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501(c) is a provision of the United States Internal Revenue Code (26 U.S.C. § 501(c)), listing 27 types of non-profit organizations exempt from some federal income taxes. The United States of America —commonly referred to as the The Internal Revenue Code (or IRC; more formally the Internal Revenue Code of 1986 as amended) is the main body of domestic statutory Tax law The Internal Revenue Code (or IRC; more formally the Internal Revenue Code of 1986 as amended) is the main body of domestic statutory Tax law A non-profit organization ( abbreviated "NPO" also "not-for-profit" is a legally constituted Organization whose objective is to support or engage A tax exemption is an exemption from all or certain Taxes of a state or nation in which part of the taxes that would normally be collected from an individual or an organization Taxation in the United States is a complex system which may involve payment to at least four different levels of government and many methods of taxation The Sections 503 through 505 list the requirements for attaining such exemptions. Many states reference Section 501(c) for definitions of organizations exempt from state taxation as well.

Contents

Types

The types of 501(c) organizations are:

General compliance issues

Under IRS's IRC Section 511, a 501(c) organization is subject to tax on its "unrelated business income," whether or not the organization actually makes a profit, but not including selling donated merchandise or other business or trade carried on by volunteers, or certain bingo games. The Federal Credit Union Act is a United States federal law signed into law by President Franklin D IRS Definition A voluntary employees' beneficiary association (VEBA under Internal Revenue Code section 501(c(9 is an organization organized to pay life sick A cemetery is a place in which dead bodies and cremated remains are buried. A credit union is a Cooperative Financial institution that is owned and controlled by its members and operated for the purpose of promoting thrift providing credit Mutual insurance is a type of Insurance where those protected by the insurance (policyholders also have certain "ownership" rights in the organization. Events 524 - Battle of Vézeronce, the Franks defeat the Burgundians The year 1959 ( MCMLIX) was a Common year starting on Thursday (link will display full calendar of the Gregorian calendar. This is a list of Veterans organizations. Australia Returned and Services League of Australia Canada Pneumoconiosis is an Occupational lung disease caused by the Inhalation of dust Reinsurance is a means by which an Insurance company can protect itself against the risk of losses with other insurance companies Unrelated Business Income Tax (UBIT in the US Internal Revenue Code is the tax on unrelated business income which comes from an activity engaged in by a tax-exempt [1] Disposal of donated goods valued over $2,500, or acceptance of goods worth over $5,000 may also trigger special filing and record-keeping requirements.

Note that "tax exempt" also does not excuse an organization from maintaining proper records and filing any required annual or special-purpose tax returns. [2] Previously, annual returns were not generally required from an exempt organization accruing less than $25,000 in gross income yearly. [3] However, from 2008 onwards, many such organizations must file a yearly "e-Postcard" or risk losing their exemption [4]

Failure to file required returns such as Form 990 (Return of Organization Exempt From Income Tax) may result in monetary fines of up to $250,000 per year. 2008 ( MMVIII) is the current year in accordance with the Gregorian calendar, a Leap year that started on Tuesday of the Common Exempt or political organizations (excluding churches or similar religious entities) must make their returns, reports, notices, and exempt applications available for public inspection.

The exempt organization filed IRS Form 990 (or similar such public record as the Form 990-EZ or Form 990-PF) are generally available for public inspection and photocopying at the offices of the exempt organization, through a written request and payment for photocopies by mail from the exempt organization, or through a direct Form 4506-A Request for Public Inspection or Copy or Political Organization IRS Form request to the IRS of the exempt organization filing of Form 990 for the past three tax years. The Form 4506-A also allows the public inspection and/or photocopying access to Form 1023 Application for Recognition of Exemption or Form 1024, Form 8871 Political Organization Notice of Section 527 Status, and Form 8872 Political Organization Report of Contribution and Expenditures.

Failure to timely file such returns and to make other specific information available to the public is also prohibited. [5]

501(c)(3)

Section 501(c)(3) is a tax law provision granting exemption from the federal income tax to non-profit organizations. This exemption does not cover other federal taxes such as employment taxes.

