501(c)(3) FAQ's

1. Why is it important to maintain our nonprofit charity status?
Due to the tax deductions associated with donations, loss of 501(c)(3) status can be highly challenging if not fatal to a charity's continued operation, as many foundations and corporate matching funds do not grant funds to a charity without such status, and individual donors often do not donate to such a charity due to the unavailability of the deduction.

2. May a 501(c)(3) organization provide financial or other support to a political campaign?
Under the Internal Revenue Code, all section 501(c)(3) organizations are absolutely prohibited from directly or indirectly participating in, or intervening in, any political campaign on behalf of (or in opposition to) any candidate for elective public office. Contributions to political campaign funds or public statements of position (verbal or written) made on behalf of the organization in favor of or in opposition to any candidate for public office clearly violate the prohibition against political campaign activity. Violating this prohibition may result in denial or revocation of tax-exempt status and the imposition of certain excise taxes.

3. May 501(c)(3) organization spend money for lobbying to influence legislation?
In contrast to the prohibition on political campaign interventions by all section 501(c)(3) organizations, public charities (but not private foundations) may conduct a limited amount of lobbying to influence legislation.  The law states that "No substantial part..." of a public charity's activities can go to lobbying.

4.  Are contributions to a 501(c)(3) organization are tax-deductible?
Donors' contributions to a 501(c)(3) organization are tax-deductible only if the contribution is for the use of the 501(c)(3) organization.

5. What is the inurement prohibition?
The inurement or private benefit prohibition forbids the use of the income or assets of a tax-exempt organization to directly or indirectly unduly benefit an individual or other person that has a close relationship with the organization or is able to exercise significant control over the organization.

6.  Can individual members or leaders can’t benefit financially from the programs and activities of the organization?
No, individual members or leaders can not benefit financially from the programs and activities of the organization.

7. Can a 501(c)(3) organization give cash or gift card (or cash equivalent items) gifts to members or donors?
No a 501(c)(3) organization can not give cash or gift card gifts to members or donors?

8.  Can a 501(c)(3) organization give gifts of low market value to members or donors?
Yes, within reason.  A 501(c)(3) organization can give thank you gifts, sympathy gifts, memorial gifts, get well gifts and awards of low market value.  "Low market value" is not well defined and care should be taken to limit and not give the impression of excessive gifts.  Gifts can not be cash, cash equivalent, vacation, meals, lodging, theater or sports tickets, or securities.   For ideas on how chapters can provide flowers or other nominal items for birthdays, health issues, sympathy or remembrance gifts, see the BCHW Sunset Funds guidelines.  

9.  Can 501(c)(3) organization finance any kind of charitable work or project?
No, an exempt organization is expected to operate in accordance with the charitable purpose or purposes outlined in its application for recognition of tax-exempt status.

10. Can a 501(c)(3) organization generate income from any source?
No an organization may lose its exempt status if it generates excessive income from a regularly-carried-on trade or business that is not substantially related to the organization's exempt purpose.  This is unrelated business income (UBI).

11. Do nonprofits have to disclose financials?
Yes. Nonprofit corporations must submit their financial statements, which include the salaries of directors, officers and key employees to the IRS on Form 990. Both the IRS and the nonprofit corporation are required to disclose the information they provide on Form 990 to the public.


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