01
Internal Revenue Service
Applying for Tax Exempt Status
The IRS starting point for obtaining federal tax-exempt recognition, with links to Form 1023, Form 1023-EZ, and related guidance.
Link checked October 28, 2026Open resource →Topic guide
Start a Nonprofit or CDC
Starting an organization can feel like the obvious next step once a group of neighbors has a cause. Sometimes it is. But a new nonprofit carries real costs: state filings, an IRS application, annual reports, bookkeeping, insurance, and a board that has to keep showing up for years. Many good projects do better by joining or reviving an existing group, or by working under a fiscal sponsor until they have proven themselves.
A community development corporation is not a special legal category. In the United States it is usually an ordinary nonprofit corporation, most often recognized by the IRS as a 501(c)(3), that focuses on a defined place and works on housing, commercial revitalization, jobs, or other physical and economic improvements, with residents involved in its governance. There is no national certification or registry for CDCs, although some designations, such as a HOME-program CHDO, open specific funding doors. This guide helps you decide what you actually need before you file anything.
- 01
Define the need and find out who is already working on it
Write a short description of the problem, the geographic area, and what would be different if you succeeded. Then look hard for existing organizations: ask your city or county community development office, regional planning agency, community foundation, and neighborhood groups, and check your state's association of community development organizations. Because there is no central list of CDCs, this takes legwork, but it can save you years of duplicated effort.
- 02
Decide whether you need a new organization at all
Before incorporating, weigh three alternatives. You can join or reshape an existing group, even if you have doubts about its current leadership. You can partner with an established nonprofit that runs your project as one of its programs. Or you can use a fiscal sponsor, an existing charity that receives grants and donations for your project and handles the accounting and legal oversight, usually for a fee. Coalitions often work this way, with one agency serving as the fiscal agent for a shared grant.
- 03
Choose the structure that fits the work
An informal coalition or unincorporated association works for advocacy and occasional events. A nonprofit corporation with 501(c)(3) status is the usual choice when you need tax-deductible donations and foundation grants; note that a 501(c)(3) may do only limited lobbying. A CDC is typically a 501(c)(3) nonprofit with a place-based development mission, and it may own for-profit subsidiaries as long as the nonprofit keeps control. If you plan to build or rehabilitate housing for lower-income households, ask whether becoming a certified CHDO for the federal HOME program makes sense; if you plan to lend, look at Treasury's CDFI certification.
- 04
Incorporate in your state, then apply to the IRS
You must first form a nonprofit corporation under your state's law, which usually means a name, a purpose statement, a registered address, and a minimum number of directors or incorporators. Then you apply for federal recognition. Form 1023 must be filed electronically on Pay.gov and the IRS user fee is $600; smaller groups may qualify for the streamlined Form 1023-EZ ($275) if they pass the eligibility worksheet in its instructions, which rules out organizations expecting gross receipts above $50,000 in any of the next three years, with receipts above $50,000 in any of the past three years, or with assets over $250,000. Filing within 27 months after the end of the month you were formed lets approved exemption date back to your formation date. An attorney experienced in nonprofit law can help you avoid wording mistakes, and many will do early work at low or no cost.
- 05
Build a board that reflects the community and can do the work
Meet your state's minimum board size, then recruit for both representation and skills. Aim for a substantial share of residents from the area you serve, including renters and people living on tight budgets, and add people with real estate, legal, accounting, or construction experience as your work requires. Recruit with a short concept paper describing the vision, time commitment, and expectations, and plan regular board training rather than assuming people will learn on the job. CHDOs face specific board rules under the HOME program, including reserving at least one-third of seats for low-income community representatives.
- 06
Plan the money realistically
"We'll get a grant" is not a financial plan. Estimate what your first one or two projects will cost and where that money will come from, including operating support for staff and an office. Real estate work in particular can take years to produce income, so talk honestly with funders about a multi-year commitment, look for smaller supporting contributions from local government or other foundations, and put any public funding in a written agreement. Start frugal and keep a cushion for setbacks.
- 07
Start small, then track what you accomplish
Launch with a modest, visible project, such as a cleanup, a beautification effort, or a housing condition survey that gives you baseline data, so residents see results while you prepare bigger work. Decide early what success will look like and keep simple records of outputs and outcomes. Be transparent with residents about decisions, since community trust is a CDC's main asset and residents will watch closely.
Questions to bring
- Is any existing nonprofit, CDC, or neighborhood group already working on this need in our area, and would they partner with us or act as our fiscal sponsor?
- What does our state require to incorporate a nonprofit (minimum directors, filing fee, annual report), and which office handles it?
- Does our state require charities to register before soliciting donations, and do we need a state tax-exemption application as well?
- Does our city, county, or state housing finance agency certify CHDOs, and what are its current requirements and HOME funding availability?
- Will our local government or community foundation provide operating support for a new organization, and under what written terms?
- Can a nonprofit attorney or legal clinic review our articles, bylaws, and IRS application before we file?
