24 Hope.

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Charity By Lam Bapiny Montuel

Started (2019-Present)

Yearly giving Back to the Communities and Public Schools.

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A nonprofit organization (NPO) or non-profit organisation, also known as a non-business entity,[1] not-for-profit organization,[2] or nonprofit institution,[3] is a legal entity organized and operated for a collective, public or social benefit, in contrary with an entity that operates as a business aiming to generate a profit for its owners. A nonprofit is subject to the non-distribution constraint: any revenues that exceed expenses must be committed to the organization's purpose, not taken by private parties. An array of organizations are nonprofit, including some political organizations, schools, business associations, churches, social clubs, and consumer cooperatives. Nonprofit entities may seek approval from governments to be tax-exempt, and some may also qualify to receive tax-deductible contributions, but an entity may incorporate as a nonprofit entity without securing tax-exempt status.

Key aspects of nonprofits are accountability, trustworthiness, honesty, and openness to every person who has invested time, money, and faith into the organization. Nonprofit organizations are accountable to the donors, founders, volunteers, program recipients, and the public community. Theoretically, for a nonprofit that seeks to finance its operations through donations, public confidence is a factor in the amount of money that a nonprofit organization is able to raise. Supposedly, the more nonprofits focus on their mission, the more public confidence they will have. This will result in more money for the organization.[1] The activities a nonprofit is partaking in can help build the public's confidence in nonprofits, as well as how ethical the standards and practices are.

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According to the National Center for Charitable Statistics (NCCS), there are more than 1.5 million nonprofit organizations registered in the United States, including public charities, private foundations, and other nonprofit organizations. Private charitable contributions increased for the fourth consecutive year in 2017 (since 2014), at an estimated $410.02 billion. Out of these contributions, religious organizations received 30.9%, education organizations received 14.3%, and human services organizations received 12.1%.[4] Between September 2010 and September 2014, approximately 25.3% of Americans over the age of 16 volunteered for a nonprofit.[5]

In the United States, both nonprofits are tax-exempt. There are various types of nonprofit exemptions, such as 501(c)(3) organizations that are a religious, charitable, or educational-based organization that does not influence state and federal legislation, and 501(c)(7) organizations that are for pleasure, recreation, or another nonprofit purpose.[citation needed]

Nonprofits may be member-serving or community-serving. Member-serving nonprofit organizations create a benefit for the members of their organization and can include but are not limited to credit unions, sports clubs, and advocacy groups. Community-serving nonprofit organizations focus on providing services to the community either globally or locally. Community-serving nonprofits include organizations that deliver aid and development programs, medical research, education, and health services. It is possible for a nonprofit to be both member-serving and community-serving.[citation needed]

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501(c) organization

A 501(c) organization is a nonprofit organization in the federal law of the United States according to Internal Revenue Code (26 U.S.C. § 501(c)) and is one of over 29 types of nonprofit organizations exempt from some federal income taxes. Sections 503 through 505 set out the requirements for obtaining such exemptions. Many states refer to Section 501(c) for definitions of organizations exempt from state taxation as well. 501(c) organizations can receive unlimited contributions from individuals, corporations, and unions.[1]

For example, a nonprofit organization may be tax-exempt under section 501(c)(3) if its primary activities are charitable, religious, educational, scientific, literary, testing for public safety, fostering amateur sports competition, or preventing cruelty to children or animals.

