An IRS recognized nonprofit is called a 501(c) corporation.
There are several types of nonprofit organizations, each with its own code number. For instance some nonprofit corporations are classified as 501(c)(6) organizations. They may be a Chamber of Commerce or other business-related organization.
The 501(c)(3) designation is the most common and applies to "charitable" organizations. Each charitable organization is classified either as a public charity or as a private foundation.
A public charity actively seeks contributions from many sources that can include the general public, government agencies, corporations, private foundations or other public charities.
A private foundation, on the other hand, usually has a single source of funding (such as gifts from one family or corporation), and primarily engages in making grants to other charitable organizations and to individuals. Foundations do not directly operate charitable programs.
Public charities and private foundations are exempt from federal income tax and contributions made to them by individuals and corporations are deductible for the donors.
501(c)(3) Covers a Lot Of Ground
A 501(c)(3) nonprofit is exempt from federal income tax if it has these purposes:
charitable, religious, educational, scientific, literary, testing for public safety, fosters amateur sports competition, prevents cruelty to children or animals.
Examples of qualifying organizations include old-age homes, parent-teacher associations, charitable hospitals, alumni associations, schools, chapters of the Red Cross or Salvation Army, Boys' or Girl's clubs, and churches.
Determining the proper category for which to apply is a crucial step to achieving nonprofit status for your organization.