Tips on Tax Deductions for Charitable Contributions (II)

Organizations that Solicit Donations

Organizations that solicit contributions and memberships generally fall
into one of the following four tax exempt categories: 501(c)(3),
501(c)(4) 501(c)(6), and 501(c)(19). These numbers correspond to the
sections of the Internal Revenue Code that describe these organizations.

501(c)(3)

To obtain a 501(c)(3) tax exempt status, most nonprofit organizations
must file documents with the IRS that prove them to be operated for
certain charitable purposes specified by statute. (Older charities may
have a 101(6) ruling, which corresponds to section 501(c)(3) of the
current Internal Revenue Code.) Churches and small charities with less
than $5,000 annual income do not have to apply to the IRS for recognition
of exemption.

Organizations in the 501(c)(3) category include groups whose purposes are:

* Charitable
* Religious
* Scientific
* Educational
* Literary
* Preventing cruelty to children or animals
* Fostering national or international amateur sports competition
* Testing for public safety

Contributions to all 501(c)(3) organizations, except those that "test for
public safety," are deductible as charitable donations for federal income
tax purposes.

Foundation Status

While its 501(c)(3) status determines that an organization is eligible to
receive tax deductible donations, its foundation status determines the
limits of an individual donor's deduction.

The three principal classifications of 501(c)(3) organizations are as
follows:

A public charity (identified in IRS terms as "not a private foundation")
normally receives a substantial part of its income, directly or
indirectly, from the general public or from the government. The public
support must be fairly broad, not limited to a few individuals or
families. Public charities are defined in the Internal Revenue Code under
sections 509(a)(1) through 509(a)(4).

A private foundation, sometimes called a non-operating foundation,
receives most of its income from investments and endowments. This income
is used to make grants to other organizations, rather than being
disbursed directly for charitable activities. Private foundations are
defined in the Internal Revenue Code under section 509(a) as 501(c)(3)
organizations which do not qualify as public charities. A private
operating foundation is a private foundation that devotes most of its
earnings and assets directly to the conduct of its tax exempt purposes,
rather than to making grants to other organizations for these purposes.
Private operating foundations are defined in the Internal Revenue Code
under section 4942(j)(3).