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You may be able to name many various, beneficial purposes
your organization serves. But as far as the IRS is concerned,
you only have one purpose, and it has to be one of the following.
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Religious, as in
general types of religious organizations and more
formal institutionalized churches. |
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Charitable, providing
services beneficial to the public interest. |
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Scientific Research
carried out in the public interest |
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Literary, not including
commercial book writing or sales |
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Educational, a broad
purpose that allows instruction for both self-development
and the benefit of the community |
In order to receive tax exempt status, your organization
must fall into one of the these categories, or purposes.
Since you are required to list a purpose when you file articles
of incorporation, it is important to be descriptive in your
application.
A number of factors could help determine your category. As
with all things legal and tax-related, consulting a professional
is recommended.
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To qualify for federal tax-exempt status under 501(c)(3)
of the federal tax code, the nonprofit organization must be
organized and operate for some religious, charitable, educational,
literary, or scientific purpose permitted under this section
of the code. Nonprofit corporations may also be formed for
other purposes pursuant to different sections of the IRS code.
To qualify for federal tax-exempt status as a nonprofit under
a different section of the code, your organization must comply
with the requirements of that federal tax code section.
The religious category refers to general types of religious
organizations and more formal institutionalized churches.
Charitable purpose is defined in section 501(c)(3) as providing
services beneficial to the public interest.
Scientific research that is carried on in the public interest
qualifies for tax-exempt status; however, research incidental
to commercial or industrial operations does not qualify.
The literary purpose includes writing, publishing and distribution
of books which are directed toward promoting the public interest
rather than engaging in commercial book writing and selling.
The educational purpose is a broad purpose that allows instruction
for both self-development and the benefit of the community.
The purpose must be listed in the articles of incorporation;
therefore, it is very important that the purpose of the organization
be well described in the articles of incorporation. Additionally,
certain states require approvals from state departments prior
to approving the formation of a nonprofit organization. One
example of this is New York. New York often requires one or
several departmental approvals based on the business purpose
of the prospective nonprofit organization. Please keep in
mind that there may be additional time required to obtain
these approvals, and additional fees charged, This varies
by state. If you would like Business Filings to obtain these
approvals on behalf of your prospective nonprofit organization,
the fee is $100 per approval.
For a specific answer to whether or not your company's purpose
is acceptable to be classified as a nonprofit organization,
contact an attorney or accountant.
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