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The Curious Bag
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501(c)(3) status is the privilege of tax-exemption granted to charitable organizations in the United States. The name "501(c)(3)" comes from the location of the definition within the Internal Revenue Code.
Eligible Purposes
A 501(c)(3) organization must exist, according to the IRS code, for purposes that are "charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, and preventing cruelty to children or animals."
Donations
Donations to a 501(c)(3) organization are usually exempt from taxation themselves. Such law is explained in 26 U.S.C. § 170.
Subclasses
501(c)(3) organizations are divided between "private foundations," which receive the majority of their funds from private corporations or individuals, and "public charities," which are largely funded by the government.
Prohibited Activities
A charitable organization is not allowed to participate in any way in a candidate's campaign for political office. Lobbying activities are allowed, but must be kept to a minimum.
Exemption Exceptions
Any revenue from business activities that are unrelated to the purpose of the charity, or are conducted for the purposes of profit is not tax-exempt.
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