A 501(c)(3) organization is a tax-exempt non-profit organization. Learn the requirements, costs, and pros and cons of setting up a 501(c)(3).

Exemption Requirements - 501(c)(3) Organizations

Compliance Guide for 501(c)(3) Public Charities

Exempt Organizations Annual Reporting Requirements - Form 990, Schedules A and B: Public Charity Support Test

Form 1023: Purpose of Questions About Organization Applying More than 27 Months After Date of Formation

Form 1023 and 1023-EZ: Amount of User Fee

How Long Does It Take to Get a 501(c)(3) Determination Letter

Explaining The Differences Between 501(c)3 And 501(c)4 Non-Profits

Table of Contents
Expand While the Internal Revenue Service (IRS) recognizes more than 30 types of nonprofit organizations, organizations that qualify as 501(c)(3) organizations are unique because donations to these organizations are tax-deductible for donors.
501(c)(3) organizations must pay their employees fair market value wages.
To receive its favorable tax treatment, the non-profit organization must not deviate from its purpose or mission.
To be considered a charitable organization by the IRS, an organization must operate exclusively for one of these purposes: charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, and preventing cruelty to children or animals. What Is a 501(C)(3) Organization?
How a 501(c)(3) Organization Works
Requirements of a 501(c)(3)
Special Considerations
Pros and Cons of a 501(c)(3)
Example of a 501(c)(3)
501(c)(3) FAQs
The Bottom Line
Section 501(c)(3) is a portion of the U.S. Internal Revenue Code (IRC) and a specific tax category for nonprofit organizations. While the Internal Revenue Service (IRS) recognizes more than 30 types of nonprofit organizations, organizations that qualify as 501(c)(3) organizations are unique because donations to these organizations are tax-deductible for donors. It is typically not permitted to engage in lobbying (except in instances when its expenditures are below a certain amount).
People employed by the organization must be paid solely based on the fair market value that the job function requires, with no expectation of bonuses or compensation.
Once an organization is categorized as a 501(c)(3), the designation remains as long as the organization exists, unless it is revoked by the IRS.
To remain tax-exempt under Section 501(c)(3)

501(c)(3) Organization

Bargain sale to a charitable organization is the sale of a good or service to a charitable organization for less than the value of the good or service received.

Publication 526: Charitable Contributions

Publication 544: Sales and Other Dispositions of Assets

A bargain sale to a charitable organization is the sale of a good or service to a charitable organization for less than the fair market value of the good or service received. A bargain sale to a charitable organization is the sale of a good or service to a charitable organization for less than the fair market value of the good or service received. There are number of variables that could potentially affect the taxable outcome that results from making a bargain sale to a charitable organization, so it is advised that donating parties consult qualified tax preparers to make sure that they achieve the dual mission of providing a charity with a good or service, while obtaining favorable tax treatment, as a result. A bargain sale to a charitable organization is the sale of a good or service to a charity for the amount less than the fair market value. For a transaction to qualify for bargain sale treatment, the donor or seller must declare his or her intent to make a charitable gift prior to the transaction and the transaction must produce a charitable contribution income tax deduction under the Internal Revenue Code.

Bargain Sale to a Charitable Organization

A benefactor is an individual that provides money or other resources to an individual, group, or organization.

The Open Society Foundations and George Soros

Michael Bloomberg: Why I'm Giving $1.8 Billion for College Financial Aid

A benefactor is an individual that provides money or other resources to an individual, group, or organization. Benefactors are people in the position of being able to do good deeds by giving money without an expectation of recompensation, so benefactors are usually older, wealthy individuals who seek to do good by giving their money to younger people in need, charities and non-profit institutions. Being a benefactor does not require an individual to be wealthy, though the term is most frequently associated with large financial gifts to charities and university endowments. The Ford Foundation was created in 1936 by Edsel Ford, son of Henry Ford, the founder of the Ford Motor Company. American industrialists of the 18th and 19th centuries sometimes created new universities with a new endowment of cash, for example Ezra Cornell who endowed Cornell University with a gift of $500,000 in 1865.

Benefactor

Cash for Clunkers was a former federal program that gave owners a way to dispose of old vehicles in exchange for more fuel-efficient cars.

