IRS 501(c)(3) Status Requirements

Written by True Tamplin, BSc, CEPF®

Reviewed by Editorial Team

Updated on March 22, 2023

IRS 501(c)(3) Overview

501(c)(3) organizations qualify for federal income tax exemptions under the IRS. 501(c)(3)s are defined in section 501(c)(3) of the Internal Revenue Code (IRC). The IRS publishes a list of 501(c)(3) organizations that can be searched on its website.

501(c)(3) Exemption

The 501(c)(3) exemption is a vital status for many non-profit organizations in the United States. The designation grants an organization exemption from federal income tax, allows for tax-deductible donations, and offers other financial benefits.

However, obtaining 501(c)(3) status requires an organization to meet specific eligibility requirements and adhere to certain operational guidelines.

Eligibility Requirements for 501(c)(3) Exemption

Organizational Requirements for 501(c)(3) Exemption

The first set of requirements that an organization must meet to qualify for 501(c)(3) exemption is organizational requirements. These requirements include formation, purpose, and non-profit status.


The formation of an organization involves creating a legal entity that will receive 501(c)(3) exemption status. There are various types of organizations that can qualify for an exemption, including corporations, trusts, and associations.

To obtain 501(c)(3) exemption status, the organization must file articles of incorporation with the state in which it will operate. The articles of incorporation should include the organization's name, purpose, duration, and initial board of directors.


An organization must also have bylaws, which outline the rules and procedures for how the organization will operate.

The bylaws should include provisions for how the organization will be governed, how board members will be elected, and how the organization will make decisions.


The purpose of the organization is another critical element in determining eligibility for 501(c)(3) exemption. To qualify for an exemption, the organization's primary purpose must be one of the following:

Charitable Purpose

To qualify as a charitable organization, an organization must have a charitable purpose. The Internal Revenue Service (IRS) defines a charitable purpose as that which is beneficial to the community or society as a whole.

Examples of charitable purposes include providing housing for the homeless, feeding the hungry, and promoting the arts.

Educational Purpose

An educational organization must have the primary purpose of providing education. This can include offering courses, conducting research, and providing educational materials.

Religious Purpose

A religious organization must have a religious purpose. This includes the promotion of religious beliefs, the advancement of religion, and the provision of religious services.

Non-profit Status

Finally, to qualify for 501(c)(3) exemption, an organization must be a non-profit entity. This means that any profits the organization generates cannot be distributed to individuals, but instead must be used to further the organization's mission.

Non-profit status can be obtained by incorporating as a non-profit corporation or by applying for non-profit status with the IRS.

Operational Requirements for 501(c)(3) Exemption

In addition to organizational requirements, an organization seeking a 501(c)(3) exemption must also meet operational requirements.

These requirements focus on the activities of the organization and its interaction with the community.

Charitable Purpose

An organization that has obtained a 501(c)(3) exemption must continue to operate for a charitable purpose. This means that the organization must spend the majority of its resources on activities that further its mission.

If an organization spends too much time and resources on activities that do not further its mission, it may jeopardize its exemption status.

Prohibition of Political Intervention

501(c)(3) organizations are prohibited from intervening in political campaigns or endorsing candidates for public office.

This includes making contributions to political campaigns or engaging in any activity that supports or opposes a candidate for public office.

Restrictions on Activities and Income

501(c)(3) organizations are also subject to certain restrictions on their activities and income. These restrictions are in place to ensure that the organization is operating primarily for its charitable purpose.

Private Benefit Prohibition

501(c)(3) organizations are prohibited from providing private benefits to individuals. This means that the organization cannot provide benefits to individuals that are not available to the general public.

For example, a charitable organization that provides scholarships cannot limit those scholarships to members of a particular family or group.

Unrelated Business Income

501(c)(3) organizations are also subject to rules related to unrelated business income. If an organization generates income from activities that are not related to its charitable purpose, that income may be subject to taxation.

However, there are exceptions to this rule, and organizations can generate a certain amount of unrelated business income without losing their exemption status.

Public Support Test

Finally, 501(c)(3) organizations must meet a public support test. This test is designed to ensure that the organization receives a significant portion of its support from the general public.

If an organization fails the public support test, it may be reclassified as a private foundation, which is subject to different rules and regulations.

Additional Requirements for 501(c)(3) Exemption

Finally, an organization seeking a 501(c)(3) exemption must meet certain additional requirements. These requirements include annual reporting, public availability of information, and compliance with state and federal law.

Annual Reporting

501(c)(3) organizations are required to file annual information returns with the IRS. The form required depends on the organization's level of income and assets.

The most common form is Form 990, which is required for organizations with gross receipts of $200,000 or more or assets of $500,000 or more.

Public Availability of Information

501(c)(3) organizations must also make certain information available to the public.

This includes providing copies of their annual information returns to anyone who requests them and making certain information available on their website, such as their mission statement and board members.

Compliance With State and Federal Law

Finally, 501(c)(3) organizations must comply with state and federal laws related to their activities. This includes laws related to fundraising, employment, and taxes. Failure to comply with these laws can result in fines or loss of exemption status.

Final Thoughts

501(c)(3) exemption status is a valuable designation for non-profit organizations. However, to obtain and maintain this status, organizations must meet specific eligibility requirements and adhere to operational guidelines.

Organizations seeking 501(c)(3) exemption should carefully consider the requirements and seek professional guidance to ensure compliance. By meeting these requirements, organizations can enjoy the benefits of 501(c)(3) exemption and continue to serve their communities.

IRS 501(c)(3) Status Requirements FAQs

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website, view his author profile on Amazon, or check out his speaker profile on the CFA Institute website.

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