Other Section 501(c)(3) Organizations

In addition to the information required for all organizations, as described earlier, you should include any other information described in this section.

Charitable Organizations

If your organization is applying for recognition of exemption as a charitable organization, it must show that it is organized and operated for purposes that are beneficial to the public interest. Some examples of this type of organization are those organized for:

• Relief of the poor, the distressed, or the underprivileged,
• Advancement of religion,
• Advancement of education or science,
• Erection or maintenance of public buildings, monuments, or works,
• Lessening the burdens of government,
• Lessening of neighborhood tensions,
• Elimination of prejudice and discrimination,
• Defense of human and civil rights secured by law, and
• Combating community deterioration and juvenile delinquency.

The rest of this section contains a description of the information to be provided by certain specific organizations. This information is in addition to the required inclusions described in chapter 1, and other statements requested on Form 1023. Each of the following organizations must submit the information described.

Charitable organization supporting education. Submit information showing how your organization supports education -- for example, contributes to an existing educational institution, endows a professorial chair, contributes toward paying teachers' salaries, or contributes to an educational institution to enable it to carry on research.

Scholarships. If the organization awards or plans to award scholarships, complete Schedule H of Form 1023. Submit the following also.

1. Criteria used for selecting recipients, including the rules of eligibility.
2. How and by whom the recipients are or will be selected.
3. If awards are or will be made directly to individuals, whether information is required assuring that the student remains in school.
4. If awards are or will be made to recipients of a particular class, for example, children of employees of a particular employer--
1. Whether any preference is or will be accorded an applicant by reason of the parent's position, length of employment, or salary,
2. Whether as a condition of the award the recipient must upon graduation accept employment with the company, and
3. Whether the award will be continued even if the parent's employment ends.
5. A copy of the scholarship application form and any brochures or literature describing the scholarship program.

Hospital. If you are organized to operate a charitable hospital, complete and attach Section I of Schedule C, Form 1023.

If your hospital was transferred to you from proprietary ownership, complete and attach Schedule I of Form 1023. You must attach a list showing:

1. The names of the active and courtesy staff members of the proprietary hospital, as well as the names of your medical staff members after the transfer to nonprofit ownership, and
2. The names of any doctors who continued to lease office space in the hospital after its transfer to nonprofit ownership and the amount of rent paid. Submit also an appraisal showing the fair rental value of the rented space.

Clinic. If you are organized to operate a clinic, attach a statement including:

1. A description of the facilities and services,
2. To whom the services are offered, such as the public at large or a specific group,
3. How charges are determined, such as on a profit basis, to recover costs, or at less than cost,
4. By whom administered and controlled,
5. Whether any of the professional staff (that is, those who perform or will perform the clinical services) also serve or will serve in an administrative capacity, and
6. How compensation paid the professional staff is or will be determined.

Home for the aged. If you are organized to operate a home for the aged, complete and attach Schedule F of Form 1023. Explain on Schedule F:

1. How charges are or will be determined, such as on a profit basis, to recover costs, or at less than cost, and whether the charges are based on providing service at the lowest feasible cost to the residents,
2. Whether all residents are or will be required to pay fees,
3. Whether any residents are or will be accepted at lower rates or entirely without pay and, if so, how many, and
4. Whether federal mortgage financing has been applied for and if so, the type.

Community nursing bureau. If you provide a nursing register or community nursing bureau, provide information showing that your organization will be operated as a community project and will receive its primary support from public contributions to maintain a nonprofit register of qualified nursing personnel, including graduate nurses, unregistered nursing school graduates, licensed attendants and practical nurses for the benefit of hospitals, health agencies, doctors, and individuals.

Organization providing loans. If you make, or will make loans for charitable and educational purposes, submit the following information.

1. An explanation of the circumstances under which such loans are, or will be, made.
2. Criteria for selection, including the rules of eligibility.
3. How and by whom the recipients are or will be selected.
4. Manner of repayment of the loan.
5. Security required, if any.
6. Interest charged, if any, and when payable.
7. Copies in duplicate of the loan application and any brochures or literature describing the loan program.

Public-interest law firms. If your organization was formed to litigate in the public interest (as opposed to providing legal services to the poor), such as in the area of protection of the environment, you should submit the following information.

1. How the litigation can reasonably be said to be representative of a broad public interest rather than a private one.
2. Whether the organization will accept fees for its services.
3. A description of the cases litigated or to be litigated and how they benefit the public generally.
4. Whether the policies and program of the organization are the responsibility of a board or committee representative of the public interest, which is neither controlled by employees or persons who litigate on behalf of the organization nor by any organization that is not itself an organization described in this chapter.
5. Whether the organization is operated, through sharing of office space or otherwise, in a way to create identification or confusion with a particular private law firm.
6. Whether there is an arrangement to provide, directly or indirectly, a deduction for the cost of litigation that is for the private benefit of the donor.

Acceptance of attorneys' fees. A nonprofit public-interest law firm can accept attorneys' fees in public interest cases if the fees are paid directly by its clients and the fees are not more than the actual costs incurred in the case. Once undertaking a representation, the organization cannot withdraw from the case because the litigant is unable to pay the fee.

Firms can accept fees awarded or approved by a court or an administrative agency and paid by an opposing party if the firms do not use the likelihood or probability of fee awards as a consideration in the selection of cases. All fee awards must be paid to the organization and not to its individual staff attorneys. Instead, a public-interest law firm can reasonably compensate its staff attorneys, but only on a straight salary basis. Private attorneys, whose services are retained by the firm to assist it in particular cases, can be compensated by the firm, but only on a fixed fee or salary basis.

