The Requirements for 501(c)(3)Non-Profit Organizations

The Internal Revenue Code's 501(c)(3) exempts organizations from federal taxation. A corporation, trust, unincorporated association, and other organization types are exempt from federal income taxes under Section 501(c)(3) of Title 26 of the United States Code. A non-profit organization can only be recognized as charitable if it is classified as a 501(c)(3) organization. A 501(c) organization, or a taxable corporation, must follow certain rules and regulations in order to be tax-exempt. In addition to being exempt from federal taxes, 501(c) organizations are organized for charitable, educational, or any other purposes allowed under the Internal Revenue Code. You might see 501(c) organizations on a regular basis with 501c3 requirements, but you don't usually think of them as non-profits. For instance, most churches fall under the 501(c) organization category and are thus eligible for tax exemptions as well as benefits.

Lobbying in politics

501(c)(3) organizations and organizations registered as 501(c)(4) cannot make excessive political contributions to the government or participate in political lobbying. A 501(c) organization with 501c3 requirements has specific regulations pertaining to when and how it can participate in the lobbying process; for the most part, the activities are strictly limited in order to ensure that the corporation or entity remains a public entity and does not become a special interest group.

The interest of the public

To qualify as a 501(c)(3) organization, the organization must serve the public interest and not benefit private interests. Non-profit organizations such as churches, schools, and charities such as Goodwill and Salvation Army are all public interest organizations, meaning they benefit the public and are not designed to create wealth for the individuals operating the organization. The IRS requires a charitable organization sustained with 501c3 requirements to go through pre-approved procedures before it can enrich its officers or directors. A charitable organization is exempt from this tax requirement.

The act of disbursing money

Private individuals or shareholders are not allowed to receive any earnings, dividends, or other monies from a 501(c)(3) organization with 501c3 requirements. Essentially, this means that all money received by the non-profit organization must be distributed in a way that is consistent with the organization's stated goals and cannot be used to gain physical wealth from its members or those with a stake in the organization. This regulation is closely guarded by the IRS, and corporations found in violation risk their non-profit status being revoked as well as other tax and criminal penalties.

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