Organizations that are created for reasons other than to earn money for owners are classified as Nonprofit Organizations. Nonprofit Organizations may apply for and be granted Tax-Exempt Status by the Internal Revenue Service. The Internal Revenue Code (IRC) establishes different criteria under which an organization may be classified as non profit and achieve Tax-Exempt Status. Many organizations created to act as nonprofits apply for and receive Tax-Exempt Status under provisions set forth in IRC section 501(c)(3). These nonprofits are also called 501(c)(3) organizations. 
Section 501(c)(3) organizations can be divided into two separate classes: Private Foundations and Public Charities.
Under the rules set by the IRS in the relevant code sections, a Public Charity is defined as an organization that is created, organized and operated exclusively for exempt purposes and that is not an action organization intended to influence the political process. Being classified as a Public Charity has significant benefits to your organization and you should contact an experienced Scottsdale Arizona nonprofit lawyer at Lotzar Law Firm, P.C. for help in determining if you qualify. Our experienced attorneys can help you to complete all required IRS forms and documentation so you will be able to obtain the classification if your organization is eligible.
What is a Public Charity?
Section 501(c)(3) grants Tax-Exempt Status to organizations created for charitable; religious; educational; literary or scientific purposes. Organizations that are created to test for public safety; foster amateur sports competitions; or prevent cruelty to children and animals may also obtain Tax-Exempt Status under section 501(c)(3) of the IRC.
All domestic and foreign organizations that receive Tax-Exempt Status under section 501(c)(3) are considered to be private foundations except for a limited number of organizations that are referred to in 1-4 of IRC section 509(a). In other words, a Public Charity is a Nonprofit Organization created for an approved purpose under 501(c)(3) that falls into a special category found in section 509(a). Some of the different organizations that may be considered public charities include:
- Churches
- Hospitals
- Medical research organizations affiliated with hospitals that meet specific criteria
- Educational institutions, including colleges, universities and other schools
- Organizations that receive income from conducting activities that are designed to further the exempt goals of the organization
- Organizations that function to support one or more existing Public Charities
Public Charities are distinct from Private Foundations because Public Charities often do take in money or raise funds from various sources. For example, hospitals may charge insurance companies for the provided services. The organization can still be a non profit because it puts this money back into serving a charitable purpose, rather than giving the money to owners.
By contrast, Private Foundations are distinct from Public Charities because Private Foundations typically have one single source, such as a family or corporation, that provides the bulk of funding.
Lotzar Law Firm, P.C. can help you to determine if your organization should classify as a Public Charity and can help you to complete all required IRS paperwork to obtain your exempt status. Call today to schedule a consultation with a Scottsdale Arizona non profit lawyer to learn more.
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