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What is the difference between 501(c)(3) and 508(c)(1)(A)?

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What is the difference between 501(c)(3) and 508(c)(1)(A)?

What is the difference between 501(c)(3) and 508(c)(1)(A)?

Section 501(c)(3) of the Tax Code is the section that describes charitable organizations that are exempt from paying federal income tax.  Section 508 of the Code requires any organization created after October 9, 1969 that seeks 501(c)(3) charitable exemption to notify the Internal Revenue Service and apply to obtain an official recognition, but exempts from the filing requirement those organizations described in Section 508(c). 

Section 508(c)(1) exempts in subsection (A) churches, their integrated auxiliaries, and conventions or associations of churches, while subsection (B) exempts charities that are not private foundations and normally have gross receipts of not more than $5000 a year.

The religious organizations mentioned in (A) are also exempt from filing an annual Form 990 series tax information return.  The small nonprofits that don’t have to file for recognition of exemption under 508(c)(1)(B) nevertheless have to file a tax information return, normally the Form 990-N electronic postcard.  They will automatically lose their exempt status (even though the IRS may not know that they exist) if they fail to file for three consecutive years.

Tuesday, February 2, 2021


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