits that make taxable sales are retailers: "They must get an Idaho sales tax permit and collect and forward tax to the state." Its list of taxable sales includes gift shops, recreational admissions, door-to-door and fundraising sales (cookies, candy, magazine subscriptions), concessions, lodging, equipment rentals, public rummage sales, promotional items and vending machines. A group with one or two sales a year can get a temporary permit.

The guidance draws some lines worth knowing before the event:

• Donations. If you ask for a donation with no set amount, it is a donation and is not taxed. If you set or suggest a price, tax is due on it, even when the sign says "donation." A "$5 donation suggested" sign makes every payment taxable.
• Auctions. An auction item is taxed on its final bid unless the group posts the item's fair market value and gives the buyer an invoice showing the value, the tax and the amount paid. Then only the fair market value is taxed and the rest is a donation.
• Admissions. Admission to a recreational event, such as a concert or a play, is taxable. Admission to an event hosted by a 501(c)(3) or a 527 group is not taxable when the event is not predominantly commercial or recreational, any entertainment value is minimal next to the charge, and the host paid sales tax on what it used at the event. A policy dinner with a speaker can fit; a fundraising concert does not.
• Raffles. Raffle ticket sales are not taxable. The page adds that some raffle operators need a license from the Idaho Lottery, which lesson 07 covers.
• Receipts. State the tax separately. If you do not, the guidance says you charge tax on the whole-dollar amount.

Property tax: the county's own decision

Property tax exemptions are in Title 63, Chapter 6. The two that most nonprofits use:

• Idaho Code 63-602B exempts property of a religious corporation, limited liability company or society used exclusively for its religious, educational or recreational activities, including residences used for those purposes.
• Idaho Code 63-602C exempts property of a fraternal, benevolent or charitable corporation, limited liability company or society, and World War veteran organization buildings and memorials, used exclusively for the purposes for which the group is organized.

Both sections tax property that is leased, or used for business that produces revenue unrelated to the purpose. Both use the same arithmetic for a building that is partly commercial: the assessor values the whole building and the commercial part. If the commercial part is 3 percent or less of the total value, the whole property stays exempt. Above 3 percent, the commercial share, with its land, is taxed. And both say certain uses do not count as commercial even when fees are charged: athletic or recreational facilities, residence halls, meeting rooms, auditoriums and club rooms used for the group's purposes. Idaho Code 63-602D, amended in 2025, covers nonprofit hospitals with its own conditions.

Note what is missing: an advocacy group that rents an office does not own property and has nothing to exempt. The exemption follows ownership and use, so it matters once a group buys a building or receives one by bequest.

Applying, and what "charitable" means

Idaho Code 63-602(3), last amended in 2026, says these exemptions are approved annually by the board of county commissioners. The religious and charitable exemptions are not on the statute's list of exemptions that need no application. For property the county assessor values, the taxpayer applies to the board of county commissioners by April 15 unless other law sets a different date, and gets notice of the decision by May 15. The decision can be appealed to the county board of equalization under 63-501 and 63-501A, and from there to the state Board of Tax Appeals. An owner preparing property for an exempt use may ask for a provisional exemption under 63-1305C. Subsection (5) adds that lending an exempt building as a polling place does not hurt the exemption.

"Charitable" in 63-602C is not defined by the IRS letter. Idaho courts use a list of factors. In Idaho Legal Aid Services v. Ada County, Appeal No. 25-A-1086, decided January 30, 2026, the Idaho Board of Tax Appeals applied the eight factors from In re Sunny Ridge Manor, Inc., 106 Idaho 98, noting from Housing Southwest v. Washington County, 128 Idaho 335 (1996), that the list is not exclusive:

1. The stated purposes of the undertaking.
2. Whether its functions are charitable.
3. Whether it is supported by donations.
4. Whether the people it serves pay for the help.
5. Whether there is a general public benefit.
6. Whether its income produces a profit.
7. Where the assets go on dissolution.
8. Whether the help is based on need.

The county had denied the exemption for a Boise office building, assessed at $1,138,200, arguing that federal grants made up about 90 percent of the organization's revenue from 2022 to 2024, so it was not supported by donations and gave no general public benefit. The Board reversed. It found the roughly 10 percent in private donations substantial, because the donations let the group provide free services, and that free legal help lessens a burden on government. It also said a group need not satisfy all eight factors. Factor 7 is the reason lesson 02 insists on a dissolution clause: a county looks at where the assets go when the group ends.

The federal annual return: which form, and when

The IRS requires most exempt organizations to file something every year. Churches, conventions of churches and certain church-related groups are excused by statute, which is why the BMF codes in lesson 10 carry a "not required to file (church)" category. Everyone else uses the IRS table:

Form	Who files	How filed
990-N (e-Postcard)	Gross receipts normally $50,000 or less	Online only, through the IRS 990-N system with a Login.gov or ID.me account
990-EZ	Gross receipts under $200,000 and total assets under $500,000	Electronically
990	Gross receipts $200,000 or more, or total assets $500,000 or more	Electronically
990-PF	Every private foundation, whatever its size	Electronically
990-T	Any exempt group with $1,000 or more of gross unrelated business income	Electronically, in addition to the regular return

A group that qualifies for the 990-N may file the 990-EZ or 990 instead, and some do, because grantmakers and county assessors ask for a real financial return. The 990-N asks for eight things: the EIN, the tax year, the legal name and mailing address, any other names used, the principal officer's name and address, the website, confirmation that gross receipts are $50,000 or less, and a termination statement if the group is closing.