GAO-10-486: Lessons Learned From Cash for Clunkers Program

U.S. DOT to Implement Car Allowance Rebate System

Consumer Assistance to Recycle and Save Act of 2009

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Cash for Clunkers: Yet Another Way Government Increased the Cost of Living

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Cash for Clunkers Had Modest and Short-Lived Effects

Cash for Clunkers Results Finally in: Taxpayers Paid $24,000 per Vehicle Sold, Reports Edmunds.com

Vehicle Retirement Frequently Asked Questions

Publication 526, Charitable Contributions

The Car Allowance Rebate System: Evaluation and Lessons for the Future

Table of Contents
What Is Cash for Clunkers?
Understanding Cash for Clunkers
Requirements for Cash for Clunkers
Pros and Cons of Cash for Clunkers
Cash for Clunkers FAQs
The Bottom Line
Cash for Clunkers was a U.S. government program that provided financial incentives to car owners to trade in their old, less fuel-efficient vehicles and buy more fuel-efficient vehicles. Supporters of the program have argued that the program was a success because it provided a stimulus to the economy and replaced many fuel-inefficient vehicles with more fuel-efficient vehicles that created less pollution. Cash for Clunkers was a government program that provided financial incentives to car owners to trade in their old, less fuel-efficient vehicles for more fuel-efficient ones. The purpose of the program was primarily to act as an economic stimulus during the Great Recession by providing the population with monetary incentives to buy new cars, thereby increasing automobile sales, while at the same time reducing carbon emissions by replacing old vehicles with new, fuel-efficient ones.

Cash for Clunkers

Within certain limitations, the Charitable Contributions Deduction allows taxpayers to deduct their cash and property contributions to qualified charities.

One of the itemized deductions available for taxpayers who donate to charity. This applies the majority of charities receiving the donations, including all public charities, all private operating foundations, and certain private foundations that distribute the contributions they receive to public charities and private operating foundations within 2-1/2 months after the year of receiving the donations. The Charitable Contributions Deduction allows taxpayers to deduct all of their contributions to qualifying charitable contributions of cash and property within certain limitations. Some of the acceptable charities include:
A trust, a community chest, or a foundation created in the United States or its possessions, that’s organized and operated exclusively for scientific, religious, charitable, literary or scientific purposes. The Charitable Contributions Deduction allows taxpayers who make substantial charitable gifts and take sizeable tax deductions for the year in which their donations are made.

Charitable Contributions Deduction

Form 8282: Donee Information Return (Sale, Exchange or Disposition of Donated Property) is an IRS form used by organizations to report the sale or disposition of charitable deduction property to the IRS and to donors.

About Form 8282, Donee Information Return (Sale, Exchange or Other Disposition of Donated Property)

Form 8282: Donee Information Return (Sale, Exchange or Disposition of Donated Property) is an IRS tax form used by donor organizations to report the sale or disposition of charitable deduction property—other than money and publicly traded securities—to both the IRS and to donors. The IRS considers charitable deduction property to be any donated property (with the exception of money and publicly traded securities) donated by the donor to one or more donee organizations if the claimed value exceeds $5,000 per item (or group of similar items).
The original donee is also required to sign Form 8283, Noncash Charitable Contributions, Section B Donated Property Over $5,000 (Except Certain Publicly Traded Securities), presented by the donor for charitable deduction property. The original organization that received the property (the original donee) must provide Form 8282 to the successor organization that is now receiving the property (the successor donee). Original donee and successor donee organizations must file Form 8282 if they sell, exchange, consume, or dispose of charitable deduction property (or any portion) within three years after the date the original donee received the property. The successor organization must provide the original organization with a document outlining the date the transfer of property was received, and the original donor must be provided with a copy of Form 8282.

Form 8282: Donee Information Return

Form 8283-V: Payment Voucher for Filing Fee Under Section 170(f)(13) is a tax form completed by taxpayers claiming a charitable contribution exceeding $10,000 of an easement on the exterior of a building.

Form 8283-V, Payment Voucher for Filing Fee Under Section 170(f)(13)

Instructions for Form 8283, Noncash Charitable Contributions

Tax Incentives for Preserving Historic Properties

Easements to Protect Historic Properties: A Useful Historic Preservation Tool with Potential Tax Benefits

