A 501(c)(3) nonprofit organization is officially recognized by the Internal Revenue Service as a tax exempt entity. The status is reserved for organizations that serve religious, scientific, educational and literary needs or work to prevent cruelty to animals and children, as reported by the Foundation Group.Continue Reading
The IRS issues the 501(c)(3) status under the conditions that none of the charitable organization's profits go to any individual or private interests and restricts the amount of political and legislative lobbying that a charity can conduct with the distinction.
Once the status is obtained, an organization can apply for grant money, accept donations without paying taxes and receive exemptions from property and income tax.
The process of applying for a 501(c)(3) status requires that legal documents concerning the organization's structure, board and purpose are filed including specific provisions that prove it's only function is to serve charitable interests.
The IRS can also revolve a charity's tax exempt status if it finds that it is spending more than the limit on lobbying, endorsing a political candidate, failing to file the yearly tax return or ceasing to perform the activities that were stated in the original application. Other reasons for removal from the government's active list are if an individual within the charity is profiting from its income, according to the Nonprofit Risk Management Center.Learn more about Taxes