IRS Designations for Nonprofits
If your nonprofit organization is exploring ways to improve its operations and data management, you may be exploring Salesforce and heard about the Salesforce Power of Us program. This program offers qualified nonprofit organizations a grant for free licenses and other resources to help them better serve their mission. To qualify for the program, an organization must be a 501(c)(3) or 501(c)(4) and must go through an application process. However, the process can be complicated and time-consuming, which is where a Salesforce consulting company like Systems Rewired can be of great help. Our team can guide you through the application process and ensure that your organization meets all of the eligibility requirements.
If you are unsure about your organization’s designation (use this tool) It’s important to understand the different types of designations that are recognized by the IRS and not all qualify for the grant. The most common types of designations include 501(c)(3) organizations, which are charitable organizations that are exempt from federal income tax and can receive tax-deductible donations, and 501(c)(4) organizations, which are social welfare and advocacy organizations that focus on promoting social welfare and civic improvement. Other designations include 501(c)(6) organizations, which are business leagues and trade associations, and 501(c)(7) organizations, which are social clubs.
Below you will find the different designations.
501(c)(1)
501(c)(1) is a tax-exempt status under the United States Internal Revenue Code that applies to organizations that are organized and operated exclusively for the benefit of certain types of government entities, such as state governments or political subdivisions.
This tax-exempt status is known as a “Government Instrumentality” and is designed to provide certain tax benefits to organizations that are closely affiliated with a governmental entity and operate to further the governmental entity’s purposes.
501(c)(1) organizations are exempt from federal income tax and are also eligible to receive tax-deductible contributions from donors. However, because they are closely affiliated with a governmental entity, they may be subject to certain regulations and restrictions on their activities, including limits on lobbying and political activities.
Examples of organizations that may qualify for 501(c)(1) status include state-created entities that perform government functions, such as housing authorities or public transit systems.
501(c)(2)
501(c)(2) is a tax-exempt status under the United States IRC that applies to certain types of holding corporations. Specifically, it applies to organizations that are organized for the exclusive purpose of holding title to property, collecting income from that property, and using the income to pay expenses and make distributions to its shareholders.
501(c)(2) organizations are often used by parent companies to hold title to the property of its subsidiaries, such as real estate or intellectual property. By doing so, the parent company can ensure that its subsidiaries’ assets are protected and can also streamline management and control of the subsidiaries’ assets.
501(c)(2) organizations are exempt from federal income tax and are also eligible to receive tax-deductible contributions from donors. However, they are subject to certain restrictions on their activities, including limitations on lobbying and political activities.
501(c)(3)
501(c)(3) is a tax-exempt status under the United States IRC that applies to charitable organizations. These organizations are organized and operated exclusively for charitable, religious, educational, scientific, or literary purposes, or for the prevention of cruelty to animals or children.
To qualify for 501(c)(3) status, an organization must meet certain requirements, including limitations on its political activities, the prohibition of private inurement or benefit to individuals, and the requirement to have a public benefit.
501(c)(3) organizations are exempt from federal income tax and are also eligible to receive tax-deductible contributions from donors. This tax-exempt status is designed to encourage charitable giving by providing donors with a tax deduction for their contributions.
Examples of organizations that may qualify for 501(c)(3) status include educational institutions, churches and religious organizations, foundations, charities, scientific research organizations and some professional societies.
501(c)(3) organizations must file annual reports with the IRS to maintain their tax-exempt status and comply with various federal tax laws and regulations.
501(c)(4)
501(c)(4) is a tax-exempt status under the United States Internal Revenue Code that applies to social welfare organizations. These organizations are primarily focused on promoting social welfare causes and may engage in lobbying and other political activities that are not permitted for 501(c)(3) organizations.
To qualify for 501(c)(4) status, an organization must be operated exclusively for the promotion of social welfare, and its activities must primarily further this purpose. This includes promoting the common good and general welfare of the community, advocating for social and political change, and engaging in lobbying and political activities to further these goals.
