If you didn’t already know, the IRS (Internal Revenue Service) has several classifications for nonprofit organizations in the United States. These classifications determine the type of tax-exempt status an organization is granted and the types of activities they can engage in. It’s important you know and understand what type of nonprofit you wish to establish. Changing your classification after the fact, is very time consuming and disrupting to your nonprofit.
Here are the 10 main classifications:
- 501(c)(3) Organizations:
- Purpose: Charitable, Religious, Educational, Scientific, Literary, Testing for Public Safety, Fostering National or International Amateur Sports Competition, Preventing Cruelty to Children or Animals.
- Tax Deductibility: Contributions to 501(c)(3) organizations are tax-deductible for donors.
- Limitations: These organizations are generally prohibited from engaging in political campaigns and substantial lobbying activities.
- 501(c)(4) Organizations:
- Purpose: Civic leagues, social welfare organizations, and local associations of employees.
- Tax Deductibility: Donations to 501(c)(4) organizations are generally not tax-deductible.
- Limitations: These organizations can engage in lobbying activities and some political activities, but they can’t primarily focus on electoral politics.
- 501(c)(5) Organizations:
- Purpose: Labor, Agricultural, or Horticultural Organizations.
- Tax Deductibility: Donations to 501(c)(5) organizations are generally not tax-deductible.
- Limitations: These organizations are generally focused on the interests of their members and can engage in lobbying activities.
- 501(c)(6) Organizations:
- Purpose: Business leagues, chambers of commerce, real estate boards, and boards of trade.
- Tax Deductibility: Donations to 501(c)(6) organizations are generally not tax-deductible.
- Limitations: They are usually industry or trade-focused and can engage in lobbying activities.
- 501(c)(7) Organizations:
- Purpose: Social and recreational clubs.
- Tax Deductibility: Donations to 501(c)(7) organizations are generally not tax-deductible.
- Limitations: These organizations must be organized for pleasure, recreation, and other nonprofitable purposes.
- 501(c)(8) Organizations:
- Purpose: Fraternal beneficiary societies and associations.
- Tax Deductibility: Donations to 501(c)(8) organizations are generally not tax-deductible.
- Limitations: These organizations provide for the payment of life, sick, accident, or other benefits to their members.
- 501(c)(9) Organizations:
- Purpose: Voluntary employees’ beneficiary associations providing for the payment of life, sick, accident, or other benefits to the members of the association or their dependents.
- Tax Deductibility: Donations to 501(c)(9) organizations are generally not tax-deductible.
- Limitations: These organizations provide benefits to their members or their dependents.
- 501(c)(10) Organizations:
- Purpose: Domestic fraternal societies, orders, or associations operating under the lodge system.
- Tax Deductibility: Donations to 501(c)(10) organizations are generally not tax-deductible.
- Limitations: These organizations provide for the payment of life, sick, accident, or other benefits to the members of the association or their dependents.
- 501(c)(11) Organizations:
- Purpose: Teachers’ retirement fund associations.
- Tax Deductibility: Donations to 501(c)(11) organizations are generally not tax-deductible.
- Limitations: These organizations provide for the payment of life, sick, accident, or other benefits to the members of the association or their dependents.
- 501(c)(12) Organizations:
- Purpose: Benevolent life insurance associations, mutual ditch or irrigation companies, mutual or cooperative telephone companies, etc.
- Tax Deductibility: Donations to 501(c)(12) organizations are generally not tax-deductible.
- Limitations: These organizations have specific purposes related to mutual assistance and cooperation.
It’s important to note that even within each category, there may be additional requirements and specific rules. If you’re considering starting or working with a nonprofit organization, it’s highly recommended to consult with a legal professional or experienced nonprofit advisor, like ALM Business Institute, who is familiar with the current IRS regulations and can provide guidance specific to your situation.