Form 8283-V: Payment Voucher for Filing Fee Under Section 170(f)(13) is a tax form completed by taxpayers claiming a charitable contribution exceeding $10,000 of an easement on the exterior of a historic building. Some other similar types of preservation and conservation easements include:
Historic structures, such as bridges or dams
Historically important land, including cultural landscapes, battlefields, and archeological sites
Open-space or natural habitats, such as farmland or land used for public recreation
Here is a link to a downloadable copy of Form 8283-V: Payment Voucher for Filing Fee Under Section 170(f)(13).
Form 8283-V is completed by taxpayers claiming a charitable contribution exceeding $10,000 of an easement on the exterior of a historic building.
The owner of a registered historic building, which could include a home, agrees not to alter the building’s exterior.
Each property that meets the charitable contribution requirements carries with it an additional filing fee. Form 8283-V: Payment Voucher for Filing Fee Under Section 170(f)(13) is a tax form completed by taxpayers claiming a charitable contribution exceeding $10,000 of an easement on the exterior of a historic building. In the case of a charitable easement on a historic building, however, the property owner places restrictions on changes that can be made to the building exterior and gives a qualified organization, such as a historic trust, the authority to enforce the easement. The need for Form 8283-V: Payment Voucher for Filing Fee Under Section 170(f)(13) arises when the owner of a registered historic building, which could include a home, agrees not to alter the building’s exterior.

Form 8283-V: Payment Voucher for Filing Fee Under Section 170(f)(13)

Form 8283: Noncash Charitable Contributions is a tax form distributed by the IRS and is used by filers who wish to deduct noncash contributions made to a qualifying charitable organization.

About Form 8283, Noncash Charitable Contributions

Form 8283: Noncash Charitable Contributions,

Instructions for Form 8283: Noncash Charitable Contributions,

Instructions for Form 8283: Noncash Charitable Contributions

About Form 1098-C: Contributions of Motor Vehicles, Boats, and Airplanes.

Form 8283: Noncash Charitable Contributions is a tax form distributed by the Internal Revenue Service (IRS) and used by filers who wish to deduct noncash contributions made to a qualifying charitable organization.﻿﻿ Deductions for noncash contributions are reported as itemized deductions. Form 8283: Noncash Charitable Contributions is a tax form distributed by the Internal Revenue Service (IRS) and used by filers who wish to deduct noncash contributions made to a qualifying charitable organization.﻿﻿ Deductions for noncash contributions are reported as itemized deductions. The filer will then fill out the following information for each column in Part I of Section A:
**A**: Name and address of the organization
**B**: Vehicle identification number (VIN), if the property is a vehicle
**C**: Property description. **H**: Fair market value
**I**: How the filer achieved the fair market value
Part II is filled out if there was less than an entire interest in a property listed in the previous section. Part I of Section B, which is similar to Part I in Section A, is filled out by the taxpayer and/or the appraiser.

Form 8283: Noncash Charitable Contributions Explanation

IRS Publication 561 provides information on how to determine the fair market value for charitable contributions that a taxpayer may wish to deduct.

Publication 561: Determining the Value of Donated Property,

Publication 501 (2018), Dependents, Standard Deduction, and Filing Information.

Publication 526 (2018), Charitable Contributions.

H.R.1994 - Setting Every Community Up for Retirement Enhancement Act of 2019.

Publication 561 (Rev. April 2007) Determining the Value of Donated Property,

IRS Publication 561: Determining the Value of Donated Property, is a document published by the Internal Revenue Service (IRS) that provides taxpayers with information on how to determine the fair market value for assets donated to a qualified organization. In Publication 561, the IRS also details guidance for asset valuations of the following:
Household goods
Used clothing
Jewelry and gems
Collections
Vehicles, boats, and aircrafts
Inventory from a personal business
Stocks and bonds
Real estate
Interest in a business
Annuities, interest for life or term of years, remainders, and reversions
Certain life insurance and annuity contracts
Partial interest in property not in trust
Taxpayers must generally file Form 8283 if the fair market value of donations is more than $500. IRS Publication 561: Determining the Value of Donated Property, is a document published by the Internal Revenue Service (IRS) that provides taxpayers with information on how to determine the fair market value for assets donated to a qualified organization. IRS Publication 561 provides guidance for determining the fair value of donated assets which can translate to an itemized tax deductible value. In general, IRS fair market valuations are in line with standard accounting practices which require a valuation to be based on a selling price in the open market.

IRS Publication 561

A nonprofit has tax-exempt status for furthering religious, scientific, charitable, educational, literary, public safety, or cruelty-prevention causes.

Exemption Requirements -- 501(c)(3) Organizations

Exempt Purposes -- Internal Revenue Code Section 501(c)(3)

The Restriction of Political Campaign Intervention by Section 501(c)(3) Tax Exempt Organizations

A nonprofit organization is a business that has been granted tax-exempt status by the Internal Revenue Service (IRS) because it furthers a social cause and provides a public benefit. Donations made to a nonprofit organization are typically tax-deductible to individuals and businesses that make them, and the nonprofit itself pays no tax on the received donations or on any other money earned through fundraising activities. A nonprofit designation and tax-exempt status are given only to organizations that further religious, scientific, charitable, educational, literary, public safety or cruelty-prevention causes or purposes. A nonprofit organization is a business that has been granted tax-exempt status by the Internal Revenue Service (IRS) because it furthers a social cause and provides a public benefit. Organizations seeking 501(c)(3) status must state explicitly in their organizing papers that they will not participate in any political campaign on the behalf of any candidate or make expenditures for political purposes.﻿﻿ There are 501(c) groups that can engage in these activities, but not 501(c)(3) organizations.

