501c

Article

November 28, 2021

501c is paragraph c of article 501 of the American federal tax code IRC (Internal Revenue Code), established in 1917. It lists the twenty-eight types of associations or d nonprofit organizations that are exempt from certain federal income taxes in the United States. Donors can deduct their donations from their income taxes. Articles 503 to 505 set out the conditions required to access such exemptions. Many American states refer to paragraph 501c for the classification of associations also exempt from local taxation. Its equivalent in France is the association law of 1901.

More than a million associations

There are 1.6 million nonprofit associations in the United States, and the non-profit sector accounts for 8.5% of gross domestic product. They employ 9.3% of the working population, which is the world record. Americans give $ 250 billion annually to nonprofits and these donations are tax exempt. 36% of donations are allocated to the various Churches, 13% go to education, 8.6% to health and 5.4% to culture (or $ 13 billion). Art house cinemas, foundations, ballets, university publishing houses are some examples of non-profit associations in the field of culture. Non-profit associations are run on a voluntary basis by a Board of Trustees. Its members are often donors. They have broad powers and define the missions of the association. They are responsible for raising funds. Endowment (“endowment” in French) is one of the sources of funding for associations: it is an amount placed on the stock market and of which only the interest is spent each year (working capital).

Legal typology of associations 501c

This paragraph contains twenty-eight paragraphs each corresponding to a type of non-profit association as defined by US federal law: 501c1: corporations incorporated under laws of Congress such as the Federal Credit Union Act. 501c2: 501c3 (en): foundations or charitable, charitable, religious, scientific, literary or educational organizations as well as certain amateur sports associations. American universities are governed by this paragraph, as are certain private foundations (first defined by the Tax Reform Act of 1969). American law distinguishes non-profit organizations from charitable organizations. While both types of associations are exempt from tax, only charities can receive tax-free donations. Among the latter, the law distinguishes between public charities (e.g. municipal foundations), such as the Cleveland Foundation (en), and private foundations (such as the Rockefeller Foundation or the Wikimedia Foundation). 501c4 (en): civic associations promoting social welfare or local associations of employees, with a limited number of members. 501c5: trade unions, agricultural or horticultural organizations. 501c6: trade associations, business associations, chambers of commerce. 501c7: leisure clubs. 501c8: fraternities, societies, orders or fraternal associations which provide financial assistance in the event of accident or illness to its members. 501c9: Voluntary Employee Beneficiary Associations, structures for managing the social protection of employees. 501c10: fraternal associations organized in lodges, for exclusively religious, charitable, scientific, literary, educational or fraternal purposes. 501c11: common funds managing teachers' pensions. 501c12: local associations managing life insurance, joint insurance companies

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