Article Archives >> To the Point

501(c)(3) versus 509(a)(1). What is the difference between these two statuses?

Section 501(c)(3) is the section of the Tax Code that describes religious, scientific, literary, educational and other charitable organizations exempt from federal income tax. All charities are further subdivided, however, between public charities, which receive broad public support from gifts or fees, and private foundations, which receive almost all of their income (other than investment income) from a very narrow group of persons, such as a single individual, family or corporation. The Code provides more restrictions on the activities of private foundations than on public charities. (See Ready Reference Page: What Do We Mean When We Say Nonprofit?)

Every charity is deemed to be a private foundation unless it satisfies the IRS that it meets one of the definitions of a public charity under Section 509(a). Section 509(a)(1) primarily includes churches, schools, hospitals, and other organizations that receive their public support primarily from gifts, grants and contributions from a broad group of people. Section 509(a)(2) covers organizations that receive their support from a combination of gifts, grants and contributions and fees for their exempt services. The methods of calculating these public support levels can be tricky. (See Ready Reference Page: “Calculating Public Support.”)

Section 509(a)(3) covers “supporting organizations” that support other public charities, governmental units and certain other exempt organizations. They receive public charity status because of the relationship, without regard to the source of their income. Congress has recently enacted some significant limitations on supporting organizations. (See Ready Reference Page: Congress Passes Charitable Reforms, Approves Limited Giving Incentives.”)

Therefore, it is not 501(c)(3) versus 509(a)(1), but 501(c)(3) and 509(a)(1).

Rev:  5/21/2007

Article Archives >> To the Point

Planned Giving Primer

Pre-recorded Webinar -
Listen Today

Planned giving sounds complicated, with its CRUTs and CRATsCLUTs and CLATS, and CGAs.  It can be incredibly complicated, but it needn’t be. Keeping it simple may be the best way to start a planned giving program for a charity that hasn’t already put one in place.

This webinar offered a review of major planned giving instruments and a discussion of ones that make the most sense to emphasize in starting a planned giving program.  It discussed the advantages of integrating planned giving into an existing development program, targeting the best prospects, getting buy-in from the board that is likely to generate results, and setting a structure to make it all happen.

Receive the weekly question by e-mail

Sign up and receive FREE:

Weekly question and answer

Notice of each full edition
and its free stories

Report on 501(c)(3) electioneering


What our readers say about Nonprofit Issues

Once again you've tackled a tricky question and explained it so we all can understand the issue.--M.V.

Thank you for your informative and keen advice on nonprofit matters. I believe it's a unique and concise place to get answers to this often wispy area called nonprofit. --R.T.


Have a question?

If you can't find your answer, submit a question and Don will pick one question a week to answer online and to include in our weekly e-mail notice.

Other ways to
find answers:

Talk to the Editor
Next Conference Call:
Thursday, October 23, 2014

Participate in this bi-monthly telephone seminar conference call and ask your questions directly to Editor Don Kramer.

Access the entire site
($9.95/24 hours, $17.95/3 months).


Nonprofit Issues Live
Full Day Program
A well-received full-day program that covers the current hottest topics in nonprofit law. Qualifies in Pennsylvania for Continuing Education credits.

Speaking Engagements
Don is available for programs and speaking engagements ranging from a one-hour presentation to a full-day primer on nonprofit law. Contact us if you are interested in having him speak at your program.

None of the information on the Nonprofit Issues Website should be deemed legal advice or
should be acted upon without prior consultation with appropriate professional advisors.
Materials prepared by Nonprofit Issues contained in these pages is copyrighted by Nonprofit Issues, Inc., 2009-2012.

Home | Article Archives | Ready Reference | Ask the Editor | Bookstore | About Us

Change Profile/Password
Subscribe or Renew

Free E-notice

Nonprofit Issues, Inc.
P.O. Box 482
Dresher, PA 19025
(215) 542-7547 FAX (215) 542-7548

E-mail Us