What "normally $50,000 or less" means

The IRS 990-N page uses gross receipts before expenses and averages them:

• In existence 1 year or less: received, or had donors pledge, $75,000 or less in the first tax year.
• In existence 1 to 3 years: averaged $60,000 or less in each of the first two tax years.
• At least 3 years old: averaged $50,000 or less over the preceding three tax years, including the current one.

Due dates, extensions and penalties

Every form in the family is due on the 15th day of the 5th month after the tax year ends: May 15 for a calendar-year group. Form 8868 gives an automatic six-month extension for the 990, 990-EZ and 990-PF. The 990-N cannot be extended, and the IRS says it cannot be filed until after the tax year ends. There is no penalty for a late 990-N; the danger is the three-year count below.

Late 990s and 990-EZs cost money. The 2025 Form 990 instructions list a penalty under section 6652(c)(1)(A) of $25 a day, up to the lesser of $13,000 or 5 percent of the group's gross receipts for the year. A group with gross receipts over $1,309,500 pays $130 a day, up to $65,000 for one return. A return that should have been e-filed and was mailed on paper counts as not filed. After the IRS sets a deadline in writing to fix an incomplete return, the person responsible can be charged $10 a day, up to $6,500 for all persons on one return. Reasonable cause can excuse the organization penalty.

Automatic revocation, and the way back

Congress made the yearly filing self-enforcing. Under 26 U.S.C. 6033(j), the IRS must send a notice after two consecutive missed years, and a group that misses three consecutive years has its exemption treated as revoked. The IRS automatic revocation page says the revocation takes effect on the original due date of the third return, that there is no appeal, and that the IRS cannot undo a proper revocation. The group drops off Publication 78, the list donors check. It may owe tax as a corporation or trust. Donors can deduct gifts made before the group's name appears on the revocation list, not after. And in Idaho, 63-3025B removes the state income tax exemption too. The last lesson counts how many Idaho groups are on that list.

The IRS's reinstatement page, built on Revenue Procedure 2014-11, gives four routes back. Every one requires a new exemption application (Form 1023, 1023-EZ, 1024 or 1024-A) and its user fee, which lesson 05 covers.

Route	Who can use it	Deadline	Effect
Streamlined retroactive	Groups that were eligible for the 990-EZ or 990-N in all three years and were never revoked before	Within 15 months of the later of the CP-120A revocation letter or the date the group appeared on the revocation list	Back to the revocation date. Form 1023-EZ allowed. Missing 990-EZs filed and marked "Retroactive Reinstatement"; years that qualified for the 990-N need no return
Retroactive within 15 months	Groups that cannot use the streamlined route, such as full 990 filers or groups revoked before	Same 15 months	Back to the revocation date, with a reasonable cause statement for at least one of the three years and all missing returns filed
Retroactive after 15 months	Any revoked group	After the 15 months	Back to the revocation date, with reasonable cause shown for all three years
Prospective	Any revoked group	Any time	Exempt from the application's postmark date only

A reasonable cause statement has to show ordinary business care and prudence: the facts in detail, how the failure was found and what the group did to keep it from happening again. A treasurer who moved away with the login is a common story. The IRS also warns that the three-year clock starts over with the year it approves reinstatement, and a group revoked a second time cannot use the streamlined route.

Public inspection: who gets to read your filings

An exempt group's tax documents are public by law. Under 26 U.S.C. 6104(d), a group exempt under section 501(c) or (d), or a 527 political organization, must make these available at its principal office during regular business hours, and at any regional or district office with three or more employees:

• Its exemption application (Form 1023, 1023-EZ, 1024 or 1024-A), with supporting documents and any letter or document the IRS issued about it.
• Its annual returns (990, 990-EZ, 990-PF) with schedules and attachments, for three years beginning on the due date, counting extensions.
• For a 501(c)(3), its Form 990-T, which is how a member of the public can see a charity's unrelated business income.

Copies must be given immediately to someone who asks in person and within 30 days of a written request. The group may charge a reasonable fee for copying and postage. The duty to hand out copies does not apply if the group has made the documents widely available, which the regulations allow by posting them on the internet, or if the IRS agrees, on the group's application, that the requests are part of a harassment campaign. The IRS disclosure page repeats the immediate and 30-day rules.

What may be held back

The big one is donor identity. Section 6104(d)(3)(A) says groups other than private foundations and 527 political organizations do not have to disclose the name or address of any contributor. In practice that means the public copy of Schedule B shows the amounts and leaves names and addresses off. Private foundations disclose their donors; 527s disclose theirs. The IRS list of documents subject to disclosure adds that a 501(c)(4) need not disclose its Form 8976 notice under Revenue Procedure 2016-41. A Social Security number has no place on any form the public sees, and the Form 990 instructions say so.

The penalties for refusing are modest but they add up. Section 6652(c)(1)(C) sets $20 a day for failing to allow inspection of a return, up to $10,000 per return, and (c)(1)(D) sets $20 a day with no maximum for the exemption application. Section 6685 adds $5,000 per return or application for a willful failure.