Basics of Non-Profit and Charitable Organizations (Part One)

By Marc F. Herron The Internal Revenue Code breathes life into charitable organizations. For an organization to be recognized as a non-profit or charitable organization it must be limited in its activities to the purposes set out in Section 501(c)(3) of the Internal Revenue Code (26 USC 501(c)(3)). Such purposes are as follows:

-charitable, -scientific, -religious, -educational, -literary, -testing for public safety, -fostering of national or international amateur sports competition, and -preventing the cruelty to children and animals.

Moreover, none of the net earnings of the organization (the profit of the organization after paying salaries and other expenses) can benefit any shareholder or individual and all of its assets must be permanently dedicated to one of the exempt purposes.

Let’s recap: 1. Section 501(c)(3) of the Internal Revenue Code governs. 2. Limit purpose to those set out in 501(c)(3). 3. No net earnings to benefit any shareholder or individual. 4. Assets permanently dedicated to charitable purpose.

Please remember these series of articles are for informational purposes only and to ensure compliance with requirements imposed by the Internal Revenue Service, please note that any tax advice contained in this website is not intended or written to be used, and cannot be used, for the purpose of avoiding tax-related penalties under the Internal Revenue Code, nor for promoting, marketing or recommending to another party any matters addressed herein. For more information please visit