501(c)(4) organizations are exempt from federal income tax, but donations to them are not tax-deductible for donors. This tax-exempt status allows them to engage in certain political activities, such as endorsing or opposing political candidates, to advance their social welfare goals.
Examples of organizations that may qualify for 501(c)(4) status include advocacy groups, civic leagues, social welfare organizations, and other organizations that are focused on promoting social welfare causes.
501(c)(4) organizations must comply with certain restrictions on political activities, including limits on the amount of lobbying they can engage in and restrictions on political campaign activities.
501(c)(5)
501(c)(5) is a tax-exempt status under the United States Internal Revenue Code that applies to labor, agricultural, and horticultural organizations. These organizations are primarily focused on improving the working conditions and livelihoods of their members, such as labor unions and agricultural associations.
To qualify for 501(c)(5) status, an organization must be composed of members who work in the same industry or profession, and its primary purpose must be to improve working conditions, wages, and benefits for its members.
501(c)(5) organizations are exempt from federal income tax, but donations to them are not tax-deductible for donors. This tax-exempt status is designed to help these organizations focus on improving the conditions and livelihoods of their members by providing certain tax benefits.
Examples of organizations that may qualify for 501(c)(5) status include labor unions, agricultural and horticultural associations, and other organizations focused on promoting the interests and welfare of workers in a particular industry or profession.
501(c)(5) organizations are subject to certain restrictions on political activities, including limits on the amount of lobbying they can engage in and restrictions on political campaign activities.
501(c)(6)
501(c)(6) is a tax-exempt status under the United States Internal Revenue Code that applies to business leagues, chambers of commerce, real estate boards, and other similar organizations. These organizations are primarily focused on promoting the common interests of their members, such as trade associations and professional organizations.
To qualify for 501(c)(6) status, an organization must be organized and operated to promote the common interests of its members, and its activities must primarily further this purpose. This includes promoting the interests of a particular industry or profession, advocating for legislation and regulations that benefit its members, and providing networking and educational opportunities.
501(c)(6) organizations are exempt from federal income tax, but donations to them are not tax-deductible for donors. This tax-exempt status is designed to help these organizations focus on promoting the common interests of their members by providing certain tax benefits.
Examples of organizations that may qualify for 501(c)(6) status include trade associations, chambers of commerce, and professional organizations, such as bar associations and medical associations.
501(c)(6) organizations are subject to certain restrictions on political activities, including limits on the amount of lobbying they can engage in and restrictions on political campaign activities.
501(C)(7)
501(c)(7) is a tax-exempt status under the United States Internal Revenue Code that applies to social and recreational clubs. These organizations are primarily focused on providing social and recreational activities for their members, such as hobby clubs, sports clubs, and fraternal organizations.
To qualify for 501(c)(7) status, an organization must be organized and operated for pleasure, recreation, and other similar non-profitable purposes, and its activities must primarily further this purpose. This includes providing facilities and activities for social interaction, entertainment, and recreation for its members.
501(c)(7) organizations are exempt from federal income tax, but donations to them are not tax-deductible for donors. This tax-exempt status is designed to help these organizations focus on providing social and recreational activities for their members by providing certain tax benefits.
Examples of organizations that may qualify for 501(c)(7) status include country clubs, hobby clubs, sports clubs, and fraternal organizations, such as Masonic lodges and Knights of Columbus councils.
501(c)(7) organizations must operate exclusively for the benefit of their members and not for the general public, and they are subject to certain restrictions on political activities, including limits on the amount of lobbying they can engage in and restrictions on political campaign activities.
501(c)(8)
501(c)(8) is a tax-exempt status under the United States Internal Revenue Code that applies to fraternal beneficiary societies and associations. These organizations are primarily focused on providing benefits to their members and their families in times of need, such as fraternal organizations and mutual aid societies.
