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Nonprofit regulation

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Section 501(c) of the U.S. IRS code is titled "List of exempt organizations" and exclusively lists 29 types of organizations which fit into this category.[1]

Note: The words "association", "order", "league" and other related words, are included in the umbrella term "organization" for the purposes of this article.


Under section 501(c)(1), an organization created by Congress which is an instrument of the U.S., if it is exempt from federal income taxes, is determined under section 501(l).[1]

Section 501(c)(1) is titled "Government corporations exempt under subsection (c)(1)." It lists:[1]

  • The Central Liquidity Facility
  • The Resolution Trust Corporation
  • The Resolution Funding Corporation


See also: 501(c)(2)

501(c)(2) organizations exist for the sole purpose of holding title to property, as opposed to being an operating organization and turning over income thus collected to an organization which itself is exempt under section 501(a).[2] It cannot accept contributions.[3]


See also: 501(c)(3)

Section 501(c)(3) is for corporations, community chests, funds or foundations which exist to pursue:[1]

  • Religious
  • Charitable
  • Scientific
  • Testing for public safety
  • Literary/educational purposes
  • Fostering national or international amateur sports competition, if none of the funds are used for sports equipment. The limitation on sports equipment was thought necessary to prevent private gyms and athletic clubs from gaining exemption under 501(c)(3). However, since it also potentially affected athletic organizations such as Olympic training, Congress added Section 501(j) to provide exemption for “real” amateur athletic organizations even if they provided equipment or facilities.[4]
  • The prevention of cruelty to children or animals

These organizations may have no involvement in political campaigns.


See also: 501(c)(4)

Subsection 4 covers civic organizations or local employee associations operated solely for the promotion of social welfare.[1] The membership of these is limited to either members of a specific municipality or members of a specific profession. The net earnings must be devoted exclusively to charitable, educational or recreational purposes; private individuals must not benefit from these.[1]


Organizations under this subsection include labor, agricultural or horticultural organizations.[1] Prominent examples of these organizations include: The SEIU


501(c)(6) organizations are organization which are not organized for profit and which do not profit an individual or private shareholder. These include:[1]

  • Business leagues
  • Chambers of commerce
  • Real-estate boards
  • Boards of trade
  • Professional football leagues


This subsection is for organizations which are organized for pleasure, recreation and other nonprofitable purposes.[1]


Subsection 8 is for fraternal beneficiary societies, orders or associations operating under the lodge system or which provides for the payment of health and insurance benefits.[1]


Section 501(c)(9) is composed of voluntary employees' beneficiary associations.[1]


This subsection is for domestic fraternal societies operating within the lodge system.[1]


Local teachers retirement fund associations are listed under this subsection.[1]


Section 501(c)(12) includes the following when 85 percent or more an organization's income consists of amounts collected from members. Some of these entities have several conditions to meet, which are covered under 501(c)(12)(B),(C) and (H); definitions are covered under 501(c)(12)(D),(E),(F),(G); and rules and conditions are discussed under section 501(c)(12)(H):[1]

  • Local benevolent life insurance associations
  • Mutual ditch or irrigation companies
  • Mutual or cooperative telephone companies or like organizations


This section lists cemetery companies, which are nonprofit.[1]


Organizations under this subsection include credit unions without capital stock organized and operated for mutual purposes. Additionally, certain types of organizations organized before September 1, 1957 without capital stock which are operated for the purpose of providing reserve funds, insurance of shares or deposits in[1]

  • Domestic building and loan associations,
  • Cooperative banks without capital stock organized and operated for mutual purposes and without profit

and other such organizations.


This subsection is for insurance companies other than life if certain conditions are met. For example, the gross receipts for the taxable year do not exceed $600,000 or in the case of a mutual insurance company, if the gross receipts of which for the taxable year do not exceed $150,000.[1]


Cooperative organizations for the financing of crop operations is the subject of this section.[1]


Organizations under this section are supplemental unemployment benefit trusts for dispensing unemployment compensation.[1]


Employee funded pension trust organizations which meet certain conditions created before June 25, 1959 are covered under subsection 501(c)(18).[1]


Section (c)(19) is for organizations comprised of past or present members of the Armed Forces of the United States and spouses and ancestors of service persons.[1]


Specific requirements for group legal services plans are outlined under this section.[1]


This section lists rules regarding Black Lung benefit trusts.[1]


Section 501(c) concerns the Withdrawal Liability Payment Fund, a trust created or organized in the United States and established in writing by the plan sponsors of multi-employer plans if meeting specific conditions covered under this subsection.[1]


Veterans organizations (created before 1880) for present or past members of the Armed Forces with a principal purpose of providing benefits to veterans or their dependents are covered under this section.[1]


The text of 501(c)(24) states: "A trust described in section 4049 of the Employee Retirement Income Security Act of 1974 (as in effect on the date of the enactment of the Single-Employer Pension Plan Amendments Act of 1986)."[1]


This section is "Title Holding Corporations or Trusts with Multiple Parents." The subparagraphs of this subsection outline which specific corporations fall within this category, as well as specific rules these must abide by for tax-exempt status.[1]


State-sponsored organization providing health coverage for high-risk individuals are outlined under this section.


501(c)(27) is for state-sponsored workers' compensation reinsurance organization


The National Railroad Retirement Investment Trust established under section 15(j) of the Railroad Retirement Act of 1974 is discussed in this section.


This section exempts qualified nonprofit health insurance issuers "that have received a loan or grant under the Centers for Medicare and Medicaid Services (CMS) CO-OP program for periods that they meet both the requirements of section 1322 of the Affordable Care Act and of any loan agreement with CMS." It was created by section 1322(h)(1) of the Affordable Care Act.[5]

See also

Ballotpedia:Index of Terms

External links