Defining 501(C)(3) Nonprofit Organizations

To be tax exempt, an organization must have one or more exempt purposes stated in its organizing document. In the case of nonprofits or 501(C)(3) organizations, they must be charitable, educational, or religious.

For an organization to be considered charitable, it must conduct activities that promote:

  • Relief of the poor, the distressed, or the underprivileged
  • Advancement of religion
  • Advancement of education or science
  • Erection or maintenance of public buildings, monuments, or works
  • Lessening the burdens of government
  • Lessening neighborhood tensions
  • Eliminating prejudice and discrimination
  • Defending human and civil rights secured by law
  • Combating community deterioration and juvenile delinquency

Educational organizations include:

  • Schools
  • Day care centers (nonprofit)
  • Organizations that offer a “distance learning” course of instruction by correspondence or through television, radio, or the Internet
  • Organizations that conduct public discussion groups, forums, panels, lectures, or similar programs
  • Museums, zoos, planetariums, symphony orchestras, similar arts and educational organizations
  • Youth sports organizations

Nonprofit religious organizations include:

  • Churches, including synagogues, temples, mosques, and other similar types of religious organizations
  • Mission organizations, nondenominational ministries, or faith-based social agencies.

Once classified into one of the above categories, an organization should then be defined as a public charity or as a private foundation. The difference between the two will be the organization’s source of financial support. Generally, a public charity will have a broad base of support mainly from; you guessed it, the public! A private foundation will have limited sources of support and a different set of tax rules.

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