The Many Classifications of a Non-Profit
Many people know about 501(c)(3) nonprofit organizations, but other types of nonprofits are not as commonly known. The IRS established several sections of the Internal Revenue Code that nonprofit organizations can qualify under. An organization desiring to apply for nonprofit status, must apply under the section that fits its purpose. Understanding the types of nonprofits available and the qualifications for each helps you choose the correct section to apply under.
According the IRS, five basic classifications of nonprofit organizations exist under Section 501(c)(3)of the Internal Revenue Code. Classifications include charitable, religious, educational, scientific and literary. A nonprofit organization may fall under one or more classifications. For example, a Christian charity providing food to homeless citizens could fall under charitable and religious classifications. Nonprofits must apply for federal tax-exemption as a 501(c)(3) by completing Form 1023. 501(c)(3)nonprofits can offer tax-exempt donations to individual contributors.
Nonprofit organizations formed to promote social and community welfare can apply for federal tax-exemption under Section 501(c)(4) of the Internal Revenue Code. To qualify, organizations must provide a benefit to the general public. Organizations catering to a private group of people do not meet eligibility requirements. An example of a 501(c)(4) is an organization that provides social resources to retirees. Charitable, educational and recreational organizations that do not qualify for 501(c)(3) status can apply under this section. Unlike 501(c)(3) nonprofits, 501(c)(4) organizations can participate in lobbying activities. Organizations whose primary business with the public reflects that of a for-profit corporation cannot qualify as a 501(c)(4). Nonprofits must apply for this status by completing Form 1024.
Social clubs formed for nonprofit exempt purposes can apply for federal tax-exemption under Section 501(c)(7) of the Internal Revenue Code. Form 1024 is used to apply for a 501(c)(7). To qualify under this section, nonprofits cannot discriminate against citizens based on race, color or religion. However, religious 501(c)(7) organizations can limit its membership to those belonging to a particular religion. 501(c)(7) nonprofits must receive support from memberships fees and dues. Example of nonprofits with this status include college fraternities and sororities, country clubs and homeowners associations that meet for the purpose of preserving its recreation areas and facilities.
501(c)(8) and 501(c)(10) status belongs to nonprofit organizations operating as fraternal societies. Members of the societies must come together to pursue common goals. 501(c)(8) organizations must offer life, health, accident and other insurance benefits to its members. 501(c)(10) nonprofits cannot offer such benefits to members, but can secure third-organizations to offer benefits. 501(c)(8) nonprofits are not required to offer benefits to all members, but most members of the organization must meet eligibility requirements for benefits. Use Form 1024 to apply for 501(c)(8) and 501(c)(10) status.