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Understanding the nonprofit organization exemption requirements

On Behalf of | Feb 6, 2023 | Non-Profit Organizations

Running a nonprofit organization is complicated, but doing good work in your community is its own reward. However, maintaining compliance with the Internal Revenue Code is important. Otherwise, you could receive a letter from the Internal Revenue Service threatening to take away your nonprofit status.

An overview of your tax-exempt status

As you know, it took work to get the approval for your Section 501(c)(3) status. However, to maintain your status, you must ensure that you keep operating your organization for tax-exempt purposes. In addition, you must avoid turning your organization into a political action organization.

Your tax-exempt purpose

Keep in mind that your tax-exempt purpose stated to the IRS is allowable, and if you change that purpose, you must notify the IRS as well. However, as long as you maintain an allowable tax-exempt purpose, you can maintain your Section 501(c)(3) nonprofit charitable status. This can be for charitable, religious, educational or scientific purposes.

Realistically, as the term charitable, by the IRS, is given its generally accepted legal definition, your organization could be to eliminate discrimination, prejudice, defend civil rights, defend juvenile justice or combat juvenile delinquency. Your organization could seek to lessen government burdens or neighborhood tensions, or even maintain public buildings, monuments or public works. It could be for the advancement of religion, education or science. Finally, it could be for classic reasons, like supporting the underprivileged, poor, distressed, etc.

Political action organization

Nonetheless, your nonprofit cannot be a political action organization that works on political activities, legislative activities or any lobbying activities. Your nonprofit organization cannot seek to influence legislation as any substantial part of its activities, and it cannot become a part of any political campaigns, campaign activities or campaign for or against any particular candidates.