501c3
Type
Charitable Organizations
Examples
Charitable, religious, educational, scientific,
literary, etc. organizations
Description and Exempted Purposes
The exempted purposes set forth in IRC Section
501c3 are charitable, religious, educational, scientific, literary,
testing for public safety, fostering national or international
amateur sports competition, and the prevention of cruelty to
children or animals. The term charitable is used in its generally
accepted legal sense and includes relief of the poor, the
distressed, or the underprivileged; advancement of religion;
advancement of education or science; erection or maintenance of
public buildings, monuments, or works; lessening the burdens of
government; lessening of neighborhood tensions; elimination of
prejudice and discrimination; defense of human and civil rights
secured by law; and combating community deterioration and juvenile
delinquency.
Organizational Details
To be organized exclusively for a charitable
purpose, the organization must be a corporation, community chest,
fund, or foundation. Individuals or partnerships do not qualify. The
articles of organization must limit the organization's purposes to
one or more of the exempt purposes set forth in IRC Section 501c3.
In addition, the assets of an organization must be permanently
dedicated to an exempt purpose. This means that should an
organization dissolve, its assets must be distributed for an exempt
purpose described in this chapter, or to the federal government or
to a state or local government for a public purpose.
Lobbying
In general, no organization may qualify for section 501(c)(3) status
if a substantial part of its activities is attempting to influence
legislation (commonly known as lobbying).
A 501(c)(3) organization may engage in some lobbying, but too
much lobbying activity risks loss of tax-exempt status.
An organization will be regarded as attempting to influence
legislation if it contacts, or urges the public to contact, members
or employees of a legislative body for the purpose of proposing,
supporting, or opposing legislation, or if the organization
advocates the adoption or rejection of legislation. Organizations
may, however, conduct educational meetings, prepare and distribute
educational materials, or otherwise consider public policy issues in
an educational manner without jeopardizing their tax-exempt status.
501c5
Type
Agricultural, Labor, and Horticultural
Organizations
Examples
Labor unions, farm bureaus, and other labor and
agricultural organizations
Description and Exempted Purposes
A labor organization is an association of workers,
usually in the form of a labor union, council, or committee that is
organized to protect and promote the interests of labor in
connection with employment. Agricultural and horticultural
organizations are connected with raising livestock, forestry,
harvesting crops or aquatic resources, the cultivation of useful or
ornamental plants, and similar pursuits.
Organizational Details
Labor Organizations: The organization must be
organized to carry out the betterment of the conditions of workers,
the improvement of the grade of their products, and the development
of a higher degree of efficiency in their respective occupations. In
addition, no net earnings of the organization may inure to the
benefit of any member. While a labor organization generally is
composed of employees or representatives of the employees (in the
form of collective bargaining agents) and similar employee groups,
evidence that an organization's membership consists mainly of
workers does not in itself indicate an exempt purpose. Agricultural
Organizations: The primary purpose of exempt agricultural and
horticultural organizations must be to relate to techniques of
production, betterment of conditions of those engaged in agriculture
or horticulture, development of efficiency, or improvement of the
grade of products.
Lobbying
The seeking of legislation germane to the labor or
agricultural organization's programs is recognized as a permissible
means of attaining its exempt purposes. Thus, a section 501(c)(5)
labor or agricultural organization may further its exempt purposes
through lobbying as its primary activity without jeopardizing its
exempt status. However, a section 501(c)(5) organization that
engages in lobbying may be required to either provide notice to its
members regarding the percentage of dues paid that are applicable to
lobbying activities or pay a proxy tax.