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Public Library District Toolkit: Strategies to Assure your Library’s Legal and Financial Stability

Tax Exempt Status 

Once a new public library district is chartered by the Board of Regents it is automatically state tax exempt. In addition, because public library districts are generally considered by the IRS to be state or local government entities, they are not required to pay federal income tax. If asked by a donor or Foundation to provide a tax-exempt number or determination letter to prove its status as a tax-exempt organization, a library may contact the IRS for a letter requesting a "governmental information letterexternal link opens in a new window" describing the tax status of government entities.

In some cases a library may wish to qualify as a 501c3 tax exempt organization under the tax code rather than as a governmental entity. In this case the new library must file IRS form 1023external link opens in a new window in order to obtain a determination from the IRS.

In any case, it is important to note that the federal tax exemption does not automatically transfer from an existing library to a new public library district.