Various 501(c)(3) organizations may pursue charitable activities or operate to pursue altruistic purposes. However, what if such activities or purposes do not fall within the Internal Revenue Code’s requirements for charitable organizations? Besides jeopardizing the ability of donor taxpayers to deduct contributions, the organizations may find that they are taxable and have certain filing requirements other than annual Form 990 filings. In a recent Private Letter Ruling, the Internal Revenue Service highlighted that “charitable” organizations, such as hockey organizations, that ultimately take care of their own members may not be so charitable for tax purposes.
501(c)(3) Organizations, Generally
Generally, charitable organizations must meet certain requirements to be exempt for federal tax purposes. First, the organization must operate for limited purposes (e.g., religious, charitable, scientific, testing for public safety, literary, or educational purposes). Second, individuals must not privately benefit from the net earnings of the organization. Finally, the organization must not engage in substantial propaganda or lobbying activities, and the organization must not participate in (or intervene in) any political campaign for or against a political candidate.