To qualify for 501(c)(8) status, an organization must be a fraternal beneficiary society, order, or association that operates under the lodge system or a mutual aid association, and its primary purpose must be to provide benefits to its members and their families in times of need. This includes providing financial assistance, such as life insurance, disability benefits, and educational scholarships, to members and their families.
501(c)(8) organizations are exempt from federal income tax, but donations to them are not tax-deductible for donors. This tax-exempt status is designed to help these organizations focus on providing benefits to their members by providing certain tax benefits.
Examples of organizations that may qualify for 501(c)(8) status include fraternal organizations, such as the Order of the Eastern Star and the Knights of Pythias, and mutual aid societies, such as the Modern Woodmen of America and the Woodmen of the World.
501(c)(8) organizations must operate exclusively for the benefit of their members and their families and not for the general public, and they are subject to certain restrictions on political activities, including limits on the amount of lobbying they can engage in and restrictions on political campaign activities.
501(c)(9)
501(c)(9) is a tax-exempt status under the United States Internal Revenue Code that applies to voluntary employee beneficiary associations (VEBAs). These organizations are primarily focused on providing benefits to their members who are current or former employees of a single employer, such as retiree health and welfare benefits.
To qualify for 501(c)(9) status, an organization must be a VEBA that is funded through employer contributions, and its primary purpose must be to provide benefits to its members who are current or former employees of the employer that sponsors the VEBA. This includes providing health, life, and other welfare benefits to retirees and their beneficiaries.
501(c)(9) organizations are exempt from federal income tax, but donations to them are not tax-deductible for donors. This tax-exempt status is designed to help these organizations focus on providing benefits to their members by providing certain tax benefits.
Examples of organizations that may qualify for 501(c)(9) status include VEBA trusts established by a single employer to provide retiree health and welfare benefits to their employees.
501(c)(9) organizations must operate exclusively for the benefit of their members and not for the general public, and they are subject to certain restrictions on political activities, including limits on the amount of lobbying they can engage in and restrictions on political campaign activities.
501(c)(10)
501(c)(10) is a tax-exempt status under the United States Internal Revenue Code that applies to fraternal organizations that provide benefits to their members. These organizations are typically focused on providing mutual aid and benefits to their members, such as insurance, and may also engage in charitable activities in their communities.
To qualify for 501(c)(10) status, an organization must be a fraternal organization that provides benefits to its members, such as life insurance or disability benefits, and its primary purpose must be to provide these benefits to its members. These organizations may also engage in social, recreational, and charitable activities, but their primary focus must be on providing benefits to their members.
501(c)(10) organizations are exempt from federal income tax, but donations to them are not tax-deductible for donors. This tax-exempt status is designed to help these organizations focus on providing benefits to their members by providing certain tax benefits.
Examples of organizations that may qualify for 501(c)(10) status include fraternal benefit societies, such as the Fraternal Order of Eagles and the Loyal Order of Moose.
501(c)(10) organizations must operate exclusively for the benefit of their members and not for the general public, and they are subject to certain restrictions on political activities, including limits on the amount of lobbying they can engage in and restrictions on political campaign activities.
501(c)11
501(c)(11) is a tax-exempt status under the United States Internal Revenue Code that applies to employee-funded workers’ compensation reinsurance organizations. These organizations are typically formed by groups of employers who contribute to a fund to cover their workers’ compensation claims.
To qualify for 501(c)(11) status, an organization must be a workers’ compensation reinsurance organization that is funded by contributions from its members, which are typically employers. Its primary purpose must be to provide reinsurance coverage for workers’ compensation claims that exceed the amounts covered by traditional insurance policies.
501(c)(11) organizations are exempt from federal income tax, but donations to them are not tax-deductible for donors. This tax-exempt status is designed to help these organizations focus on providing reinsurance coverage for workers’ compensation claims by providing certain tax benefits.
Examples of organizations that may qualify for 501(c)(11) status include self-insured groups of employers who contribute to a fund to cover their workers’ compensation claims.
