The IRS does charge a non-refundable processing fee for exemption applications. It is a two-tier fee schedule. Organizations whose gross receipts have averaged, or will average, not more than $10,000 per year (over a four-year period) pay $300 (increases to $400 in 2010). Larger organizations pay $750 ($850 in 2010).
The IRS announces new fees (if any) each January. If you are submitting your application late in the year, you may want to get it in before January 1st.
Other costs when setting up a new non-profit organization include incorporation in your state, charitable solicitation and other state or local registration fees, and professional preparation of your articles of incorporation, bylaws and exemption application.
Find the latest user fee information at www.irs.gov, keyword "user fee."