501(c)(3) exemptions apply to corporations, and any community chest, fund, or foundation, organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes, or to foster national or international amateur sports competition, or for the prevention of cruelty to children or animals. A religion is a set of Tenets and practices often centered upon specific Supernatural and moral claims about Reality, the Cosmos The definition of charitable organization, and of charity varies according to the country and in some instances the region of the country in which the charitable organization operates Science (from the Latin scientia, meaning " Knowledge " or "knowing" is the effort to discover, and increase human understanding Literature is the Art of written works Literally translated the word means "acquaintance with letters" (from Latin littera letter Education encompasses both the Teaching and Learning of Knowledge, proper conduct, and technical competency

Another provision, 26 U.S.C. § 170, 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. The Internal Revenue Code (or IRC; more formally the Internal Revenue Code of 1986 as amended) is the main body of domestic statutory Tax law Charitable contribution deductions for United States Federal Income Tax purposes are defined in section 170(c of the Internal Revenue Code as contributions Regulations specify which such deductions must be verifiable in order to be allowed (e. g. , receipts for donations over $250).

Testing for public safety is described under section 509(a)(4) of the code which makes the organization a public charity and not a private foundation, but contributions to 509(a)(4) organizations are not deductible by the donor for federal income, estate, or gift tax purposes.

The three principal 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. A non-profit organization ( abbreviated "NPO" also "not-for-profit" is a legally constituted Organization whose objective is to support or engage The 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)(1) through 509(a)(4).

A private foundation, sometimes called a non-operating foundation, receives most of its income from investments and endowments. Private foundations are legal entities set up by an individual a family or a group of individuals for a purpose such as Philanthropy. 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.

A private operating foundation is a private foundation that devotes most of its earnings and assets directly to the conduct of its tax exempt purposes, rather than to making grants to other organizations for these purposes. Private operating foundations are defined in the Internal Revenue Code under section 4942(j)(3).

Charitable deductions

Under IRS's IRC Section 170, individuals giving to 501(c)(3) organizations that are either public charities, private operating foundations, and certain private foundations may deduct contributions representing up to 50% of the donor's adjusted gross income if the individual itemizes on his tax returns. Individuals giving to 501(c)(3) organizations that are private foundations may generally deduct contributions representing up to 30% of their adjusted gross income. Corporations may deduct all contributions to 501(c)(3) organizations (regardless of foundation status) up to an amount normally equal to 10% of their taxable income.

501(c)(3) status for charities and the related section 170 deduction for donors are important to many charitable groups. Some individuals and groups (and virtually all foundations) will not give to a charity if it does not have 501(c)(3) status (as no tax deduction would be allowed). Therefore, loss of this status can be harmful (if not fatal) to a charity's existence.

Obtaining 501(c)(3) status

Some organizations automatically acquire 501(c)(3) status upon filing of proper organizational documents (e. g. , articles of incorporation as a church), at least until annual income exceeds a statutory threshold. Others will not receive 501(c)(3) status until they file an application and supporting documentation to the IRS and have a certification letter issued. The IRS will examine the application and may request further financial and organization information prior to granting the 501(c)(3) status. To cover donations made before the letter is issued, the regulations require prompt filing of the application after organization, or after an existing organization satisfies the criteria for 501(c)(3), or after exceeding the income threshold.

Political activity

Organizations with this classification are prohibited from conducting political campaign activities to influence elections to public office. A political campaign is an organized effort which seeks to influence the decision making process within a specific group An election is a Decision-making process by which a population chooses an individual to hold formal office Public charities (but not private foundations) are permitted to conduct a limited amount of lobbying to influence legislation. Although the law states that "no substantial part" of a public charity's activities may be devoted to lobbying, charities with very large budgets may lawfully expend a million dollars (under the "expenditure" test) or more (under the "substantial part" test) per year on lobbying. Lobbying includes all attempts to influence Legislators and officials whether by other legislators constituents or organized groups [6]

