Blue Lion Foundation -About 501(3)(c) Charities

About 501 (3) (c) Charities

Section 501(c)(3) is a tax law provision granting exemption from the federal income tax to non-profit organizations. This exemption does not cover other federal taxes such as employment taxes. 501(c)(3) exemptions apply to corporations, and any community chest, fund, or foundation, organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes, or to foster national or international amateur sports competition, or for the prevention of cruelty to children or animals.

Another provision, 26 U.S.C. § 170, provides a deduction, for federal income tax purposes, for donors who make charitable contributions to most types of 501(c)(3) organizations, among others. Regulations specify which such deductions must be verifiable in order to be allowed (e.g., receipts for donations over $250).

The three principal classifications of 501(c)(3) organizations are as follows: The public support must be fairly broad, not limited to a few individuals or families.

Under IRC Section 170, individuals giving to 501(c)(3) organizations that are either public charities, private operating foundations, and certain private foundations may deduct contributions representing up to 50% of the donor's adjusted gross income if the individual itemizes on his tax returns.

Individuals giving to 501(c)(3) organizations that are private foundations may generally deduct contributions representing up to 30% of their adjusted gross income. Corporations may deduct all contributions to 501(c)(3) organizations (regardless of foundation status) up to an amount normally equal to 10% of their taxable income.

Organizations with this classification are prohibited from conducting political campaign activities to influence elections to public office. Public charities (but not private foundations) are permitted to conduct a limited amount of lobbying to influence legislation.