Anyone interested in creating a non-profit entity should consult with an experienced tax-exempt organizations attorney to ensure the necessary and proper application is filed. Such an attorney can guide the applicant through the process.
What is a Charitable Tax-Exempt Non-Profit Organization?
A charity is often a non-stock corporation qualified as tax-exempt under section 501(c)(3) of the Internal Revenue Code. They are often known simply as 501(c)(3)s. These organizations fall into one of three main categories: public charities, private foundations, and private operating foundations. A charitable nonprofit must exist for one or more charitable purposes in order to qualify as tax exempt.
Benefits of 501(c)(3) Status
Among other benefits, attainting 501(c)(3) status provides such advantages as:
- Exemption from federal income tax.
- Grant makers often require federal charitable status.
- Donations are tax deductible.
- Many state tax exemptions require 501(c)(3) status.
- Ability to mail at lower postal rates.
Types of 501c3 Organizations
There are three main 501(c)(3) categories:
Public Charity. The most common charitable entity, public charities conduct operations in pursuit of a charitable mission. Typically, such organizations receive donations from the public and may receive funding from sponsorships and grants.
Private Foundation. A private foundation does not necessarily conduct direct operations but rather provides funding to other like-minded organizations. Private foundations are often funded privately by a business, family or individual.
Private Operating Foundation. Private operating foundations conduct direct operations like a public charity but are financed privately like a Private Foundation.
Applying for 501(c)(3) Status
To qualify for 501(c)(3) tax exempt status, a nonprofit corporation must exist for one or more charitable “purposes”, including for example:
- Religious
- Literary
- Charitable
- Educational
- Scientific
- Fostering amateur sports
- Public safety testing
- Prevention of cruelty to children or animals
While there are a wide array of charitable purposes and missions, some examples include:
- Public health services such as hospitals and clinics.
- Civil liberties protection services (e.g., NAACP, ACLU).
- Aiding the poor in areas of foster care, housing and hunger.
- Improving public access and preservation of green spaces and nature.
- Educating the public in areas of scientific, social, and other disciplines.
Nonprofit/Tax-Exempt Organization Attorneys
Applying for and operating a nonprofit organization, while a noble venture, can be harder than it looks. We are here to help with your nonprofit and tax exemption needs. From forming a nonprofit corporation to applying for tax exempt status with the IRS and much more. To learn more, please contact Cook, Craig, and Francuzenko today.
