What does a 501 (c)(3) Non Profit Organization mean?
What does a 501 (c)(3) organization mean? It means that a particular nonprofit organization has been approved by the Internal Revenue Service (IRS) as a tax-exempt, charitable organization. “Charitable” is broadly defined as for purposes that are religious, educational, charitable, scientific, literary, testing for public safety, fostering of national or international amateur sports, or prevention of cruelty to animals and children. There are over 1,400,700 registered 501(c)(3) organizations in the United States according to the National Center for Charitable Statistics. The benefits of having 501(c)(3) status include exemption from federal income tax and certain employment taxes. Certain 501(c)(3) organizations may also be eligible to receive tax-deductible charitable contributions.
According to the IRS website ‘the exemption requirements for an organization must not be organized or operated for the benefit of private interests, and no part of a section 501(c)(3) organization’s net earnings may inure to the benefit of any private shareholder or individual. If the organization engages in an excess benefit transaction with a person having substantial influence over the organization, an excise tax ( an excise tax is a flat-rate tax that applies to specific goods, services, and activities) may be imposed on the person and any organization managers agreeing to the transaction.’
Other specific guidelines includes:
- The 501(c)(3) organization must refrain from participating in the political campaigns of candidates and limit its lobbying activities to an insubstantial part of its total activities.
- The organization must also not have purposes or activities that are illegal or violate fundamental public policy.
- Keeping detailed books and records on all activities and to file an annual information return (IRS Form 990) is required.
- All 501(c)(3) organizations must make their applications, core governing documents, and the annual IRS Form 990 returns available to the public for inspection. The IRS Form 990s are generally posted on websites such as Guidestar.org.
There are additional eligibility guidelines, other requirements and filing requirements that can be found in the below link to UF/EDIS publication.
- EIN Application: https://www.irs.gov/businesses/small-businesses-self-employed/apply-for-an-employer-identification-number-ein-online
- EIN Form: https://www.irs.gov/charities-non-profits/employer-identification-number
- Form 1023 and 1023-EZ Directions: https://www.irs.gov/forms-pubs/about-form-1023ez
- Step-by-Step Analysis of Eligibility for Application: https://www.irs.gov/charities-non-profits/application-process
- IRS Pub 4220: https://www.irs.gov/pub/irs-pdf/p4220.pdf
For more information on filing and guidelines: http://edis.ifas.ufl.edu/fy1481