Types

According to the IRS Publication 557, in the Organization Reference Chart section, the following is an exact list of 501(c) organization types and their corresponding descriptions.[1][a]

Organization type Description 501(c)(1) Corporations Organized Under Act of Congress, including Federal Credit Unions[3] and National Farm Loan Associations[4] 501(c)(2) Title-holding Corporations for Exempt Organizations[5] 501(c)(3) Religious, Educational, Charitable, Scientific, Literary, Testing for Public Safety, to Foster National or International Amateur Sports Competition, or Prevention of Cruelty to Children or Animals Organizations 501(c)(4) Civic Leagues, Social Welfare Organizations, and Local Associations of Employees 501(c)(5) Labor, Agricultural and Horticultural Organizations 501(c)(6) Business Leagues, Chambers of Commerce, Real Estate Boards 501(c)(7) Social and Recreational Clubs 501(c)(8) Fraternal Beneficiary Societies and Associations 501(c)(9) Voluntary Employee Beneficiary Associations 501(c)(10) Domestic Fraternal Societies and Associations 501(c)(11) Teachers' Retirement Fund Associations 501(c)(12) Benevolent Life Insurance Associations, Mutual Ditch or Irrigation Companies, Mutual or Cooperative Telephone Companies, and Like Organizations 501(c)(13) Cemetery Companies 501(c)(14) State-Chartered Credit Unions, Mutual Reserve Funds 501(c)(15) Mutual Insurance Companies or Associations 501(c)(16) Cooperative Organizations to Finance Crop Operations 501(c)(17) Supplemental Unemployment Benefit Trusts 501(c)(18) Employee Funded Pension Trust (created before June 25, 1959) 501(c)(19) Post or Organization of Past or Present Members of the Armed Forces 501(c)(20) Group Legal Services Plan Organizations[b] 501(c)(21) Black Lung Benefit Trusts 501(c)(22) Withdrawal Liability Payment Fund 501(c)(23) Veterans Organizations[c] 501(c)(24) Section 4049 ERISA Trusts[d] 501(c)(25) Real Property Title-Holding Corporations or Trusts with Multiple Parents[8] 501(c)(26) State-Sponsored Organization Providing Health Coverage for High-Risk Individuals 501(c)(27) State-Sponsored Workers' Compensation Reinsurance Organization 501(c)(28) National Railroad Retirement Investment Trust 501(c)(29) Qualified Nonprofit Health Insurance Issuers[e] General compliance

Under Section 511, a 501(c) organization is subject to tax on its "unrelated business income", whether or not the organization actually makes a profit, but not including selling donated merchandise or other business or trade carried on by volunteers, or certain bingo games.[10] Disposal of donated goods valued over $2,500, or acceptance of goods worth over $5,000 may also trigger special filing and record-keeping requirements.

Tax exemption does not excuse an organization from maintaining proper records and filing any required annual or special-purpose tax returns, e.g., 26 U.S.C. § 6033 and 26 U.S.C. § 6050L. Prior to 2008, an annual return was not generally required from an exempt organization accruing less than $25,000 in gross income yearly.[11] Since 2008, most organizations whose annual gross receipts are less than $50,000 must file an annual information return known as Form 990-N.[12][f] Form 990-N must be submitted electronically using an authorized IRS e-file provider. Form 990, Form 990-EZ, and Form 990-PF may be filed either by mail or electronically through an authorized e-file provider.

Failure to file required returns such as Form 990 (Return of Organization Exempt From Income Tax) may result in fines of up to $250,000 per year. Exempt or political organizations, excluding churches or similar religious entities, must make their returns, reports, notices, and exempt applications available for public inspection. The organization's Form 990 (or similar such public record as the Form 990-EZ or Form 990-PF) must be available for public inspection and photocopying at the offices of the exempt organization, through a written request and payment for photocopies by mail from the exempt organization, or through a direct Form 4506-A "Request for Public Inspection or Copy or Political Organization IRS Form" request to the IRS of for the past three tax years. Form 4506-A also allows the public inspection or photocopying access to Form 1023 "Application for Recognition of Exemption" or Form 1024, Form 8871 "Political Organization Notice of Section 527 Status", and Form 8872 "Political Organization Report of Contribution and Expenditures". Internet access to many organizations' 990 and some other forms are available through GuideStar.[g] Certain organizations are exempt from filing Form 990, such as churches, their integrated auxiliaries, and conventions or associations of churches; the exclusively religious activities of any religious order; and religious organizations; and most organizations whose annual gross receipts are less than $5,000.[15] Failure to file such timely returns and to make other specific information available to the public also is prohibited.[16][17]

