ANSWERS: 1
  • A 501(c)(3) is a type of tax-exempt nonprofit organization under the Internal Revenue Service's (IRS) tax code. A 501(c)(3) is a nonprofit whose purpose serves the public good.

    IRS Classification System

    The phrase "501(c)(3)" is found in the National Taxonomy of Exempt Entities (NTEE), a system used by the IRS to classify nonprofit organizations. An organization is classified based upon information its leadership supplies in its application for tax-exempt status.

    Examples

    Examples of 501(c)(3) organizations include nonprofit hospitals, youth groups, public charities, educational institutions and historical societies, among others. The American Red Cross, Salvation Army, Harvard University and Longwood Gardens are all 501(c)(3) organizations.

    Qualifications

    According to IRS rules, a 501(c)(3) nonprofit must be organized and operated for "charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, and preventing cruelty to children or animals" purposes.

    Other Requirements

    501(c)(3) groups may not distribute any profit to shareholders or other individuals. They are also not permitted to substantially engage in lobbying, and they are forbidden from engaging in partisan political activities.

    Tax Deduction

    Because of their work for the public good, individual donors who give to 501(c)(3) tax-exempt groups are able to deduct a percentage of their contributions from their personal taxes. A nonprofit with 501(c)(3) status is better able to draw grants from foundations and government, as it is usually a requirement for those organizations.

    Source:

    National Center for Charitable Statistics

    Internal Revenue Code Section 501(c)(3)

    Exemption Requirements: Section 501(c)(3) Organizations

    Resource:

    IRS.gov

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