Organizations that solicit contributions and memberships generally fall into one of the following four tax exempt categories: 501(c)(3), 501(c)(4) 501(c)(6), and 501(c)(19). These numbers correspond to the sections of the Internal Revenue Code that describe these organizations.While its 501(c)(3) status determines that an organization is eligible to receive tax deductible donations, its foundation status determines the limits of an individual donor’s deduction.
The three principal classifications of 501(c)(3) organizations are as follows:
A public charity (identified in IRS terms as “not a private foundation”) normally receives a substantial part of its income, directly or indirectly, from the general public or from the government. The public support must be fairly broad, not limited to a few individuals or families. Public charities are defined in the Internal Revenue Code under sections 509(a)(1) through 509(a)(4).
A private foundation, sometimes called a non-operating foundation, receives most of its income from investments and endowments. This income is used to make grants to other organizations, rather than being disbursed directly for charitable activities. Private foundations are defined in the Internal Revenue Code under section 509(a) as 501(c)(3) organizations which do not qualify as public charities.
A private operating foundation is a private foundation that devotes most of its earnings and assets directly to the conduct of its tax exempt purposes, rather than to making grants to other organizations for these purposes. Private operating foundations are defined in the Internal Revenue Code under section 4942(j)(3).