A 501(c)(3) organization is a non-profit organization that has been "approved by the Internal Revenue Service as a tax-exempt, charitable organization," according to the IRS. A 501(c)(3) is either a public charity, private foundation, or private operating foundation.

Qualifying Organizations

"Corporations, trusts, community chests, LLCs1, and unincorporated associations" can seek 501(c)(3) determination, according to Foundation Group. Most 501(c)(3) organizations are nonprofit corporations. The difference between 501(c)(3) entities and other tax exempt organizations is the ability to tax deduct any donations. Regulations for deductions vary by state.

Public Charity

A public charity is not a private foundation and receives most of its funding from the general public or government. At least one-third of its funding must be obtained from public support. Public charities need a governing body. Churches, animal welfare agencies or educational organizations are examples.

Private Foundation

A private foundation usually does not have active programs. Funding usually comes form a small amount of donors. A family can act as the governing body for the foundation.

Private Operating Foundation

Private operating foundations are similar to public charities, but their governing body is small and closely related, such as a foundation. Most funding goes towards the foundations active programs.

Restrictions

The activities or net earnings of the organization can unfairly benefit any employee of the organization, even if the organization shuts down. These organizations cannot intervene in political campaigns, endorse or speak out against any public office candidate.

Source:

Foundation Group: What is a 501c3?

IRS.gov: Tax Information for Charities & Other Non-Profits