Types of Organizations
Achieving tax-exempt status for your organization.
Prior to applying for tax-exempt status with the Internal Revenue Service, an organization must meet certain filing requirements. Deciphering those requirements, completing the necessary attachments, working through the process to complete the application for tax-exemption as well as determining the organization’s classification as defined by the Internal Revenue Code, takes experience and a keen understanding of the regulations. Our nonprofit professionals can walk you through the entire process and assist you with completing the forms and filing the necessary paperwork.
How to Qualify for Federal Exemption
To be considered tax-exempt from federal income taxes, your organization must meet certain Internal Revenue Service requirements as defined in the Internal Revenue Code.
In general, an organization granted tax-exempt status is one that does not distribute its surplus funds to owners or shareholders, but instead uses those funds to help pursue its goals. In addition, the organization may not be an “action” organization. Examples include:
- Not attempting to influence legislation as a substantial part of its activities
- Not participating in any campaign activity for or against political candidates
The Internal Revenue Code identifies certain categories of tax-exempt organizations including, but not limited to, the following:
|IRC Code Section ||Description of Organization ||General Nature of Activities ||Application Form ||Annual Return Required to be Filed |
|501(c)(3) ||Religious, Educational, Charitable, Scientific, Literary, Testing for Public Safety, to Foster National or International Amateur Sports Competition, or Prevention of Cruelty to Children or Animals Organizations ||Activities of nature implied by description of class of organization ||1023 ||990, 990-EZ; 990-N; 990-PF |
|All 501(c)(3) organizations are further categorized as one of five types under IRC 509(a): |
| ||Private Foundations ||All 501(c)(3) organizations that don't qualify as public charities. Some private foundations are additionally subclassified as private operating foundations or private non-operating foundations, which receive some of the advantages of public charities |
| ||509(a)(1) Public Charities ||Publicly-supported charities. |
| ||509(a)(2) Public Charities ||Exempt purpose activity-supported charities. |
| ||509(a)(3) Public Charities ||Supporting organizations for 509(a)(1) or 509(a)(2) charities. |
| ||509(a)(4) Public Charities ||Public safety charities. |
|501(c)(4) ||Civic Leagues, Social Welfare Organizations, and Local Associations of Employees ||Promotion of community welfare; charitable, educational or recreational ||1024 ||990; 990-EZ; 990-N |
|501(c)(5) ||Labor, Agricultural, and Horticultural Organizations ||Educational or instructive, the purpose being to improve conditions of work, and to improve products and efficiency ||1024 ||990; 990-EZ; 990-N |
|501(c)(6) ||Business Leagues, Chambers of Commerce, Real Estate Boards, Etc. ||Improvement of business conditions of one or more lines of business ||1024 ||990; 990-EZ; 990-N |
|501(c)(7) ||Social and Recreation Clubs ||Pleasure, recreation, social activities ||1024 ||990; 990-EZ; 990-N |
|501(c)(10) ||Domestic Fraternal Societies and Associations ||Lodge devoting its net earnings to charitable, fraternal, and other specified purposes. No life, sickness, or accident benefits to members ||1024 ||990; 990-EZ; 990-N |
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