501(c)(11) organizations must operate exclusively for the benefit of their members and not for the general public, and they are subject to certain restrictions on political activities, including limits on the amount of lobbying they can engage in and restrictions on political campaign activities.
501(c)(12)
501(c)(12) is a tax-exempt status under the United States Internal Revenue Code that applies to mutual insurance companies or associations. These organizations are typically formed by groups of individuals or businesses that pool their resources to provide insurance coverage for themselves or their members.
To qualify for 501(c)(12) status, an organization must be a mutual insurance company or association that is owned and controlled by its policyholders. Its primary purpose must be to provide insurance coverage to its members, which may include property and casualty insurance, liability insurance, or other types of insurance.
501(c)(12) organizations are exempt from federal income tax, but donations to them are not tax-deductible for donors. This tax-exempt status is designed to help these organizations focus on providing insurance coverage to their members by providing certain tax benefits.
Examples of organizations that may qualify for 501(c)(12) status include mutual insurance companies or associations that provide coverage to specific groups, such as farmers or homeowners.
501(c)(12) organizations must operate exclusively for the benefit of their members and not for the general public, and they are subject to certain restrictions on political activities, including limits on the amount of lobbying they can engage in and restrictions on political campaign activities.
501(c)13
There is a 501(c)(13) tax-exempt status under the United States Internal Revenue Code that applies to cemetery companies or associations. These organizations are typically formed to own and manage cemeteries, mausoleums, and other burial sites.
To qualify for 501(c)(13) status, an organization must be a cemetery company or association that is organized and operated for the exclusive purpose of owning and operating cemetery or burial facilities. The organization may not be operated for the benefit of any private shareholder or individual.
501(c)(13) organizations are exempt from federal income tax, but donations to them are not tax-deductible for donors. This tax-exempt status is designed to help these organizations focus on providing burial services and maintaining cemetery facilities by providing certain tax benefits.
Examples of organizations that may qualify for 501(c)(13) status include cemetery associations, cemetery corporations, and other organizations that own and operate cemeteries and burial sites.
501(c)(13) organizations must operate exclusively for the benefit of the general public, and they are subject to certain restrictions on political activities, including limits on the amount of lobbying they can engage in and restrictions on political campaign activities.
501(c)14
501(c)(14) is a tax-exempt status under the United States Internal Revenue Code that applies to credit unions that are chartered by the state rather than by the federal government.
To qualify for 501(c)(14) status, an organization must be a state-chartered credit union that is organized and operated for the exclusive purpose of promoting thrift among its members and providing credit for productive purposes. The credit union must also be a cooperative association that is owned and controlled by its members.
501(c)(14) organizations are exempt from federal income tax, but donations to them are not tax-deductible for donors. This tax-exempt status is designed to help credit unions focus on providing financial services to their members by providing certain tax benefits.
Examples of organizations that may qualify for 501(c)(14) status include state-chartered credit unions that provide financial services to members of a specific community, such as a credit union for employees of a particular company or residents of a specific geographic area.
501(c)(14) organizations must operate exclusively for the benefit of their members and not for the general public, and they are subject to certain restrictions on political activities, including limits on the amount of lobbying they can engage in and restrictions on political campaign activities.
501(c)(15)
501(c)(15) is a tax-exempt status under the United States Internal Revenue Code that applies to mutual insurance companies or associations.
To qualify for 501(c)(15) status, an organization must be a mutual insurance company or association that is owned by its policyholders and operated for the purpose of providing insurance coverage and services to its policyholders. The organization must also be operated on a non-profit basis.
501(c)(15) organizations are exempt from federal income tax, but donations to them are not tax-deductible for donors. This tax-exempt status is designed to help mutual insurance companies focus on providing insurance coverage and services to their policyholders by providing certain tax benefits.
Examples of organizations that may qualify for 501(c)(15) status include mutual insurance companies that provide coverage for property, casualty, liability, or other risks, and are owned and controlled by their policyholders.
