501(c)(3) Definition | Tax-Exemption for Qualifying Nonprofits

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501(c)(3) Definition

Short Definition

Section 501(c)(3) of the U.S. Internal Revenue Code allows some nonprofit organizations to be exempt from federal income taxes. It also makes donations made to the organization tax deductible.

Expanded Definition

501(c)(3) status is granted to organizations that operate exclusively for one of the following purposes: religious, charitable, scientific, testing for public safety, literary, educational, fostering nation or international amateur sports competition, or prevention of cruelty to children or animals. To receive 501(c)(3) status, an organization must apply using Form 1023. Once the organization is recognized as a 501(c)(3) organization, it will be exempt from federal income tax, federal unemployment tax, and sometimes state and local income taxes.

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