An organization maybe tax-exempt under section 501(c)(3) of the Internal Revenue Code (IRC) if it is organized and operated exclusively for purposes set forth in IRC section 501(c)(3), and none of its earnings may inure to any private shareholder or individual. This excludes an action organization, one that attempt to influence legislation (such as lobbying) as a substantial part of its activities. It also may not participate in any campaign activity for or against political candidates.
Tax-exempt organizations qualify under section 501(c)(3) are commonly referred to as charitable organizations. A California tax-exempt organization must also comply with the rules and regulations of the Secretary of State, qualify as a tax-exempt organization by the Franchise Tax Board and register with the Attorney General’s office on an annual basis.
Tax-exempt organizations must abide by the requirements set forth by multiple levels of government agency. It can be a complex process to obtain tax benefit associated with a cause of your passion. Consult with an attorney specialized in non-profit organizations to ensure proper compliance and correct path to take so you can focus on growing a successful organization to benefit those in-need.