Lesson 3 of 11
Charitable purposes and eligibility
Exemption under 501(c)(3) requires that the organisation is both organised and operated exclusively for one or more recognised exempt purposes.
Recognised purposes
- Charitable
- Religious
- Educational
- Scientific
- Literary
- Testing for public safety
- Fostering national or international amateur sports competition
- Preventing cruelty to children or animals
Limits that come with it
- No part of net earnings may benefit private shareholders or individuals beyond reasonable pay
- Lobbying must be no more than an insubstantial part of activities
- Participation in political campaigns for or against candidates is prohibited
- On dissolution, assets must go to another exempt purpose
The articles of incorporation must contain specific purpose and dissolution language for the IRS to approve exemption. Generic corporate articles usually fail this test.
Official sources
Want help with the paperwork?
You can incorporate and apply for exemption yourself using the steps in this course. If you would rather have support, Gullia Filing prepares and files your nonprofit incorporation, supplies compliant bylaws and conflict of interest policy, and obtains your EIN.