In a world of need, the government makes it easier for charitable organizations to create programming and for donors to give to the causes they care about. Supportive policies are in place, but sometimes using them to plan your giving isn’t intuitive. Understanding how charitable organizations gain their designation apart from other tax-exempt organizations can make donating a simpler and more informed process. Here’s what qualifies as a charitable organization.
Who Qualifies an Organization?
First of all, donors must know what governing body officially acknowledges a charitable organization. The Internal Revenue Service, or IRS, classifies all manner of income-receiving businesses and organizations for taxation purposes. This means that, when you’re looking to donate and account for your gifts for tax purposes, an entity that claims to be a registered charitable organization must have their IRS documentation readily accessible for curious prospective donors.
Charitable Organization Requirements
When you’re asking what qualifies as a charitable organization, learning the IRS requirements can bring some clarification. The idea behind a charitable organization is that it serves the public good rather than benefitting one or several select people. Practically, these groups apply to acquire 501(c)(3) tax status via the 1023 tax form. In order to qualify under the IRS 501(c)(3) tax code for charitable entities, charities must follow IRS rules to illustrate their commitment to this public mission. These rules are strict, but the 501(c)(3) recognition helps the organization gain funding and incentivizes donors by allowing them to deduct their donations on their taxes.
To gain and retain this status, organizations must appeal broadly for public funding, put this money towards programming, exist for at least three years before applying, and avoid using their influence for political lobbying purposes. Their actions must demonstrate a commitment to their stated cause and not benefit staff, administration, or donors. This is why political advocacy, which benefits the advocate by electing a desired official or passing some legislation, violates the 501(c)(3) designation.
Charitable Organizations vs. Tax-Exempt Only Status Entities
The definition of a charitable organization may make sense, but the existence of other tax-exempt organizations muddies the picture somewhat. For example, political organizations registered under the 527 tax code are tax-exempt, but—unlike charitable organizations—they influence public policy and elections. Other bodies, including social clubs and fraternal organizations, are also tax-exempt, but they don’t need to appeal broadly to the public or create charitable programming. These are not technically charitable organizations, but they enjoy the same tax-exempt status that charities do.
If you’d like to partner with a charitable organization, make sure they have a 501(c)(3) designation, and determine what they need. If they need tangibles such as clothes, accessories, and school supplies, contact 2moda about supplying them. We specifically offer women’s wholesale wallets, tote bags, makeup tools, and many more quality wholesale products.