News for Non Profits
Does your organization qualify as a 501c3 charity?
When people think of non-profits, they typically think of “charitable” organizations. For example, the Red Cross and Salvation Army are in this category. These organizations are governed under Internal Revenue code 501c3, which are more commonly referred to as publicly supported charities. One feature of 501c3 organizations is the tax deductible nature of donations that the organization receives. Charitable organizations, as defined by Internal Revenue Code, court opinions and I.R.S. rulings are organized for one (or more) of these specific purposes: The relief of poverty, advancement of religion, literary or support for the arts, promotion of health, scientific research, educational organizations (schools, universities, libraries, museums and organizations who instruct the public), and organizations designed to reduce suffering and prevent cruelty to children and animals.
There are other categories of non-profit (and generally tax exempt) organizations that fall outside of the 501c3, publicly supported charity classification. Examples of these organizations include social welfare and civic organizations, athletic clubs or leagues, social and fraternal clubs, business organizations, chambers of commerce, and agricultural co-ops, just to name a few. The important distinction is that donations to organizations outside of the 501c3 designation are not eligible for tax deductible status. Of course, there are exceptions to these rules.
Tax exempt organizations and not for profits are subject to a complicated and sometimes unclear set of rules. Be sure to determine what type of organization you are starting before applying for tax exempt or public charity status and receiving donations. If you need help, give us a call or join the monthly webinar.