The total amount of all attorneys' fees (court awarded and those received from clients) must not be more than 50% of the total cost of operations of the organization's legal functions, calculated over a 5-year period.

If, in order to carry out its program, an organization violates applicable canons of ethics, disrupts the judicial system, or engages in any illegal action, the organization will jeopardize its exemption.

Religious Organizations

To determine whether an organization meets the religious purposes test of section 501(c)(3), the IRS maintains two basic guidelines.

1. That the particular religious beliefs of the organization are truly and sincerely held.
2. That the practices and rituals associated with the organization's religious belief or creed are not illegal or contrary to clearly defined public policy.

Therefore, your group (or organization) may not qualify for treatment as an exempt religious organization for tax purposes if its actions, as contrasted with its beliefs, are contrary to well established and clearly defined public policy. If there is a clear showing that the beliefs (or doctrines) are sincerely held by those professing them, the IRS will not question the religious nature of those beliefs.

Churches. Although a church, its integrated auxiliaries, or a convention or association of churches is not required to file Form 1023 to be exempt from federal income tax or to receive tax deductible contributions, the organization may find it advantageous to obtain recognition of exemption. In this event, you should submit information showing that your organization is a church, synagogue, association or convention of churches, religious order, or religious organization that is an integral part of a church, and that it is engaged in carrying out the function of a church.

In determining whether an admittedly religious organization is also a church, the IRS does not accept any and every assertion that the organization is a church. Because beliefs and practices vary so widely, there is no single definition of the word church for tax purposes. The IRS considers the facts and circumstances of each organization applying for church status.

Integrated auxiliaries. An organization is an integrated auxiliary of a church if all the following are true.

1. The organization is described both in sections 501(c)(3) and 509(a)(1), 509(a)(2), or 509(a)(3).
2. It is affiliated with a church or a convention or association of churches.
3. It is internally supported. An organization is internally supported unless both of the following are true.
1. It offers admissions, goods, services or facilities for sale, other than on an incidental basis, to the general public (except goods, services, or facilities sold at a nominal charge or for a small part of the cost).
2. It normally gets more than 50% of its support from a combination of governmental sources, public solicitation of contributions, and receipts from the sale of admissions, goods, performance of services, or furnishing of facilities in activities that are not unrelated trades or businesses.

Special rule. Men's and women's organizations, seminaries, mission societies, and youth groups that satisfy (1) and (2) above are integrated auxiliaries of a church even if they are not internally supported.

Note. In order for an organization (including a church and religious organization) to qualify for tax exemption, no part of its net earnings may benefit any individual.

Although an individual is entitled to a charitable deduction for contributions to a church, the assignment or similar transfer of compensation for personal services to a church generally does not relieve a taxpayer of federal income tax liability on the compensation, regardless of the motivation behind the transfer.

Scientific Organizations

You must show that your organization's research will be carried on in the public interest. Scientific research will be considered to be in the public interest if the results of the research (including any patents, copyrights, processes, or formulas) are made available to the public on a nondiscriminatory basis; if the research is performed for the United States or a state, county, or municipal government; or if the research is carried on for one of the following purposes.

1. Aiding in the scientific education of college or university students.
2. Obtaining scientific information that is published in a treatise, thesis, trade publication, or in any other form that is available to the interested public.
3. Discovering a cure for a disease.
4. Aiding a community or geographical area by attracting new industry to the community or area, or by encouraging the development or retention of an industry in the community or area.

Scientific research, for exemption purposes, does not include activities of a type ordinarily incidental to commercial or industrial operations such as the ordinary inspection or testing of materials or products, or the designing or constructing of equipment, buildings, etc.

If you engage or plan to engage in research, submit all of the following.

1. An explanation of the nature of the research.
2. A brief description of research projects completed or presently being engaged in.
3. How and by whom research projects are determined and selected.
4. Whether you have, or contemplate, contracted or sponsored research and, if so, names of past sponsors or grantors, terms of grants or contracts, together with copies of any executed contracts or grants.
5. Disposition made or to be made of the results of your research, including whether preference has been or will be given to any organization or individual either as to results or time of release.
6. Who will retain ownership or control of any patents, copyrights, processes or formulas resulting from your research.
7. A copy of publications or other media showing reports of your research activities. Only reports of your research activities or those conducted in your behalf, as distinguished from those of your creators or members conducted in their individual capacities, should be submitted.

Literary Organizations

If your organization is established to operate a book store or engage in publishing activities of any nature (printing, publication, or distribution of your own material or that printed or published by others and distributed by you), explain fully the nature of the operations, including whether sales are or will be made to the general public, the type of literature involved, and how these activities are related to your stated purposes.

Amateur Athletic Organizations

There are two types of amateur athletic organizations that can qualify for tax-exempt status. The first type is an organization that fosters national or international amateur sports competition but only if none of its activities involve providing athletic facilities or equipment. The second type is a Qualified amateur sports organization (discussed below). The difference is that a qualified amateur sports organization may provide athletic facilities and equipment.

Donations to either amateur athletic organization are deductible as charitable contributions on the donor's federal income tax return. However, no deduction is allowed if there is a direct personal benefit to the donor or any other person other than the organization.

Qualified amateur sports organization. An organization will be a qualified amateur sports organization if it is organized and operated:

1. Exclusively to foster national or international amateur sports competition, and
2. Primarily to conduct national or international competition in sports or to support and develop amateur athletes for that competition.

The organization's membership may be local or regional in nature.

Prevention of Cruelty to Children or Animals

Examples of activities that may qualify this type of organization for exempt status are:

1. Preventing children from working in hazardous trades or occupations,
2. Promoting high standards of care for laboratory animals, and
3. Providing funds to pet owners to have their pets spayed or neutered to prevent overbreeding.

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