Having a 501(c), converting an existing corporation to a 501(c), or using a 501(c) organization under the umbrella of your entity can help your business save money, get money, attract people to the corporation and your cause, get discounts on services for the corporation, get access to specialized services for your corporation, and more. And of course, is complete with limited liability protection for your corporation. Having a 501(c) organization, which refers to a tax-exempt nonprofit organization under the Internal Revenue Code section 501(c), comes with many benefits.
Here is an expanded and complete list of the different Money Saving 501(c) nonprofit classifications recognized by the IRS:
501(c)(1): Corporations organized under the Act of Congress (including Federal Credit Unions)
501(c)(2): Title-holding corporations for exempt organizations
501(c)(3): Charitable, religious, educational, scientific, literary, testing for public safety, or prevention of cruelty to children or animal organizations
501(c)(4): Civic leagues, social welfare organizations, and local associations of employees
501(c)(5): Labor, agricultural, or horticultural organizations
501(c)(6): Business leagues, chambers of commerce, real estate boards, etc.
501(c)(7): Social and recreational clubs
501(c)(8): Fraternal beneficiary societies and associations
501(c)(9): Voluntary employees’ beneficiary associations
501(c)(10): Domestic fraternal societies and associations
501(c)(11): Teachers’ retirement fund associations
501(c)(12): Benevolent life insurance associations, mutual ditch or irrigation companies, mutual or cooperative telephone companies, etc.
501(c)(15): Mutual insurance companies or associations for casualty, etc.
501(c)(16): Cooperative organizations to finance crop operations
501(c)(17): Supplemental unemployment benefit trusts
501(c)(18): Employee-funded pension trusts (created before June 25, 1959)
501(c)(19): Post or organization of past or present members of the Armed Forces
501(c)(20): Group legal services plan organizations
501(c)(21): Black lung benefit trusts
501(c)(22): Withdrawal liability payment fund
501(c)(23): Veterans’ organizations (created before 1880)
501(c)(24): Section 4049 ERISA trust organizations
501(c)(25): Title-holding corporations or trusts with multiple parents
501(c)(26): State-sponsored organization providing health coverage for high-risk individuals
501(c)(27): State-sponsored workers’ compensation reinsurance organization
501(c)(30): Qualified nonprofit organizations that provide health coverage for patients in certain areas
501(c)(31): Qualified nonprofit organizations operating as Medicare Prescription Drug Card Sponsors
TAX EXEMPT APPLICATION PROCESS AND 501(c)(3) CORPORATE RECORDS COMPLIANCE
To obtain a favorable Federal Income Tax exemption determination from the Internal Revenue Service, your corporation will be subjected to a lengthy (about 6 to 9 months regularly, 2 to 3 months if expedited) and often cumbersome Internal Revenue Service investigation and approval process. During this period, the Internal Revenue Service will review the documents provided, make additional demands, and scrutinize corporate records and detailed information regarding your corporation’s activities. Your Articles of Incorporation, Corporate By-laws, and other corporate documents must include the proper information to comply with Internal Revenue Service Regulations. If you have an existing non-profit corporation that does not meet the requirements of 501(c)(3), it will be necessary to make changes to the Articles of Incorporation and draft the appropriate corporate documents so that your non-profit corporation is in compliance.
LIST OF ADVANTAGES FOR A MONEY SAVING 501(c) ORGANIZATION
2. Deductible donations: Donors to 501(c) organizations can generally deduct their contributions from their taxable income, incentivizing individuals and businesses to support charitable causes. This can help attract more donations and support for the organization.
3. Eligibility for grants and funding: Many foundations, government agencies, and other grant-making organizations provide funding exclusively to tax-exempt 501(c) organizations. Having 501(c) status can enhance an organization’s eligibility for grants and increase opportunities to secure funding for projects and programs.
4. Credibility and trust: Being a recognized tax-exempt organization lends credibility and trustworthiness to the organization. Potential donors, supporters, and stakeholders often view 501(c) status as a mark of legitimacy, which can boost confidence in the organization’s mission and activities.
5. Eligibility for certain exemptions and discounts: 501(c) organizations may be eligible for various exemptions and discounts, such as property tax exemptions, reduced postal rates for mailings, and discounts on certain goods and services.
6. Access to certain resources and services: Nonprofits with 501(c) status may have access to specialized resources and services, such as discounted software, volunteer support networks, capacity-building programs, and training opportunities offered by nonprofit associations or foundations.
7. Limited liability protection: Forming a nonprofit corporation under 501(c) status can provide limited liability protection to the organization’s officers, directors, and members, shielding them from personal liability for the organization’s debts and obligations in most cases.
It’s important to note that specific benefits and requirements may vary depending on the particular 501(c) classification and applicable state laws. Consulting with legal and tax professionals or nonprofit experts is advisable to fully understand the benefits and obligations associated with obtaining and maintaining 501(c) status.
For example, a 501(c)(3) organization is a non-profit corporation formed to carry out a charitable, religious, literary, educational, or scientific purpose that is recognized by the Internal Revenue Service as tax-exempt. Such a 501(c)(3) non-profit corporation doesn’t pay federal or state corporate income tax on profits it makes from events carried out in furtherance of its exempt function. In essence, this is because both state and federal taxing authorities believe that the benefits the public receives from these organizations entitle them to this advantageous tax-exempt status. These corporations are known as 501(c)(3) non-profit corporations because they are granted tax-exempt status from Section 501(c)(3) of the Internal Revenue Code.
