501(c)(3): Difference between revisions

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A '''501(c)(3) organization''' is a United States corporation, [[Trust (business)|trust]], [[unincorporated association]] or other type of organization exempt from [[federal  income tax]] under section 501(c)(3) of [[Title 26]] of the [[United States Code]]. It is one of the 29 types of [[501(c) organization|501(c)]] [[nonprofit organization]]s<ref name=":0" /> in the US.
501(c)(3) tax-exemptions apply to entities that are organized and operated exclusively for [[religion|religious]], [[Charitable organization|charitable]], [[science|scientific]], [[literature|literary]] or [[education]]al purposes, for [[Public security#Organizations|testing for public safety]], to foster national or international [[amateur sports]] competition, or for the prevention of [[Child abuse|cruelty to children]] or [[Cruelty to animals|animals]]. 501(c)(3) exemption applies also for any non-incorporated [[Community Chest (organization)|community chest]], fund, [[Cooperating Associations|cooperating association]] or foundation organized and operated exclusively for those purposes.<ref>{{cite web|url = https://www.irs.gov/charities-non-profits/charitable-organizations/exempt-purposes-internal-revenue-code-section-501c3|title= Exempt Purposes – Internal Revenue Code Section 501(c)(3) |website = irs.gov}}</ref><ref name=":0">[https://www.irs.gov/pub/irs-pdf/p557.pdf IRS Publication 557 "Tax-Exempt Status For Your Organization", Page 19, (Rev. June 2008), Cat. No 46573C.], Retrieved March 9, 2009.</ref> There are also supporting organizations—often referred to in shorthand form as "Friends of" organizations.<ref name="Hopkins2011">{{citation | last=Hopkins | first=Bruce R. | year=2011 | title=The Law of Tax-Exempt Organizations | edition=10 | publisher=John Wiley and Sons | isbn=978-0-470-60217-1  | page=879 }}</ref><ref>Judith S. Ballan, "How To Aid a Foreign Charity Through an 'American Friends of' Organization", in Proceedings of the Twenty-Third New York University Conference on Tax Planning.</ref><ref>{{cite web |url=http://www.usig.org/legal/friends_of_organizations.asp |title=Legal Dimensions of International Grantmaking: How a Private Foundation Can Use "Friends of" Organizations |publisher=Usig.org |access-date= June 7, 2011 |url-status=dead |archive-url=https://web.archive.org/web/20110916031540/http://www.usig.org/legal/friends_of_organizations.asp |archive-date=September 16, 2011 |df=mdy-all }}</ref><ref>{{cite web |url= http://gi.philanthropycapital.org/views/33/meet-the-expert-suzanne-m-reisman-law-offices-of-suzanne-m-reisman |title=Meet the expert: Suzanne M. Reisman, Law Offices of Suzanne M. Reisman |publisher=Giving Insights |date=March 3, 2010 |access-date=June 7, 2011 |url-status=dead |archive-url=https://web.archive.org/web/20110817055444/http://gi.philanthropycapital.org/views/33/meet-the-expert-suzanne-m-reisman-law-offices-of-suzanne-m-reisman |archive-date=August 17, 2011 |df=mdy-all }}</ref><ref name="Larkin2011">{{citation | last1=Larkin | first1=Richard F. | year=2011 | title=Wiley Not-for-Profit GAAP 2011: Interpretation and Application of Generally Accepted Accounting Principles | last2=DiTommaso | first2=Marie | publisher=John Wiley and Sons | isbn=978-0-470-55445-6  | page=Ch.11 }}</ref>
{{usc|26|170}} provides a deduction for federal income tax purposes, for some donors who make [[Charitable contribution deductions in the United States|charitable contributions]] to most types of 501(c)(3) organizations, among others. Regulations specify which such deductions must be verifiable to be allowed (e.g., receipts for donations of $250 or more).
Due to the tax deductions associated with donations, loss of 501(c)(3) status can be highly challenging if not fatal to a charity's continued operation, as many foundations and corporate [[matching funds]] do not grant funds to a charity without such status, and individual donors often do not donate to such a charity due to the unavailability of tax deduction for contributions.<ref>{{cite web|title=Donating to Charity|url=https://www.usa.gov/|access-date=9 October 2021}}</ref>
== Types ==
The two exempt classifications of 501(c)(3) organizations are as follows:
* A [[Charitable organization#United States|public charity]], identified by the [[Internal Revenue Service]] (IRS) as "not a private foundation", normally receives a substantial part of its income, directly or indirectly, from the general public or from the government. The public support must be fairly broad, not limited to a few individuals or families. Public charities are defined in the [[Internal Revenue Code]] under sections 509(a)(0) through 509(a)(4).<ref>{{Cite web|title=Exemption Requirements - 501(c)(3) Organizations {{!}} Internal Revenue Service|url=https://www.irs.gov/charities-non-profits/charitable-organizations/exemption-requirements-501c3-organizations|access-date=2021-03-23|website=irs.gov|language=en}}</ref>
* A [[private foundation (United States)|private foundation]], sometimes called a non-operating foundation, receives most of its income from investments and endowments. This income is used to make grants to other organizations, rather than being disbursed directly for charitable activities. Private foundations are defined in the Internal Revenue Code under section 509(a) as 501(c)(3) organizations, which do not qualify as public charities.<ref>{{Cite web|title=Private Operating Foundations {{!}} Internal Revenue Service|url=https://www.irs.gov/charities-non-profits/private-foundations/private-operating-foundations|access-date=2021-03-23|website=irs.gov|language=en}}</ref><ref>{{Cite web|title=Private Foundations {{!}} Internal Revenue Service|url=https://www.irs.gov/charities-non-profits/charitable-organizations/private-foundations|access-date=2021-03-23|website=irs.gov|language=en}}</ref>
== Provenance ==
{{WPAttribution}}
==Notes==
<references>
</references>

