A short training presentation on 501c3 for CharityNet & BizCentral USA partners.

1. Partner Service & Sales Training

2. I. What is a 501 (c)(3)?
II. Eligible Organizations
III. Eligible Activities
IV. CharityNet USA Services & Processes

3. 501(c)(3) Organizations:
• Do not pay federal corporate income tax. With this
exemption, an organization can save 15-35% of its
taxable income.
• In most cases do not pay state corporate,
franchise, excise, sales, and use taxes.
• Can offer individual and corporate donors a tax
deduction for their contribution. This is an incentive
for taxpayers who itemize their deductions.
• Are eligible to receive foundation grants.
• Are eligible for lower postal rates with the U.S.
Postal Service.
• Are viewed as a whole as reputable organizations.

4. “Nonprofit” does NOT mean tax exempt
• Many types of nonprofit organizations may
qualify for exemption from federal income taxes,
however that exemption is not automatic.
• Applications must be filed with the Internal
Revenue Service requesting the privilege of tax
exemption for the organization.
• In many states, separate application processes
exist for exemption from state-level taxation.

5. • There are many other sections of 501(c) that
provide federal tax exemption for other types of
organizations.
• Many of these sections provide different
benefits.
• Some sections provide tax exemption but not
donor deductibility.

6. I. What is a 501 (c)(3)?
II. Eligible Organizations
III. Eligible Activities
IV. CharityNet USA Services & Processes

7. • To receive a
determination as a
501(c)(3) organization,
a nonprofit must prove,
through a detailed
application process,
that they are both
organized and
operated exclusively
for allowable purposes.

8. • To qualify, an organization’s governing
document (most commonly the Articles of
Incorporation) must meet the organizational
test. They must:
– Limit the purposes of such organization to one or more
exempt purposes;
– NOT expressly empower the organization to engage in
activities which in themselves are not in furtherance of
one or more exempt purposes;
– Dedicate all assets to an exempt purpose.

9. • To satisfy the operational test, an
organization must be operated exclusively
for one or more of the following purposes:
– Religious
– Charitable
– Scientific
– Testing for public safety
– Literary
– Educational
– Fostering amateur sports
– Prevention of cruelty to children or animals

10. • Homeless Shelters • Clothing Ministries
• Soup Kitchens • Prison Ministries
• Churches • Foreign Assistance
• Outreach Ministries • Art Schools/Centers
• Private Schools
• Youth Organizations
• Daycares
• Little Leagues
• Museums
• Low Income Housing
• Community Development
Organizations • Senior Housing
• Orphanages

11. What is a 501 (c)(3)?
II. Eligible Organizations
III. Eligible Activities
IV. CharityNet USA Services & Process

12. • IRS definition of “religious”:
– "A sincere and meaningful belief which
occupies in the life of its possessor a place
parallel to that filled by the God of those
admittedly qualifying for the exemption
comes within the statutory definition."

13. • To meet the IRS definition of a “church”, a
14 point test is used, which includes
establishing that the organization has:
– Religious doctrine or belief of any kind
– Established location of worship
– Established congregation, which is not just a family
(There is no set number of members, but think 25
minimum)
– Regularly scheduled worship services
– Ordained religious leader

14. • While true churches are automatically
deemed exempt from federal income taxes,
there are many reasons why churches still
seek recognition, including:
– Ability to seek grant funding
– Ease of documenting large contributions from major
donors
– Reduced rental rates for facilities, in many cases
– Reduced postage rates
– Also, separation of outreach programs into a distinct
501(c)(3) provides additional funding options

15. • IRS definition of “Charitable”:
– Relief of the poor and distressed or of the
underprivileged
– Advancement of religion
– Advancement of education or science
– Erection or maintenance of public buildings,
monuments, or works
– Lessening of the burdens of government
– Promotion of social welfare

16. • Sports activity is not in and of itself an
exempt activity under IRC 501(c)(3)!
– An organization may be educational within the
meaning of IRC 501(c)(3) if it teaches sports to
youth or by being affiliated with an exempt
educational organization.

17. • Sports for youths may be charitable because they
combat juvenile delinquency or lessen the burdens of
government.
• An organization may qualify if they foster national or
international amateur sports competition and no part
of its activities involve the provision of athletic facilities
or equipment.

18. • 501(c)(3) organizations are subject to
limitations on some specific activities,
including:
– Private benefit/ inurement
– Lobbying
– Political Campaign Activity
– Unrelated Business

19. • The prohibition of excess benefit to insiders is
absolute. Individuals or corporations involved
cannot be in a better position because of the
existence of the nonprofit.
• In contrast, if the activities of an organization
privately benefit someone who is not an insider,
that benefit must be substantial in order to
jeopardize the organization’s tax-exempt status.

20. • Lobbying is activity designed to influence
legislation.
• Lobbying cannot be a substantial part of the
activities of a 501(c)(3) organization

21. • 501(c)(3)s are prohibited from directly or indirectly
participating or intervening in any political
campaign on behalf of or in opposition to any
candidate for public office.
• This includes making contributions to political
campaign funds or making public statements for or
against the candidate.

22. • Form 990 (Annual Tax return for Exempt
Organizations)
• State Corporate/Franchise Tax Returns
• Annual Reports
• Charity Registration
• Other state-specific filings

23. What is a 501 (c)(3)?
II. Eligible Organizations
III. Eligible Activities
IV. CharityNet USA Services & Process

24. BizCentral USA provides comprehensive 501
services, offering all items necessary to remain in
compliance with state and federal regulations,
including:
• IRS Form 1023
• Financial Projections
• Articles of Incorporation
• Bylaws
• Conflict of Interest Policies
• State Income Tax Exemption Applications
• State Sales Tax Exemption Applications
• Charitable Organization Registrations

25. • Prices charged for completion of the paperwork
necessary to apply for 501(c)(3) recognition will
vary, depending on how far the client is in the
process and how many supplemental
documents they’ve already prepared.
• In addition, pricing may be affected by the
number of state level filings required in the
client’s state.
• Price quotes include only document preparation
fees, and all government filing fees will be the
responsibility of the client.

26. • Once a sale has been made on one of our
501 services, clients are given access to our
501 Services “Steps Page”
• Here, they will find a variety of information,
tips, samples, and questionnaires.
• Step 1: Clients will complete the appropriate
questionnaire, and submit any other required
documents.
• Step 2: An interview will be set up once the
questionnaire is completed.

27. • Step 3: Once all information is gathered, their
service will be completed usually within 10-15
business days.
• Step 4: Depending on the service purchased,
some documents may be sent to the client
via email for filing.
• Step 5: Finally, the completed product is sent
to the client once final payment is made.

28. • 501(c)(3) recognition provides certain qualifying
nonprofits with many advantages.
• Benefits include exemption from federal income
taxes, as well as the ability to offer donors a tax
deduction for their contribution
• Many states will require additional filings in order to
stay in full compliance
• Professional assistance is necessary for
organizations who are not familiar with all state and
federal procedures