Nonprofit Organization (NPO)

Permanently restricted assets are funds of a nonprofit organization that must be used in designated ways and whose principal cannot be spent.

Permanently restricted assets are funds of a nonprofit organization that must be used in designated ways and whose principal cannot be touched. Donations of such assets are not uncommon, as individuals, groups or organizations making the donations may have certain preferences as to how the assets donated are used by the nonprofit entity. For example, an individual or organization may donate a large chunk of real estate to a nonprofit entity, such as a public university, with the restriction that the property only be used to house scientific research labs in perpetuity. Permanently restricted assets are funds of a nonprofit organization that must be used in designated ways and whose principal cannot be touched. The third type, permanently restricted assets, are usually related to a particularly large donation, the donor of which a majority of the time will specify the purpose of the money.

Permanently Restricted Assets

Proof of charitable contributions refers to the substantiation that the Internal Revenue Service requires to claim a donation as a tax deduction.

Charitable Contributions - Written Acknowledgments

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IRS provides tax inflation adjustments for tax year 2020

IRS provides tax inflation adjustments for tax year 2021

Publication 590-B (2018), Distributions from Individual Retirement Arrangements (IRAs)

Proof of charitable contributions refers to the substantiation required by the Internal Revenue Service (IRA) for a taxpayer to claim a donation of money, property, or financial assets as an itemizable federal income tax deduction. The standard deduction is the amount taxpayers can subtract from income if they don’t list itemized write-offs for mortgage interest, charitable donations, and state taxes, among others, on Schedule A.
A filer’s itemized deductions now need to be greater than the new standard deductions for the filer to benefit from listing deductions separately. Proof of charitable contributions refers to the substantiation required by the Internal Revenue Service (IRA) for a taxpayer to claim a donation of money, property, or financial assets as an itemizable federal income tax deduction. According to the IRS, acceptable forms of proof include bank statements, payroll deduction records, and written statements from the recipient charity containing the charity’s name, contribution date, and contribution amount.﻿﻿ For contributions of $250 or more Proof can be provided in the form of an official receipt or invoice from the receiving charitable organization, but can also be provided via credit card statements or other financial records detailing the donation.

Proof of Charitable Contributions

A qualified charitable organization is a nonprofit organization that qualifies for tax-exempt status according to the U.S. Treasury.

Exempt Purposes - Internal Revenue Code Section 501(c)(3)

The Restriction of Political Campaign Intervention by Section 501(c)(3) Tax-Exempt Organizations

A qualified charitable organization is a nonprofit organization that qualifies for tax-exempt status according to the U.S. Treasury. Section 501(c)(3) is the specific portion of the U.S. Internal Revenue Code (IRC) and a specific tax category for nonprofit organizations.
501(c)(3) organizations are not only tax-exempt, but donations to them may also be tax-deductible for donors.
Only donations that are made to a qualified charitable organization are tax-deductible. Qualified charitable organizations include charities, philanthropic groups, certain religious and educational organizations, nonprofit veterans' organizations, fraternal lodge groups, cemetery and burial companies, and certain legal corporations Qualified charitable organizations differ from strictly tax-exempt organizations, which do not have to be for a charitable purpose yet are not required to pay taxes. A qualified charitable organization is a nonprofit organization that qualifies for tax-exempt status according to the U.S. Treasury.

Qualified Charitable Organization Defined

A quid pro quo contribution is one in which the donor receives something from the recipient in exchange for the donation. 

A quid pro quo contribution is a charitable donation for which the donor receives something from the recipient in exchange for their funds. As a thank you from the school, the school offers some of the top donors gift certificates to the farm stand that they will be setting up at the end of the school year to sell off the surplus fruits and vegetables harvested from the school garden. When she goes to add the contribution to her deductions for the tax year, she can only use $140 from the donation, or the difference between the donation and the gift that she received in return. A quid pro quo contribution differs from a typical charitable contribution since with a regular donation the donor receives nothing from the charity in return for the gift or deposit. The rules for tax deductions for quid pro quo contributions are also different because with a typical donation the donor can deduct the entirety of the donation as long as it meets eligibility requirements.

Charitable Donations

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