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A 501(c)(3) organization is a United States corporation, trust, unincorporated association or other type of organization exempt from federal income tax under section 501(c)(3) of Title 26 of the United States Code. It is one of the 29 types of 501(c) nonprofit organizations[1] in the US.

501(c)(3) tax-exemptions apply to entities that are organized and operated exclusively for religious, charitable, scientific, literary or educational purposes, for testing for public safety, to foster national or international amateur sports competition, or for the prevention of cruelty to children or animals. 501(c)(3) exemption applies also for any non-incorporated community chest, fund, cooperating association or foundation organized and operated exclusively for those purposes.[2][1] There are also supporting organizations—often referred to in shorthand form as "Friends of" organizations.[3][4][5][6][7]

Template:Usc provides a deduction for federal income tax purposes, for some donors who make charitable contributions to most types of 501(c)(3) organizations, among others. Regulations specify which such deductions must be verifiable to be allowed (e.g., receipts for donations of $250 or more).

Due to the tax deductions associated with donations, loss of 501(c)(3) status can be highly challenging if not fatal to a charity's continued operation, as many foundations and corporate matching funds do not grant funds to a charity without such status, and individual donors often do not donate to such a charity due to the unavailability of tax deduction for contributions.[8]

Types

The two exempt classifications of 501(c)(3) organizations are as follows:

  • A public charity, identified by the Internal Revenue Service (IRS) as "not a private foundation", normally receives a substantial part of its income, directly or indirectly, from the general public or from the government. The public support must be fairly broad, not limited to a few individuals or families. Public charities are defined in the Internal Revenue Code under sections 509(a)(0) through 509(a)(4).[9]
  • A private foundation, sometimes called a non-operating foundation, receives most of its income from investments and endowments. This income is used to make grants to other organizations, rather than being disbursed directly for charitable activities. Private foundations are defined in the Internal Revenue Code under section 509(a) as 501(c)(3) organizations, which do not qualify as public charities.[10][11]

Provenance

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Notes

  1. ↑ 1.0 1.1 IRS Publication 557 "Tax-Exempt Status For Your Organization", Page 19, (Rev. June 2008), Cat. No 46573C., Retrieved March 9, 2009.
  2. ↑ Exempt Purposes – Internal Revenue Code Section 501(c)(3).
  3. ↑ Hopkins, Bruce R. (2011), The Law of Tax-Exempt Organizations (10 ed.), John Wiley and Sons, ISBN 978-0-470-60217-1, at 879
  4. ↑ Judith S. Ballan, "How To Aid a Foreign Charity Through an 'American Friends of' Organization", in Proceedings of the Twenty-Third New York University Conference on Tax Planning.
  5. ↑ Legal Dimensions of International Grantmaking: How a Private Foundation Can Use "Friends of" Organizations. Usig.org.
  6. ↑ Meet the expert: Suzanne M. Reisman, Law Offices of Suzanne M. Reisman. Giving Insights (March 3, 2010).
  7. ↑ Larkin, Richard F. & Marie DiTommaso (2011), Wiley Not-for-Profit GAAP 2011: Interpretation and Application of Generally Accepted Accounting Principles, John Wiley and Sons, ISBN 978-0-470-55445-6, at Ch.11
  8. ↑ Donating to Charity.
  9. ↑ Exemption Requirements - 501(c)(3) Organizations | Internal Revenue Service (en).
  10. ↑ Private Operating Foundations | Internal Revenue Service (en).
  11. ↑ Private Foundations | Internal Revenue Service (en).
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