Organizations setup for a purpose that is not to generate profits for shareholders and that meet the requirements set forth in the Internal Revenue Code are exempt from federal income tax. In addition, contributions made to charitable organizations as defined in Section 501(c)(3) by individuals and corporations are tax deductible.
Every exempt charitable organization is classified as either a public charity or a private foundation. Generally, organizations that are classified as public charities are those that (i) are churches, hospitals, qualified medical research organizations affiliated with hospitals, schools, colleges and universities, (ii) 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, (iii) receive income from the conduct of activities in furtherance of the organization’s exempt purposes, or (iv) actively function in a supporting relationship to one or more existing public charities.
Private foundations, in contrast, typically have a single major source of funding (usually gifts from one family or corporation rather than funding from many sources) 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.
Other organizations available to receive not for profit status include, but are not limited to, fraternal organization, social clubs, lodges, and many others. Contact our Firm, to see if your business qualifies for this status.
There are various requirements both at the state and federal level in order to setup the not for profit corporation and achieve tax exempt status. At the Law Offices of Senen Garcia, P.A., we will ensure these requirements are met including preparing the federal exemption application for obtaining the federal tax exemption.