Taxpert Education on Non Profit Taxes

Non Profit Taxes

Organizations that meet the requirements of Internal Revenue Code section 501(c)(3) are exempt from federal income tax and are called charitable organizations. In addition, contributions made to charitable organizations by individuals and corporations are deductible under Code section 170.

Every exempt charitable organization is classified as either a public charity or a private foundation.

Generally, organizations that are classified as public charities:

(a) are churches, hospitals, qualified medical research organizations affiliated with hospitals, schools, colleges and universities;

(b) have an active program of fundraising and receive contributions from many sources, including the general public, governmental agencies, corporations, private foundations or other public charities;

(c) receive income from the conduct of activities in furtherance of the organization’s exempt purposes;

(d) actively function in a supporting relationship to one or more existing public charities.

Private foundations, on the other hand, typically have a single major source of funding (usually gifts from one family or corporation) and most have as their primary activity the making of grants to other charitable organizations and to individuals, rather than the direct operation of charitable programs.

IRS Information About Non Profit Taxes