What makes MSMAP a non-profit organization?
And, what do we mean when we say MSMAP is a “501(c)(c) tax-exempt organization” or something like that?
LONG VERSION: “Section 501(c)(3)” refers to a section of the US Internal Revenue Code to set up a charitable corporation (a charitable corporation is a type of company that is set up with the intention of providing a service to the community, rather than making a profit). Incorporating a company makes it a legal entity, responsible for its actions in the community.
In addition, Section 501(c)(3) allows for federal tax exemption of nonprofit organizations, specifically those that are considered public charities, private foundations or private operating foundations. The code is regulated and administered by the US Department of Treasury through the Internal Revenue Service.
A public charity, identified by the IRS 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.
501(c)(3) organizations can be recognized by the IRS if the organization is organized and operated exclusively for one of the following reasons: religious, educational, charitable, scientific, literary, testing for public safety, fostering national or international amateur sports competition, or prevention of cruelty to children or animals.
Examples of qualifying organizations include old-age homes, parent-teacher associations, charitable hospitals, alumni associations, schools, chapters of the Red Cross or Salvation Army, Boys’ or Girl’s clubs, and churches.
The IRS says this:
To be tax-exempt under section 501(c)(3) of the Internal Revenue Code, an organization must be organized and operated exclusively for exempt purposes set forth in section 501(c)(3), and none of its earnings may inure to any private shareholder or individual. In addition, it may not be an action organization, i.e., it may not attempt to influence legislation as a substantial part of its activities and it may not participate in any campaign activity for or against political candidates.
Organizations described in section 501(c)(3) are commonly referred to as charitable organizations. Organizations described in section 501(c)(3), other than testing for public safety organizations, are eligible to receive tax-deductible contributions in accordance with Code section 170.
MSMAP’s recognition by the IRS comes with specific benefits and restrictions both to the organization as well as to the individuals and other organizations that make donations. This is not a comprehensive list for either category.
Tax-Deductible Donations. Individuals and other organizations that donate to MSMAP can deduct all or part of their donation from their federal income tax returns. Specifically, individuals can deduct up to 50% of the their adjusted gross income. NOTE: Deducting contributions to MSMAP requires the individual to itemize their tax returns.
Tax-Exempt. MSMAP does’t need to pay federal income tax.
Profits. Unlike a private or public for-profit company, the net earnings of the organization cannot be pocketed by any shareholder or individual.
Politics. MSMAP cannot influence legislation as a main part of its activities. However, MSMAP may conduct a limited amount of lobbying based upon a formula involving its overall operating budget. MSMAP cannot be involved in campaigning for or against any candidate for public office.
NOTE: “Lobbying occurs only when there is an expenditure of money by the 501(c)(3) for the purpose of attempting to influence legislation. Where there is no expenditure by the organization for lobbying (such as lobbying by members or volunteers), there is no lobbying by the organization...The right of citizens to petition their government is basic to our democratic way of life, and associations, including 501(c)(3)s, are one of the most effective vehicles for making use of citizen participation in shaping public policy. Fortunately, the legislation passed by Congress in 1976 makes it possible for 501(c)(3)s to lobby freely for the causes, communities and constituencies they serve...Finally, by not engaging in lobbying, your organization may be failing to employ a very important activity that could be enormously helpful in carrying out its mission.”
Nonprofit, 501(c)(3), & tax-exempt don’t mean the same thing.
Nonprofit means the entity, usually a corporation, is organized for a nonprofit purpose.
501(c)(3) means a nonprofit organization that has been recognized by the IRS as being tax-exempt by virtue of its charitable programs.
Tax-exemption is the result of a nonprofit organization being recognized by the IRS as being organized for any purpose allowable under 501(c)(3) - 501(c)(27).
What is a 501(c)(3)? (Foundation Group)
What is a 501(c)3? (wiseGEEK)
Does nonprofit, 501c3, and tax-exempt all mean the-same thing? (Foundation Group)
Charitable Donation Tax Deductions (Better Business Bureau)
Exemption Requirements - Section 501(c)(3) Organizations (Internal Revenue Service)
Top Ten Myths about 501(c)(3) Lobbying and Political Activity (The Center for Association Leadership)
501(c) organization (Wikipedia)