When it comes to charitable organizations, there are a wide variety of options to choose from. One of these options is a 501c3 charity. In simple terms, a 501c3 organization is a non-profit organization that is exempt from paying federal income taxes. However, not all 501c3 charities are created equal. In this article, we will explore the different types of 501c3 charities, what they do, and examples of each.
What is a 501c3 Charity?
Before we dive into the different types of 501c3 charities, let’s first define what a 501c3 charity is. A 501c3 organization is a non-profit organization that is tax-exempt under section 501(c)(3) of the Internal Revenue Code. This means that the organization is exempt from paying federal income taxes and in some cases, state taxes. In order to qualify for 501c3 status, an organization must meet certain requirements such as being organized and operated exclusively for charitable, educational, religious, literary, or scientific purposes.
Types of 501c3 Charities
There are three main types of 501c3 charities: public charities, private foundations, and private operating foundations. Let’s take a closer look at each type.
Public Charities
A public charity is the most common type of 501c3 charity. These organizations receive funding from the general public and are typically focused on providing direct services to their community. Public charities are further categorized into two types: 509(a)(1) organizations and 509(a)(2) organizations.
509(a)(1) Organizations
These organizations receive most of their funding from the general public or from government sources. They typically have a broad base of support and are engaged in a wide range of charitable activities. Examples of 509(a)(1) organizations include:
- American Red Cross
- Boys and Girls Clubs of America
- Habitat for Humanity
509(a)(2) Organizations
These organizations receive most of their funding from a few sources, such as a single individual or corporation. Examples of 509(a)(2) organizations include:
- Bill and Melinda Gates Foundation
- Susan G. Komen Foundation
- Harvard University
Private Foundations
A private foundation is a 501c3 organization that is typically funded by a single individual, family, or corporation. Private foundations are required to distribute a minimum of 5% of their assets each year to other charitable organizations. Private foundations are further categorized into two types: non-operating foundations and operating foundations.
Non-Operating Foundations
These foundations do not directly carry out charitable activities but instead make grants to other organizations. Examples of non-operating foundations include:
- Ford Foundation
- Rockefeller Foundation
- Gates Foundation
Operating Foundations
These foundations carry out their own charitable activities as well as make grants to other organizations. Examples of operating foundations include:
- David and Lucile Packard Foundation
- Susan Thompson Buffett Foundation
- Robert Wood Johnson Foundation
Private Operating Foundations
A private operating foundation is a relatively uncommon type of 501c3 charity. These organizations carry out their own charitable activities but are primarily funded by a single individual or family. Private operating foundations are similar to private foundations, but they have a more direct involvement in their charitable activities. Examples of private operating foundations include:
- Bill and Melinda Gates Foundation
- Bush Foundation
Conclusion
In conclusion, there are a wide variety of 501c3 charities out there. Each type of 501c3 charity has its own unique set of rules and regulations that it must follow. Public charities receive most of their funding from the general public and are typically focused on providing direct services to their community. Private foundations are typically funded by a single individual, family, or corporation and are required to distribute a minimum of 5% of their assets each year to other charitable organizations. Private operating foundations are relatively uncommon and carry out their own charitable activities but are primarily funded by a single individual or family. With this information, you can now make an informed decision on which type of 501c3 charity you would like to support or start.
References:
- IRS: Life Cycle of a Public Charity
- IRS: Exempt Organization Types
- Chron: Different Types of 501c3 Charities