Definitions

Nonprofit organizations that operate to advance religious, charitable, scientific, literary or educational purposes are eligible for tax exempt status under section 501(c)(3) of the Internal Revenue Code.

The organizations cannot be run to benefit private interests or one particular individual. All 501(c)(3) organizations are banned from participating or intervening in a political campaign on behalf of any candidate for elective public office, according to the code.

The IRS classifies charitable organizations as either a public charity or a private foundation.

Public charities include churches, hospitals, medical research organizations, schools, colleges and universities. The organizations have an active fundraising program and receive money from multiple sources that may include the general public, the government, corporations and private foundations. They may receive income from activities that further the organization’s charitable goals.

A private foundation has just one major source of funding, usually from one family or one corporation. The primary focus of most private foundations is to hand out grants to other charitable organizations.

SOURCE: Internal Revenue Service

Illinois Issues, June 2009