All 501(c)(3) organizations are also permitted to educate individuals about issues, or fund research that supports their political position without overtly advocating for a position on a specific bill. Think tanks such as the Cato Institute, Center for American Progress, and Heritage Foundation and other 501(c)(3) organizations produce reports and recommendations on policy proposals that do not count as lobbying under the tax code. A think tank (also called a policy institute) is an organization institute corporation or group that conducts Research and engages in advocacy in areas such The Cato Institute is a Libertarian Think tank headquartered in Washington D The Center for American Progress is an American liberal political policy research and advocacy organization The Heritage Foundation is an American conservative Think tank. Another example is the The American Foreign Policy Council is a lobbyist organization operating under this code. The American Foreign Policy Council (AFPC is a conservative non-profit U

Relations to other nonprofit organizations

Many 501(c)(3) organizations are part of nonprofit "conglomerates," having organizational control relationships with other nonprofit organizations. The board of a 501(c)(4) advocacy organization may create a 501(c)(3) that operates solely for "educational" purposes. The League of Women Voters advocates positions on issues and evaluates candidates as a 501(c)(4) and there is a similarly named 501(c)(3) organization, League of Women Voters Education Fund, which provides nonpartisan voter information. The League of Female Voters is an American political Organization founded in 1920 by Carrie Chapman Catt during the last meeting of the National The board of a 501(c)(6) business league may create a 501(c)(3) organization with the purpose of conducting research related to the business focus. While 501(c)(3) organizations may be similarly named to other organizations, they cannot be owned by other organizations, and cannot also have private owners. 501(c)(3) organizations should usually be chartered as independent organizations.

Examples of 501(c)(3) organizations

Prominent 501(c)(3) organizations include:

Charity Navigator offers information on more than 5,000 501(c)(3) public charities and private foundations. The American Red Cross (also known as the American National Red Cross) is a humanitarian organization that provides emergency assistance disaster relief and education inside Goodwill Industries International is one of the world’s largest nonprofit providers of education training and career services for people with disadvantages such as welfare dependency Habitat For Humanity International ( HFHI) (generally referred to as Habitat for Humanity or simply Habitat) is an international Ecumenical Rock the Vote is a 501(c(3 Non-profit organization founded in Los Angeles in 1990 by Jeff Ayeroff for the purposes of political advocacy The Salvation Army is a Christian charity and church that is internally organised like a military service. United Way of America, based in Alexandria Virginia, is a Non-profit organization that works with nearly 1300 local United Way offices throughout the country in The Wikimedia Foundation Inc is a Non-profit charitable organization headquartered in San Francisco, California, United States, Charity Navigator is an independent non-profit organization that evaluates American charities.

Even some government and/or religious organizations can obtain 501(c)3 status, for example, the University of Tennessee's Christian Student Fellowship. A religion is a set of Tenets and practices often centered upon specific Supernatural and moral claims about Reality, the Cosmos

501(c)(4)

501(c)(4) exemptions are given to civic leagues or organizations not organized for profit and operated exclusively for the promotion of social welfare, or local associations of employees. Net earnings are devoted exclusively to charitable, educational, or recreational purposes. [7]

The exemption applies so long as ". . . no part of the net earnings of such entity inures to the benefit of any private shareholder or individual. "[8]

Characteristics that set these organizations apart from a 501(c)(3) non-profit organization include but are not limited to:

Deductibility of donations to 501(c)(4) organizations

Unlike donations to 501(c)(3) non-profit organizations, donations to a section 501(c)(4) organization are not deductible by the donor under section 170 of the code unless the recipient organization is either:

Prominent 501(c)(4) organizations

501(c)(6)

The 501(c)(6) is specifically reserved to Professional and Trade organizations (Associations and Societies), chamber of commerce organizations, economic development corporations, real estate boards, trade boards, professional football leagues (e. For the AppleTalk protocol developed by Apple Computer, see AppleTalk address resolution protocol (AARP For other organizations with a similar name see Christian Coalition. The League of Conservation Voters (LCV is a political advocacy organization that was founded in 1969 by American Environmentalist David Brower. MoveOn is an American non-profit progressive liberal public policy advocacy group and Political action committee which has raised millions of The National Rifle Association, or NRA, is a non-profit ( 501(c(4) group dedicated to the protection of the Second Amendment of the A chamber of commerce (also referred to in some circles as a board of trade) is a form of Business network. g. , the NFL), and other types of business leagues. The National Football League ( NFL) is the largest professional American football league. They are characterized by a common business interest, which the organization typically promotes. Organizations under this category are exempt from most federal income taxes. "Membership Dues" for a 501(c)(6) are tax deductible as business expenses, however any percentage of these used for political activities (like lobbying) are not tax deductible. The organization must report what percentage of these "dues" are not deductible.

