In the United States, a charitable organization is an organization operated for purposes that are beneficial to the public interest. There are different types of charitable organizations. Every U.S. and foreign charity that qualifies as tax-exempt under Section 501(c)(3) of the Internal Revenue Code is considered a "private foundation" unless it demonstrates to the IRS that it falls into another category. Generally, any organization that is not a private foundation (i.e., it qualifies as something else) is usually a public charity as described in Section 509(a) of the Internal Revenue Code.
In addition, a private foundation usually derives its principal funding from an individual, family, corporation, or some other single source and is more often than not a grantmaker and does not solicit funds from the public. In contrast, a foundation or public charity generally receives grants from individuals, government, and private foundations, and while some public charities engage in grantmaking activities, most conduct direct service or other tax-exempt activities. Foundations that are generally grantmakers (i.e. they use their endowment to make grants to other organizations, which in turn carry out the goals of the foundation indirectly) are usually called "grantmaker" or "non-operating" foundations.
The requirements and procedures for forming charitable organizations vary from state to state, as do the registration and filing requirements for charitable organizations that conduct charitable activities, solicit charitable contributions, or hire professional fundraisers. In practice, the detailed definition of "charitable organization" is determined by the requirements of state law where the charitable organization operates, and the requirements for federal tax relief by the IRS.
Resources exist to provide information, even rankings, of US charities.
Federal tax relief:
Federal tax law provides tax benefits to nonprofit organizations recognized as exempt from federal income tax under section 501(c)(3) of the Internal Revenue Code (IRC). The benefits of 501(c)(3) status include exemption from federal income tax as well as eligibility to receive tax-deductible charitable contributions. There was a total of $281.86 billion tax-deductible donations by individuals in 2017, and the fastest-growing form of giving was with stock.
To qualify for 501(c)(3) status most organizations must apply to the Internal Revenue Service (IRS) for such status.
Several requirements must be met for a charitable organization to obtain 501(c)(3) status. These include the organization being organized as a corporation, trust, or unincorporated association, and the organization's organizing document (such as the articles of incorporation, trust documents, or articles of association) must limit its purposes to being charitable, and permanently dedicate its assets to charitable purposes. The organization must refrain from undertaking several other activities such as participating in the political campaigns of candidates for local, state or federal office, and must ensure that its earnings do not benefit any individual. Most tax-exempt organizations must file annual financial reports (IRS Form 990) at the state and federal levels. A tax-exempt organization's 990 and some other forms are required to be made available to public scrutiny.
The types of charitable organizationa that are considered by the IRS to be organized for the public benefit include those that are organized for:
- Relief of the poor, the distressed, or the underprivileged
- Advancement of religion
- Advancement of education or science
- Construction 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
- Combating community deterioration and juvenile delinquency.
- A number of other organizations may also qualify for exempt status, including those organized for religious, scientific, literary and educational purposes, as well as those for testing for public safety and for fostering national or international amateur sports competition, and for the prevention of cruelty to children or animals.
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