You may have heard someone say that their company is "a 501(c)(3)." But what does that mean?
501(c)(3) is a section of the Internal Revenue Code. It refers to a certain type of nonprofit company.
A nonprofit company (also called a not-for-profit company) is one that has been organized for a nonprofit purpose (such as a charitable purpose). A 501(c)(3) is a nonprofit company that has gone through the additional steps necessary to become recognized by the IRS as a charitable organization.
The biggest benefit of a 501(c)(3) is its tax-exempt status. A 501(c)(3) is exempt from various taxes such as federal tax, sales tax, and property taxes.
Another benefit is tax-deductible contributions. People who make charitable donations to a 501(c)(3) are able to take a tax deduction for the amount of the contribution.
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