501(c) organization
A 501(c) organization is a nonprofit corporation, association, or trust organized and operated for specific purposes and granted tax-exempt status under Section 501(c) of the U.S. Internal Revenue Code (IRC). This designation means that the organization is exempt from federal income tax. Donors to certain types of 501(c) organizations may also be able to deduct their contributions from their federal income taxes.
There are several different types of 501(c) organizations, each with its own specific requirements and limitations. The most well-known is the 501(c)(3), which includes organizations 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. Contributions to 501(c)(3) organizations are generally tax-deductible for donors.
Other types of 501(c) organizations include:
- 501(c)(4): Social welfare organizations that promote social welfare and may engage in political activity as long as that is not their primary purpose. Donations to 501(c)(4) organizations are generally not tax-deductible.
- 501(c)(5): Labor, agricultural, and horticultural organizations.
- 501(c)(6): Business leagues, chambers of commerce, real estate boards, and boards of trade.
To obtain 501(c) status, an organization must apply to the Internal Revenue Service (IRS) and demonstrate that it meets the specific requirements for the particular type of 501(c) organization it is seeking to become. The IRS will review the organization's articles of incorporation or other organizational documents, as well as its planned activities, to determine whether it qualifies for tax-exempt status.
Maintaining 501(c) status requires ongoing compliance with IRS regulations, including filing annual reports (e.g., Form 990) and adhering to restrictions on activities that are inconsistent with the organization's exempt purpose. Failure to comply with these requirements can result in the revocation of the organization's tax-exempt status.