What changes where you live
Nonprofit incorporation is governed by state law, so the number of directors, filing fees, naming rules, and annual reporting differ by state; your Secretary of State (or equivalent corporations office) publishes the forms. Many states also require charities to register with the attorney general or another office before asking the public for money, and some require a separate application for state income, sales, or property tax exemption. CHDO certification is handled by the local or state agency that receives HOME funds (a 'participating jurisdiction'), and each sets its own procedures within federal rules. To find the controlling rules, start with your Secretary of State's nonprofit page, your state attorney general's charities section, and your state nonprofit association (the National Council of Nonprofits website has a find-your-state contact tool).
Current national resources
02
Internal Revenue Service
About Form 1023-EZ
Instructions and the eligibility worksheet for the streamlined 501(c)(3) application, filed electronically through Pay.gov.
Link checked October 28, 2026Open resource →03
National Council of Nonprofits
Governance & Leadership
Board roles, responsibilities, and governance practices for nonprofits, plus links to state nonprofit associations.
Link checked October 28, 2026Open resource →04
National Network of Fiscal Sponsors
National Network of Fiscal Sponsors
Learn how fiscal sponsorship works and search a directory of organizations that sponsor community projects.
Link checked October 28, 2026Open resource →05
U.S. Department of Housing and Urban Development (HUD Exchange)
HOME CHDO
HUD guidance on Community Housing Development Organizations: what a CHDO is, how certification works, and the HOME set-aside.
Link checked October 28, 2026Open resource →06
Community Opportunity Alliance (formerly NACEDA)
Community Opportunity Alliance
National network of state and regional associations of community development organizations; useful for finding peers and existing CDCs near you.
Link checked October 28, 2026Open resource →From the library
Guide · Organizations & leadership
Why Start a Community Development Corporation
Start a community development corporation (CDC) to advance vital work in housing, economic development, social programs, and clean-up.Visitor question · Economic & rural development
CDC and 501(c)3
Reviewed: June 12, 2024 Visitor Question: We are interested and looking into starting a CDC in our town. Do you need to register as a 501(c)3 with theVisitor question · Economic & rural development
Recognition as a Community Development Corporation
Reviewed: June 12, 2024 Visitor Question: We are in planning to establish a Community Development Corporation in the State of Florida. We have a 501(c)3.Visitor question · Economic & rural development
Becoming Certified as a CDC
Reviewed: June 12, 2024 Visitor Question: Who can I apply to for my company to become a Community Development Corporation? When is application taken?Visitor question · Economic & rural development
Ideal composition of a CDC board of directors
Visitor Question: We are trying to start a new CDC to help us dig out of the urban mess in our neighborhood. The three of us who are working the hardestVisitor question · Economic & rural development
How Long a New CDC Will Need Grants for Operations
Reviewed: June 12, 2024 Visitor Question: How long should a foundation expect to provide operating support for a new CDC? Is there research on the averageGuide · Organizations & leadership
Nonprofit Board Development Trains, Equips Community Leaders
Nonprofit board development for community organizations can improve the capacity of leaders to work together, produce results, and increase inclusiveness.Visitor question · Economic & rural development
Who Regulates CDCs?
Reviewed: June 12, 2024 Visitor Question: Who has the authority to regulate what a CDC does? The one that is active in my neighborhood is now proposingGuide · Organizations & leadership
How A Faith Based Community Development Corporation Differs from Other CDCs
Faith based community development corporations usually operate similarly to other CDCs, but often have a different vision, mission, and ethics lens.Guide · Organizations & leadership
13 Spring Newsletter Ideas to Keep Your Communications Fresh
These spring newsletter ideas are clustered into thirteen themes to make your neighborhood e-mail composition chores easier.Guide · Organizations & leadership
A Good Homeowners Association Solves Problems Quickly and Calmly
When a homeowners association board is chosen carefully, receives training, and treats residents respectfully, all HOA members benefit.Guide · Organizations & leadership
A Rural Neighborhood Should Involve Everyone
Learn how a rural neighborhood can achieve important results through organizing, mobilizing, and resolving conflicts.Guide · Organizations & leadership
Asset-Based Community Development Focuses on the Strengths
Asset-based community development emphasizes identifying neighborhood strengths and talents instead of problems. This creates energy for change.Guide · Organizations & leadership
Autumn Newsletter Ideas for Your Neighborhood
Many HOA or neighborhood association editors struggle to come up with new autumn newsletter ideas every year. This page gives some thought starters.Guide · Organizations & leadership
Block Units Help Build Community or Solve Problems in the Neighborhood
Block units organize residents of a very small area into a simple structure to address problems or head them off. We tell you how.Guide · Organizations & leadership
Careful Project Selection for Neighborhood Associations Really Pays Off
Many neighborhood associations should limit their activities to sharpen their focus. But some community organizations need projects to add excitement.Guide · Organizations & leadership
Clear Neighborhood Boundaries Build Reputation
Clearly defined neighborhood boundaries are essential to keeping your community's needs and assets in front of the people who can make it happen.
Original guidance from A Good Community: How to Make and Keep It, owned and edited by Nancy Thompson (formerly Useful Community Development), shared with permission. Community Compass notes and updates are our own and have not been reviewed by Nancy Thompson.
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