501(c)(6) organizations may engage in limited political activities that inform, educate, and promote their given interest. They may not engage in direct expenditures advocating a vote for a political candidate or cause. Donations to 501(c)(6) organizations are not required to be disclosed.

501(c)(7)

A section 501(c)(7) organization is permitted to receive up to 35% of its gross receipts, including investment income, from outside of its membership without losing its tax-exempt status. However, only 15% of the organization's gross receipts may be derived from use of the organization's facilities by the general public.

The existence of private inurement can operate to deprive a social club of its exempt status. The general test is whether the club generates revenue from non-members, the use of which overflows to the personal advantage of the members (such as reduced dues, improved facilities, and the like).

501(c)(10)

501(c)(10) establishes exemption from federal income taxes for groups, associations or organizations that operate as a fraternal organization. These groups usually operate as "lodges" or sub-chapters under the control and/or supervision of a parent.

The tax-exempt function is related to the cause that these groups raise funds for; for example, the Ancient Arabic Order of the Nobles of the Mystic Shrine (Shriners) support Shriners Hospitals for Children. The Ancient Arabic Order of the Nobles of the Mystic Shrine, commonly known as Shriners and abbreviated A Shriners Hospitals for Children is a network of 22 pediatric Non-profit Hospitals across North America that provide all care at no charge While they are a tax-exempt organization, the only charitable tax deductible contributions that are allowed must be used exclusively for the support of a recognized 501(c)(3) public charity.

Notes

  1. ^ 26 U.S.C. § 513(f). The Internal Revenue Code (or IRC; more formally the Internal Revenue Code of 1986 as amended) is the main body of domestic statutory Tax law
  2. ^ E. g. , 26 U.S.C. § 6033 and 26 U.S.C. § 6050L. The Internal Revenue Code (or IRC; more formally the Internal Revenue Code of 1986 as amended) is the main body of domestic statutory Tax law The Internal Revenue Code (or IRC; more formally the Internal Revenue Code of 1986 as amended) is the main body of domestic statutory Tax law
  3. ^ Internal Revenue Bulletin 23, 1982, exercising 26 U.S.C. § 6033(a)(2)(B). The Internal Revenue Code (or IRC; more formally the Internal Revenue Code of 1986 as amended) is the main body of domestic statutory Tax law
  4. ^ http://www.irs.gov/charities/article/0,,id=169250,00.html.
  5. ^ 26 U.S.C. § 6652 and 26 U.S.C. § 6104. The Internal Revenue Code (or IRC; more formally the Internal Revenue Code of 1986 as amended) is the main body of domestic statutory Tax law The Internal Revenue Code (or IRC; more formally the Internal Revenue Code of 1986 as amended) is the main body of domestic statutory Tax law
  6. ^ Political and Lobbying Activities
  7. ^ See 26 U.S.C. § 501(c)(4)(A). The Internal Revenue Code (or IRC; more formally the Internal Revenue Code of 1986 as amended) is the main body of domestic statutory Tax law
  8. ^ See 26 U.S.C. § 501(c)(4)(B). The Internal Revenue Code (or IRC; more formally the Internal Revenue Code of 1986 as amended) is the main body of domestic statutory Tax law

See also

External links

A 527 group is a type of American Tax-exempt organization named after a section of the United States tax code,. In the US, a Political Action Committee, or PAC, is the name commonly given to a private group regardless of size organized to elect political candidates The Government Printing Office (GPO is an agency of the legislative branch of the United States federal government.
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