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501(c)(3) Tax Exemption for Nonprofits

Section 501(c)(3) of the IRS code exempts payment of federal income taxes for charitable, religious, scientific, literary and educational organizations. It is the most commonly used section in the IRS code granting tax exemption. Section 501(c)(3) covers organizations formed for the following purposes:

  1. Charitable organizations provide services beneficial to the public interest. Examples include battered women's shelters or low-cost medical clinics.
  2. Religious organizations are valid as long as the organization's directors, officers and members appear to truly and sincerely hold the values and beliefs espoused by the religion.
  3. Scientific organizations are individuals and groups who conduct scientific research for public benefit.
  4. Literary and educational organizations instruct the public on topics for which there are sufficient facts to permit the formation of an independent opinion or conclusion.

Unless a nonprofit corporation files a 501(c)(3) application with the IRS, it will not be exempt from paying federal income taxes. If your nonprofit's purpose qualifies under 501(c)(3), then LegalZoom can help create the application for you. Each state also requires a tax exempt application. However, many states accept the federal tax exempt application in place of their own.

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