Frequently Asked Questions
Who is eligible for the Small Organization 501(c)(3) Exemption?
Non-private foundations with annual gross receipts normally not exceeding $5,000.
How does the Small Organization 501(c)(3) Exemption work?
Organizations that are not private foundations and normally have gross receipts of $5,000 or less are exempt from the mandatory requirement to notify the IRS of their 501(c)(3) status.
What law authorizes the Small Organization 501(c)(3) Exemption?
The Small Organization 501(c)(3) Exemption is authorized under IRC §508 of the Internal Revenue Code (Title 26, United States Code).
Statutory Text — IRC §508
Source: Internal Revenue Code, Title 26, United States Code
§ 508. Special rules with respect to section 501(c)(3) organizations(a) New organizations must notify Secretary that they are applying for recognition of section 501(c)(3) statusExcept as provided in subsection (c), an organization organized after October 9, 1969, shall not be treated as an organization described in section 501(c)(3)—(1) unless it has given notice to the Secretary in such manner as the Secretary may by regulations prescribe, that it is applying for recognition of such status, or
(2) for any period before the giving of such notice, if such notice is given after the time prescribed by the Secretary by regulations for giving notice under this subsection.
(b) Presumption that organizations are private foundationsExcept as provided in subsection (c), any organization (including an organization in existence on October 9, 1969) which is described in section 501(c)(3) and which does not notify the Secretary, at such time and in such manner as the Secretary may by regulations prescribe, that it is not a private foundation shall be presumed to be a private foundation.
(c) Exceptions(1) Mandatory exceptionsSubsections (a) and (b) shall not apply to—(A) churches, their integrated auxiliaries, and conventions or associations of churches, or
(B) any organization which is not a private foundation (as defined in section 509(a)) and the gross receipts of which in each taxable year are normally not more than $5,000.
(2) Exceptions by regulationsThe Secretary may by regulations exempt (to the extent and subject to such conditions as may be prescribed in such regulations) from the provisions of subsection (a) or (b) or both—(A) educational organizations described in section 170(b)(1)(A)(ii), and
(B) any other class of organizations with respect to which the Secretary determines that full compliance with the provisions of subsections (a) and (b) is not necessary to the efficient administration of the provisions of this title relating to private foundations.
(d) Disallowance of certain charitable, etc., deductions(1) Gift or bequest to organizations subject to section 507(c) taxNo gift or bequest made to an organization upon which the tax provided by section 507(c) has been imposed shall be allowed as a deduction under section 170, 545(b)(2), 642(c), 2055, 2106(a)(2), or 2522, if such gift or bequest is made—(A) by any person after notification is made under section 507(a), or
(B) by a substantial contributor (as defined in section 507(d)(2)) in his taxable year which includes the first day on which action is taken by such organization which culminates in the imposition of tax under section 507(c) and any subsequent taxable year.
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