It’s worth noting that 501(c)(15) organizations must operate exclusively for the benefit of their policyholders and not for the general public, and they are subject to certain restrictions on political activities, including limits on the amount of lobbying they can engage in and restrictions on political campaign activities.
501(c)(16)
501(c)(16) is a specific tax-exempt status granted by the Internal Revenue Service (IRS) to mutual insurance companies or associations that provide insurance to their members.
This tax-exempt status is intended to provide a tax advantage to mutual insurance companies and associations that operate on a cooperative basis, with members contributing to a common pool of funds to cover the cost of insurance. By being recognized as a 501(c)(16) organization, these mutual insurance companies and associations are exempt from paying federal income tax on their insurance premiums and investment income. However, they may still be subject to other taxes, such as payroll taxes and state taxes.
To qualify for 501(c)(16) status, a mutual insurance company or association must meet certain requirements, such as providing property or casualty insurance coverage to its members and having a board of directors elected by its members. Additionally, the organization must be organized and operated on a cooperative basis, with any income generated being used for the benefit of its members.
501(c)17
501(c)(17) is a tax-exempt status granted by the Internal Revenue Service (IRS) to nonprofit fraternal benefit societies, which provide insurance and other benefits to their members. These organizations must meet certain requirements, such as having a fraternal purpose and providing benefits to members and dependents, and operating on a lodge system or similar structure. In addition, they must devote their net earnings exclusively to religious, charitable, scientific, literary, or educational purposes.
If a fraternal benefit society is granted 501(c)(17) status, it is exempt from federal income tax on its insurance premiums and investment income. However, it may still be subject to other taxes, such as payroll taxes and state taxes. Members of a fraternal benefit society may be able to deduct their contributions to the organization from their income taxes, subject to certain limitations.
501(c)(18)
501(c)(18) is a valid tax-exempt category recognized by the Internal Revenue Service (IRS), and it applies to Employee Funded Pension Trusts.
An Employee Funded Pension Trust is an organization that provides pension or retirement benefits to employees of a single employer or related employers. The trust is funded by contributions from employees and earnings on those contributions.
To qualify for 501(c)(18) status, the pension trust must meet specific requirements set forth by the IRS, including being established and maintained exclusively for the benefit of employees or their beneficiaries, being funded only by employee contributions or earnings on those contributions, and having a written plan document outlining contribution rules, distribution guidelines, and other benefits. Upon termination, the trust must distribute all its assets to participants or their beneficiaries.
If an Employee Funded Pension Trust is granted 501(c)(18) status, it is exempt from federal income tax on its earnings, as well as on employee contributions. However, the trust may still be subject to other taxes, such as payroll taxes.
501(c)(19)
501(c)(19) is a tax-exempt category recognized by the Internal Revenue Service (IRS) for Veterans’ Organizations.
To qualify for 501(c)(19) status, an organization must be a post or organization of past or present members of the armed forces of the United States, or an auxiliary unit or society of such a post or organization. Additionally, the organization must be operated exclusively for charitable purposes, such as promoting the welfare of veterans and their families, providing assistance to disabled veterans, or engaging in other charitable activities.
If a Veterans’ Organization is granted 501(c)(19) status, it is exempt from federal income tax on its earnings and donations it receives. However, the organization may still be subject to other taxes, such as payroll taxes.
It is worth noting that not all Veterans’ Organizations are eligible for 501(c)(19) status. The organization must meet specific criteria set forth by the IRS to qualify.
501(c)(20)
501(c)(20) is a tax-exempt category recognized by the Internal Revenue Service (IRS) for group legal services plans.
A group legal services plan is a program that provides legal services to its members, usually employees of a particular company or members of a particular organization, such as a labor union or professional association. The legal services provided may include legal advice, document preparation, and representation in court.
