You’ve probably heard the phrase, “Is it a 501(c)(3)”? In everyday language, we have a tendency to abbreviate a lot. The question is actually a shorthand way of saying, “Is it a tax-exempt organization”?
The Internal Revenue Service grants exemption from federal income tax under Section 501(c)(3) of the Internal Revenue Code. Tax-exempt organizations are nonprofit organizations and conduct charitable, educational, scientific, or religious activities.
Many people think that their organization is tax-exempt immediately after filing the articles of incorporation with their state. This is not the case. You must submit an application to the IRS (Form 1023). The IRS is the only entity that can grant exemption from federal income taxes.
Tax-exempt organizations can receive tax-deductible contributions, as well as bequests and gifts. Additionally, they are allowed to solicit donations of cash or material items such as computers, real estate, or vehicles. Some well-known exempt organizations are the YMCA, the American Red Cross, and the United Way.
A key component of 501(c)(3) is its dissolution requirement. If the organization dissolves, all assets must be donated to one or more 501(c)(3) entities.
In short: “A 501(c)(3)” is a nonprofit organization, exempt from federal income tax, serving the public.
Wondering if a particular organization is exempt? The IRS maintains a list on its website http://www.irs.gov
Click on:
1. Charities and non-profit organizations
2. Search for charities
3.Search now
The system allows you to search by name and/or location. If an organization is fairly new, it may not appear on the list.