Between 2010 and 2017 the IRS revoked the nonprofit status of more than 760,000 nonprofit organizations for failing to file the 990 form.[18]

501(c)(3)

Main article: 501(c)(3) organization 501(c)(3) tax-exemptions apply to entities that are organized and operated exclusively for religious, charitable, scientific, literary, or educational purposes; or for testing for public safety, to foster national or international amateur sports competition, or for the prevention of cruelty to children or animals. The 501(c)(3) exemption also applies for any unincorporated community chest, fund, cooperating association, or foundation that is organized and operated exclusively for those purposes.[19][20] There are also supporting organizations—often referred to in shorthand form as "Friends of" organizations.[21][22][23][24][25] 26 U.S.C. § 170, provides a deduction, for federal income tax purposes, for some donors who make charitable contributions to most types of 501(c)(3) organizations, among others.

The IRS explains that to be tax-exempt, "an organization must be organized and operated exclusively for exempt purposes ... and none of its earnings may inure to any private shareholder or individual."[26] Private inurement means that the organization's assets must not unduly benefit a person.[27]

Organizations described in section 501(c)(3) are prohibited from conducting political campaign activities to intervene in elections to public office.[28] On the other hand, public charities (but not private foundations) may conduct a limited amount of lobbying to influence legislation. Although the law states that "No substantial part..." of a public charity's activities can go to lobbying, charities may register for a 501(h) election allowing them to lawfully conduct lobbying activities as long as their financial expenditure does not exceed a specified amount.[29] 501(c)(3) organizations risk loss of tax exempt status if any of these rules are violated.[30][31]

A 501(c)(3) organization is allowed to conduct some or all of its charitable activities outside the United States.[32][33] Donors' contributions to a 501(c)(3) organization are tax-deductible only if the contribution is for the use of the 501(c)(3) organization, and that the 501(c)(3) organization is not merely serving as an agent or conduit of a foreign charitable organization.[34] Additional procedures are required of 501(c)(3) organizations that are private foundations.[33][35]

501(c)(4)

See also: Citizens United v. Federal Election Commission A 501(c)(4) organization is a social welfare organization, such as a civic organization or a neighborhood association. An organization is considered by the IRS to be operated exclusively for the promotion of social welfare if it is primarily engaged in promoting the common good and general welfare of the people of the community.[36][37] Net earnings must be exclusively used for charitable, educational, or recreational purposes.[38]

According to The Washington Post, 501(c)(4) organizations:[39]

...are allowed to participate in politics, so long as politics do not become their primary focus. What that means in practice is that they must spend less than 50 percent of their money on politics. So long as they don't run afoul of that threshold, the groups can influence elections, which they typically do through advertising.

Allowed activities

501(c)(4)s are similar to 501(c)(5)s and 501(c)(6)s in that the organizations may inform the public on controversial subjects and attempt to influence legislation relevant to its program.[40] Unlike 501(c)(3) organizations, they may also participate in political campaigns and elections, as long as their primary activity is the promotion of social welfare and related to the organization's purpose.[41][42]

The income tax exemption for 501(c)(4) organizations applies to most of their operations, but income spent on political activities—generally the advocacy of a particular candidate in an election—is taxable.[43] An "action" organization generally qualifies as a 501(c)(4) organization.[44] An "action" organization is one whose activities substantially include, or are exclusively,[45] direct or grassroots lobbying related to advocacy for or against legislation or proposing, supporting, or opposing legislation that is related to its purpose.[46]

A 501(c)(4) organization may directly or indirectly support or oppose a candidate for public office as long as such activities are not a substantial amount of its activities.[36][47]

