There are more than 30 types of tax-exempt organizations described in the Internal Revenue Code (IRC). Most tax-exempt organizations fall into one of five types: the organizations described in IRC Â§Â§ 501(c)(3), 501(c)(4), 501(c)(5), 501(c)(6), and 527. This report was developed to answer frequently asked questions about the differences among these organizations: how they are defined; what they can and cannot do; how they obtain exempt status; and what kind of information they must disclose to the IRS and the public. As will be seen, the same rules often apply to the four organizations described in IRC Â§ 501(c), while different ones apply to 527 organizations. For purposes of this report, the term "501(c) organizations" refers to the organizations described in IRC Â§Â§ 501(c)(3), 501(c)(4), 501(c)(5) and 501(c)(6). It should be noted that there are many other organizations described in IRC Â§ 501(c) and that the rules described in this report do not necessarily apply to them. The organizations described in IRC Â§ 501(c)(3) are commonly referred to as "charitable organizations." The section describes them as: organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes, or to foster national or international amateur sports competition (but only if no part of its activities involve the provision of athletic facilities or equipment), or for the prevention of cruelty to children or animals, no part of the net earnings of which inures to the benefit of any private shareholder or individual, no substantial part of the activities of which is carrying on propaganda, or otherwise attempting, to influence legislation ... and which does not participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of (or in opposition to) any candidate for public office. There are two types of 501(c)(3) organizations: public charities and private foundations. In general, public charities receive contributions from a variety of sources, while private foundations receive contributions from limited sources and are often controlled by their donors. Due to fear of abuse, private foundations are subject to stricter regulation than public charities. Examples of 501(c)(3) public charities include the Red Cross, churches, schools, hospitals, Boy Scouts, Girl Scouts, animal shelters, and Little League. Examples of private foundations include the John D. and Catherine T. MacArthur Foundation, the Ford Foundation, the Rockefeller Brothers Fund, Inc., and the Mars Foundation. An important limitation to note from the organizational definition is that 501(c)(3) organizations may only engage in a non-substantial amount of lobbying and are prohibited from engaging in political campaign activity. None of the other exempt organizations discussed in this report are similarly limited. This issue is discussed below in the " Disadvantages of Tax-Exempt Status " section. The organizations described in IRC Â§ 501(c)(4) are generally referred to as "social welfare organizations." The section describes these organizations as: [c]ivic leagues or organizations not organized for profit but operated exclusively for the promotion of social welfare, or local associations of employees, the membership of which is limited to the employees of a designated person or persons in a particular municipality, and the net earnings of which are devoted exclusively to charitable, educational, or recreational purposes. Examples of 501(c)(4) organizations include the National Rifle Association and the Sierra Club. As can be seen from the organizational definitions in IRC Â§Â§ 501(c)(3) and 501(c)(4), these organizations have some overlapping characteristics. Both sections include organizations that operate for charitable purposes and are restricted in that no earnings may be used to benefit private shareholders or individuals. There are, however, two important differences between them. First, 501(c)(3) organizations are eligible to receive tax-deductible contributions, but 501(c)(4) organizations are not (see " Benefits of Tax-Exempt Status " section, below). Second, 501(c)(3) organizations are more limited in the amount and types of political activity they may do (see " Disadvantages of Tax-Exempt Status " section, below). Thus, an organization that could qualify under either section will generally choose based on which is more important: receiving tax-deductible contributions or participating in political activity. IRC Â§ 501(c)(5) organizations are described as "labor, agricultural, or horticultural organizations." Most of these organizations are labor unions. The organizations described in IRC Â§ 501(c)(6) are generally thought of as trade associations. The section describes these organizations as: [b]usiness leagues, chambers of commerce, real estate boards, boards of trade, or professional football leagues ... not organized for profit and no part of the net earnings of which inures to the benefit of any private shareholder or individual. Examples of 501(c)(6) organizations include the Chamber of Commerce, Jaycees, American Bar Association, American Medical Association, and National Association of Manufacturers. The organizations described in IRC Â§ 527 are political organizations or funds organized and operated primarily for accepting contributions and/or making expenditures for an exempt function. Section 527 defines an exempt function as: influencing or attempting to influence the selection, nomination, election, or appointment of any individual to any Federal, State, or local public office or office in a political organization, or the election of Presidential or Vice-Presidential electors, whether or not such individual or electors are selected, nominated, elected, or appointed. IRC Â§ 527 encompasses every kind of political committee, including a candidate committee, a political party, and a political action committee set up by a union, a corporation or a group of politically-interested citizens. In recent years, the term "527 organization" has been used to describe certain groups that intend to influence federal elections in ways that may be outside the scope of federal election law; however, the tax definition of the term is not limited to such organizations. Organizations that qualify for tax-exempt status may receive various types of benefits from the federal government. These include tax and non-tax benefits. Most exempt organizations, including those described in IRC Â§Â§ 501(c)(3), 501(c)(4), 501(c)(5) and 501(c)(6), are generally exempt from tax on their income. However, they are taxed on any income from unrelated business activities. Additionally, 501(c) organizations, particularly 501(c)(3) organizations, are subject to tax if they engage in certain activities. Taxable activities include making political expenditures, participating in excess lobbying and political activities, and engaging in excess personal benefit transactions (i.e., transactions where insiders realize unwarranted benefits from their relationship with the organization). 527 political organizations are exempt from income tax to the extent that they only have exempt function income and engage in exempt function activities. Exempt function income is income from such sources as contributions, membership dues and political fundraising. The funds must be segregated to be used for an exempt function . 527 organizations are taxed if they have income derived from other sources (e.g., investment income) or if they spend money on non- exempt function activities. The exemptions under IRC Â§Â§ 501 and 527 do not extend to employment taxes. Thus, if they have employees, exempt organizations generally pay the usual employer share of taxes for Social Security and Medicare. However, churches opposed for religious reasons to the payment of these taxes may elect to be exempt from these taxes, and all 501(c) organizations are exempt for employees whose wages are less than $100. Additionally, exempt organizations generally pay the federal unemployment (FUTA) tax. However, 501(c)(3) organizations are exempt from this tax, and the other 501(c) organizations are exempt if the employee's wages are less than $50 per calendar quarter. Of the types of organizations discussed in this report, only 501(c)(3) organizations are eligible to receive tax-deductible charitable contributions. The IRS determines whether an organization is eligible to receive deductible contributions at the time it considers the organization's application for 501(c)(3) status. A list of the 501(c)(3) organizations eligible to receive deductible contributions is found in IRS Publication 78, Cumulative List of Organizations Described in Section 170(c) of the Internal Revenue Code of 1986. This publication is available on the IRS website at http://www.irs.gov. Charitable contributions to 501(c)(3) organizations are not deductible if the organization provides goods or services in exchange for the contribution. If the contribution exceeds the fair market value of the goods or services, then the amount of the excess may be deductible. When an organization receives more than $75 in exchange for goods or services, the organization must tell the donor how much of the contribution, if any, is tax-deductible. Generally, there are no particular requirements placed on contributors to 501(c)(3) organizations. However, if a contributor wants to take a tax deduction for a contribution of $250 or more, then he or she needs to obtain "contemporaneous written acknowledgment of the contribution" from the organization. The acknowledgment should include a description of the contribution, a good faith estimate of the value of any property contributed, and a statement about whether anything was given in return. In addition, the Pension Protection Act of 2006 ( P.L. 109-280 ) imposes a new requirement that any cash donation be substantiated by a bank record or written communication from the organization showing its name and the date and amount of the contribution.