Skip to main content
Find a Lawyer
Please enter a legal issue and/or a location
Begin typing to search, use arrow keys to navigate, use enter to select

What is the Difference Between 501(c) and 501(c)3?

Both 501(c) and 501(c)3 nonprofit organizations are exempt from paying federal income tax, but there are some differences in how the IRS treats each type of organization. One of the most significant differences is that donors to 501(c)3 organizations can claim a federal income tax deduction for their donation, while donors to some 501(c) entities can't.

We make business formation EASY. Click here to start your free LLC.

How Does an Organization Become Exempt?

The IRS will not grant organizations nonprofit status simply because it operates for a charitable purpose. Each organization must apply to the IRS and the state to be recognized as a nonprofit and meet specific legal requirements.

If the IRS grants an organization nonprofit status under Section 501(c) or 501(c)3 of the U.S. Tax Code, it is not required to pay tax on income related to its nonprofit purposes. The organization will also be listed in the searchable database the IRS maintains on its website.

What is a 501(c) Organization?

A 501(c) organization has been designated as a nonprofit by the IRS, but that section of the Tax Code includes 28 different exempt entities. Donors may only claim a tax deduction for contributions to some types of nonprofits. For example, Section 501(c)6 provides an exemption for chambers of commerce, real estate boards, and other business organizations. Still, those who donate to a 501(c)6 organization can't claim a tax deduction for their contribution.

Entities organized under 501(c) can generate income from their operations, but if they take in substantially more than they are spending each year, the IRS may revoke its tax-exempt status. As a result, most 501(c) organizations try to spend most of their income on operations.

What is a 501(c)3 Organization?

A 501(c)3 organization is the most common type of 501(c) organization, and the IRS allows donors to deduct most contributions to them. Organizations that have received the 501(c)(3) designation from the IRS are usually either public charities or private foundations established for the following purposes:

  • Charitable
  • Religious
  • Educational
  • Improvement of child welfare
  • Scientific or literary
  • Public safety
  • National or international sports competitions
  • Prevention of animal cruelty

The directors and officers of a 501(c)3 nonprofit may be paid for their work, but the profits earned through its activities can't provide them with a direct financial benefit. Finally, a 501(c)3 organization can't pursue lobbying or other legislative activities as its primary activity.

Need Help With Your 501(c) Or 501(c)3 Organization?

If you are forming or operating a nonprofit and need assistance in determining whether it should organize as a 501(c)3 organization or another type of 501(c) entity, a local attorney can help. An experienced lawyer can assist in deciding how your nonprofit should be structured to benefit both the organization and its donors. Additionally, an attorney can help you file for nonprofit status with the IRS and ensure that it operates in compliance with all relevant rules and regulations.

Looking to form your own nonprofit? Check out FindLaw's easy-to-use DIY nonprofit forms.

Related Resources

Was this helpful?

You Don’t Have To Solve This on Your Own – Get a Lawyer’s Help

Meeting with a lawyer can help you understand your options and how to best protect your rights. Visit our attorney directory to find a lawyer near you who can help.

Or contact an attorney near you:

I'd Like Help From a Lawyer

Contact a qualified business attorney to help you navigate the process of starting a business.

Begin typing to search, use arrow keys to navigate, use enter to select

I'd Like a Do-It-Yourself Solution

Form Your Business with Confidence!

File an LLC on your own starting at $0 + state filing fees. Save time and stress.

  • Determine the best business structure
  • File the right paperwork
  • Stay compliant with the law

Start my LLC


Prefer to work with a lawyer?Find one right now.

Copied to clipboard

Find a Lawyer

More Options