What is a 501(c)(3)?

Organizations described in section 501(c)(3) of the Internal Revenue Code are commonly referred to as charitable organizations. Organizations that qualify for 501(c)(3) tax exempt status must function solely for the qualifying purpose(s) defined in their application. (Qualifying purposes include charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, and preventing cruelty to children or animals.)

Unlike a for-profit corporation, non-profit corporations are not permitted to distribute profits to individual shareholders, however, they may raise and retain capital in a budget that can be used to fund operations. Donors that make a contribution to a 501(c)(3) corporation are able to deduct their contribution on their annual income tax return.