WHAT ARE THE NONPROFIT CHARITABLE PURPOSES?
Groups organized for “nonprofit charitable purposes” are exempt from income tax pursuant to Internal Revenue Code section 501(c)(3). Such groups include those organized and operated for religious, charitable, scientific, educational, or literary purposes.
NONPROFIT CHARITABLE PURPOSES
BROAD PUBLIC INTEREST
The term “charitable purpose” is defined broadly and includes those services that are beneficial to the public interest. The organization must serve an open class of people and not a limited number of group members. For instance, charitable purposes include providing food to the homeless in the community, but not to specifically-named people. The beneficiaries of the organization’s purpose must be open and unspecified, but does not need to be large. Other examples of charitable purposes include: relief of the poor, distressed, and underprivileged; advancement of education and science; maintaining public buildings or monuments; lessening burdens of government; eliminating prejudice and discrimination; promoting the arts; or defending human and civil rights.
Educational purposes include instructing the public on subjects that are useful for the benefit of the community or for self-development. Particular viewpoints are allowed to be the focus, but there must be a full and fair exposition of pertinent facts so that individuals can form their own opinions and conclusions on the subject. If the curriculum only focuses on an unsupported opinion, the purpose is not considered educational for charitable purposes. Examples of educational purposes include: publishing public interest materials; public discussion groups, lectures, or workshops; correspondence courses; or museums, zoos, planetariums, orchestras, or other performances.
Literary purposes must involve books and reading. The organization must not target commercial markets and must sell the publications only at a modest price. Examples of literary purposes include: environmental preservation, highway safety, or drug and alcohol publications.
COMMUNITY DEVELOPMENT AND SOCIAL WELFARE
Charitable purposes may include those that promote social welfare by lessening neighborhood tensions, eliminating prejudice and discrimination, defend human civil rights, and prevent the deterioration of the community and juvenile delinquency. Charitable purposes may also include services that assist minorities, women, immigrants, or other classes that have been historically denied equal treatment because of race, gender, citizenship, or any other protected status.
Community development programs include job training, small business development, or affordable housing programs. Such purposes qualify for Federal tax exemption by: relieving the poor and distressed, combating community deterioration, eliminating discrimination, and lessening government burdens. The IRS defines a group as “poor and distressed” when there is an inability to afford “necessities of life” without undue hardship, and factors the lack of adequate housing, unemployment rate, and the government’s classification of the group as economically disadvantaged.
RELIEF OF THE POOR, DISTRESSED, OR UNDERPRIVILEGED
There is no uniform definition of “poor.” This “charitable class” is essentially made up of low-income, minority, elderly, disabled, or other 501(c)(3) organizations. Examples of organizations that qualify include: Organizations that offer services to obtain and maintain employment, vocational training, child care, counseling, financial services to businesses owned by “needy” individuals, or housing, legal, food, and transportation services to the “needy.”
LESSENING THE BURDENS OF GOVERNMENT
In order to qualify as lessening government burdens, the activity must be government’s responsibility and the activity must in fact lessen the burden to the public. Generally, there must be a government policy or code that applies to the activity, such as housing or economic development. The government must have an involvement in the activity on a regular basis, provide funding, and perform the activity directly. The nonprofit organization’s purpose must directly address the burden to the public. The nonprofit should have a favorable relationship with the government entity and improve the government’s function without additional government expenditures. Examples include: affordable housing for low-income families, job creation, small business growth, recycling services, community land use plan, recreational facilities and public parks.