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What is a 501(c)(3) Exempt Purpose?

By Cynthia Hsu, Esq. | Last updated on

Are you looking to create a non-profit 501(c)(3) organization? If so, you'll need a 501(c)(3) exempt purpose.

Many entrepreneurs endeavor to create a non-profit organization. There's that part of us that craves to do some good in the world.

But there is a difference between becoming a non-profit and becoming tax-exempt. In order to become tax-exempt, you typically need to file an application with an IRS. Many non-profits will fall under the 501(c)(3) tax-exempt organization umbrella. But to get there you will need a proper purpose. It's mandated under the IRS code.

There are specific "purposes" outlined in section 501(c)(3). Organizations that are:

  • charitable
  • religious
  • educational
  • scientific
  • literary
  • testing for public safety
  • fostering national or international amateur sports competition
  • preventing cruelty to children or animals

What you may not realize is that there are many "charitable purposes." A charitable purpose doesn't necessarily only encompass organizations that donate to the poor -- though that is one valid definition. It also includes non-profits that work to advance the education system or science. Maintaining public buildings, monuments, and helping neighborhood tensions also qualify. So would an organization that works to reduce discrimination or racism.

Certain child-care organizations may also have a tax-exempt educational purpose. The child-care must be provided so that the child's parents have the opportunity to become gainfully employed. The services also need to be available to the general public.

Explaining your 501(c)(3) tax-exempt purpose may not necessarily be enough. Hopeful 501(c)(3) organizations may need to consult with a tax attorney for more information relevant to your specific case. The law may be tricky, and you don't want the IRS to reject your organization's application.

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