ANSWERS: 2
  • 501(c)(3) entities tend to do a lot of good for society, such as helping alumni of a college network for jobs or working for a specific cause, such as finding lost children. Even just supporting a 501(c)(3) can benefit an individual.

    Identification

    501(c)(3)s are actually nonprofit corporations, according to the Internal Revenue Service. The numbers refer to section 501(c)(3) of the Internal Revenue Service tax code for tax-exempt organizations.

    Function

    A 501(c)(3) corporation must exist for a specific religious, charitable, scientific, literary, educational or public safety purpose, reports IRS Publication 557.

    Benefits

    Besides not needing to pay taxes, 501(c)(3) corporations can also earn revenue, assuming it relates to the 501(c)(3)'s mission, reports Nolo. In addition, the IRS gives tax breaks to those who donate to a 501(c)(3).

    Features

    Forming a 501(c)(3) requires a lengthy application process. You must file several forms; examples of these are found in IRS Publication 557. Also, you need to create regulations that the 501(c)(3) will abide by, and appoint a board of directors.

    Warning

    A 501(c)(3) corporation will lose tax-exempt status when it engages in political activities, such as promoting a certain candidate. However, the 501(c)(3) may promote civic-mindedness, such as encouraging people to vote, without supporting any particular candidate, reports the IRS.

    Source:

    Internal Revenue Service; Publication 557

    Nolo.com; Nonprofits FAQ

  • Short answer: it is a charity that has applied for and received charity status by the IRS to allow people who contribute to that charity to deduct those contributions from their tax.

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