A 501(c)(4) organization that lobbies must register with the Clerk of the House if it lobbies members of the House or their staff.[42] Likewise, a 501(c)4 organization must register with the Secretary of the Senate if it lobbies members of the Senate or their staff.[42] In addition, the 501(c)(4) organization must either inform its members the amount it spends on lobbying or pay a proxy tax to the Internal Revenue Service.[42] Lobbying expenses and political expenses are not deductible as business expenses.[42]

Electioneering communications

The use of 501(c)(4), 501(c)(5), and 501(c)(6) organizations has been affected by the 2007 case FEC v. Wisconsin Right to Life, Inc., in which the Supreme Court struck down the part of the McCain-Feingold Act that prohibited 501(c)(4)s, 501(c)(5)s, and 501(c)(6)s from broadcasting electioneering communications. The Act defined an electioneering communication as a communication that mentions a candidate's name 60 days before a primary or 30 days before a general election.

Contributions

Contributions to 501(c)(4) organizations are not tax-deductible as charitable donations unless the organization is either a volunteer fire department or a veterans organization.[48][49] Dues or contributions to 501(c)(4) organizations may be deductible as a business expense under IRC 162, although amounts paid for intervention or participation in any political campaign, direct lobbying, grass roots lobbying, and contact with certain federal officials are not deductible.[50] If a 501(c)4 engages in a substantial number of these activities, then only the amount of dues or contributions that can be attributed to other activities may be deductible as a business expense.[51]

The organization must provide a notice to its members containing a reasonable estimate of the amount related to lobbying and political campaign expenditures, or else it is subject to a proxy tax on its lobbying and political campaign expenditures. It must also state that contributions to the organization are not deductible as charitable contributions during fundraising.[50]

A 501(c)(4) organization is not required to disclose their donors publicly,[52] with the exception of organizations that make independent expenditures as of 2018.[53][54][55][56] The former complete lack of disclosure led to extensive use of the 501(c)(4) provisions for organizations that are actively involved in lobbying, and has become controversial.[57][58] Criticized as "dark money", spending from these organizations on political advertisements has exceeded spending from Super PACs.[59][60] Spending by organizations that do not disclose their donors increased from less than $5.2 million in 2006 to well over $300 million during the 2012 election season.[61]

Every organization, including a 501(c)(4) organization, that expressly advocates for the election or defeat of a particular political candidate and spends more than $250 during a calendar year must disclose the name of each person who contributed more than $200 during the calendar year to the Federal Election Commission.[53][55] The Federal Election Commission is required to enforce this provision based on a federal court decision in 2018.[54][56][55]

History

The origins of 501(c)(4) organizations date back to the Revenue Act of 1913, which created a new group of tax-exempt organizations dedicated to social welfare in a precursor to what is now Internal Revenue Code Section 501(c)(4).[62]

The Protecting Americans from Tax Hikes Act of 2015 introduced a new requirement on 501(c)(4) organizations.[63] Within 60 days of the organization's formation, a 501(c)(4) organization is required to file Form 8976 with the Internal Revenue Service as notification that it is operating as a section 501(c)(4) organization.[64][65] The Internal Revenue Service will acknowledge receipt of the notification, but the acknowledgment is not a determination that the organization qualifies for section 501(c)(4) tax-exempt status.[65] A 501(c)(4) organization is not required to send the notification if the organization was formed on or before July 8, 2016, and it either applied for a determination letter using Form 1024 or filed a Form 990 between December 19, 2015, and July 8, 2016.[65]

As of January 2018, the application for recognition of exemption as a 501(c)(4) organization is a new form, Form 1024-A, rather than Form 1024.[66][67]

Between 2010 and 2017, the number of 501(c)(4) organizations dropped from almost 140,000 to fewer than 82,000.[68] In 2017 revocations of 501(c)(4) groups comprised 58% which usually is only 15% of the total nonprofits which have their tax status revoked by the IRS for their failure to file Form 990.

501(c)(5)

501(c)(6)

501(c)(7)

501(c)(8)

501(c)(13)

See also

Notes

References

Further reading

External links