To qualify for 501(c)(20) status, a group legal services plan must be organized and operated exclusively for the promotion of social welfare by providing group legal services to its members. The plan must also meet other requirements set forth by the IRS, such as having a written plan document that describes the services offered, the eligibility requirements for membership, and the fees charged.
If a group legal services plan is granted 501(c)(20) status, it is exempt from federal income tax on its earnings and donations it receives. However, the plan may still be subject to other taxes, such as payroll taxes.
501(c)(21)
A Black Lung Benefit Trust is a trust that is established and maintained to provide benefits to coal miners who have become totally disabled due to pneumoconiosis (black lung disease) arising from their coal mine employment, as well as to their eligible dependents.
To qualify for 501(c)(21) status, the trust must be established and maintained under a written trust agreement that meets certain requirements set forth by the IRS. The trust must also be funded by contributions from coal mine operators or related sources, such as the Black Lung Disability Trust Fund.
501(c)(22)
A Withdrawal Liability Payment Fund is a fund that is established and maintained to provide payments to multiemployer pension plans when an employer withdraws from the plan and has incurred withdrawal liability. Withdrawal liability is the amount that an employer must pay to the pension plan when it withdraws from the plan and is calculated based on various factors, such as the employer’s contribution history and the plan’s funding level.
To qualify for 501(c)(22) status, a Withdrawal Liability Payment Fund must be established and maintained under a written agreement that meets certain requirements set forth by the IRS. The fund must also be funded by contributions from employers who are liable for withdrawal liability under the multiemployer pension plan.
If a Withdrawal Liability Payment Fund is granted 501(c)(22) status, it is exempt from federal income tax on its earnings, as well as on contributions made to the fund. However, the fund may still be subject to other taxes, such as payroll taxes.
501(c)(26)
These organizations are typically established by state governments to provide health insurance coverage to individuals who are unable to obtain coverage in the private market due to pre-existing medical conditions. The organizations are funded by contributions from individuals, employers, and the state government.
To qualify for 501(c)(26) status, an organization must meet certain requirements set forth by the IRS. For example, it must be organized and operated exclusively for the purpose of providing health insurance coverage to high-risk individuals, and it must be sponsored by a state government or other qualifying entity.
If a State-Sponsored High-Risk Health Insurance Pool is granted 501(c)(26) status, it is generally exempt from federal income tax on its earnings, as well as on contributions made to the organization. However, the organization may still be subject to other taxes, such as payroll taxes.
501(c)(27)
These organizations are typically established by state governments to provide reinsurance to workers’ compensation insurance carriers, which helps to reduce the overall risk to the insurance market. The organizations are funded by premiums paid by the workers’ compensation insurance carriers.
To qualify for 501(c)(27) status, an organization must meet certain requirements set forth by the IRS. For example, it must be organized and operated exclusively for the purpose of providing reinsurance for workers’ compensation insurance carriers, and it must be sponsored by a state government or other qualifying entity.
If a State-Sponsored Workers’ Compensation Reinsurance organization is granted 501(c)(27) status, it is generally exempt from federal income tax on its earnings, as well as on contributions made to the organization. However, the organization may still be subject to other taxes, such as payroll taxes.
501(c)(29)
501(c)(29) is a tax-exempt category recognized by the Internal Revenue Service (IRS) for Qualified Nonprofit Health Insurance Issuers (QNHIIs).
A QNHII is a nonprofit health insurance issuer that is licensed to operate in one or more states and is created under state law specifically to provide health insurance coverage. These organizations are designed to increase the availability and affordability of health insurance coverage for individuals and families, particularly those who may not have access to coverage through an employer.
To qualify for 501(c)(29) status, an organization must meet certain requirements set forth by the IRS. For example, it must be organized and operated exclusively for the purpose of providing health insurance coverage, and it must be licensed to operate as a health insurance issuer in one or more states.
If a QNHII is granted 501(c)(29) status, it is generally exempt from federal income tax on its earnings, as well as on contributions made to the organization. However, the organization may still be subject to other taxes, such as payroll taxes.