Charities are quite prevalent in the United States today. There are many different classifications of charitable organizations, such as schools, hospitals, and churches. Furthermore, charitable organizations may qualify as a 501(c)(3) tax exempt organization under the Internal Revenue Code, meaning they do not have to pay taxes like a for-profit corporation. However, what exactly makes an organization a charity?
The state of Pennsylvania uses a five part test to determine whether an organization qualifies as a charitable organization. While this specific test is not used by the IRS, it nevertheless does provide some guidance as to what the IRS may look for when determining whether an organization qualifies for 501(c)(3) status. The five part test used in PA is known as the HUP test, as this was the name of the PA Supreme Court case which established the test. The parts of the test are as follows.
The organization must:
- Advance a charitable purpose
- Donate or render gratuitously a substantial portion of its services
- Benefit a substantial and indefinite class of persons who are legitimate subjects of charity
- Relieve the government of some of its burden
- Operate free from private profit motive
Consequently, if an organization satisfies these factors, there is a good chance the organization will qualify for 501(c)(3) status.
If you have a question regarding a 501(c)(3) issue for your non-profit organization, contact one of the experienced attorneys at Trinity Law today at 717-843-8046.