What Constitutes a Non-Profit Organization 501(c)3?

non-profit 501(c) organizations

A 501(c)3 organization is a type of organization that is exempt from federal income taxation in the United States. Such an organization can include a trust, a corporation, or an unincorporated association. There are a total of 29 types of non-profit 501(c) organizations. For information about whether your organization qualifies as a 501(c)3 tax-exempt organization, you should call the experienced San Jose lawyers at Startup Company Counsel today.


Under the law, there are two classifications of tax-exempt organizations. These include the following types of organizations:

  • Public charities – Public charities are those organizations that receive a large part of their income from the government or donations from the general public. This income may be received by the charity either directly or indirectly. The level of public support which the charity receives must be more than just a few families or individuals.
  • Private foundations – Private foundations are also commonly referred to as non-operating foundations. These entities receive a majority of their annual income from endowments and investments. Rather than the income being used for a variety of charitable purposes, the income received typically goes to other organizations in the form of grants. In a nutshell, private foundations generally are those 501(c)3 organizations that do not satisfy the legal requirements for a public charity.

How to Acquire Tax-Exempt Status

One of the essential requirements for obtaining tax-exempt status is making sure that the organization limits itself via its Article of Incorporation or via a set of nonprofit corporate bylaws. These steps are essential for the organization to obtain the necessary tax-exempt status – both at the federal and the state levels.

For an organization to obtain tax-exempt status, it must take several legal steps. First, the organization must file the IRS form 1023 and pay the necessary filing fee. The filing fee is based upon the annual amount of the organization’s gross receipts.

Automatically Tax-Exempt organizations

Some organizations are automatically treated as tax-exempt organizations. Churches (including associations of churches) are always exempt from taxes. A “church association” may also be comprised of a group of churches or religious denominations that work together to carry out religious duties, services, and activities.

Moreover, organizations which are not private foundations and which have gross receipts under $5,000 are generally exempt from taxes. These organizations, like churches, religious conventions, and religious associations, are not required to file an IRS form 1023.

Call a San Jose Startup Lawyer Today

State and federal tax codes are incredibly complex, and their nuances can be especially challenging to understand without the assistance of legal counsel. The experienced attorneys at Startup Company Counsel can help you determine whether your startup organization qualifies as a non-profit organization under 501(c)3, and in turn, whether your organization is exempt from paying federal or state income taxes. To schedule a free consultation and case evaluation with a San Jose startup lawyer, please call us at 408-441-7555 or contact us online today.

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