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What Are Qualified Charitable Organizations?

by | Jan 5, 2022 | Blog, Qualified Charitable Organization

The number of various organizations, particularly those that are supporting low-income families in the USA, has increased over the years. Most of these organizations help children’s care and supervision expenses. But, if you would take part to support an organization as such, then you should look into supporting a qualified charitable organization.

 

First, What is a Charitable Organization?

A charitable organization means a group of organized individuals or people together for the particular purpose of assisting those in need and without regard for payback. The organization instills a feeling of love and goodwill to others that are less fortunate. This entity has an established collection of funds in cash and in-kind that are taxable by law. According to the US treasury, the charitable organization can apply for an exemption of paying taxes, which makes it a qualified charitable organization.

A charitable organization can be recognized as a qualified charitable organization when it offers non-profit operations, prioritizing causes for religious, charitable, scientific activities in nature. These goals can be focused on supporting educational, financial, and care for low-income families, orphanages, animal care centers, and calamity victims.

Before applying as a Qualified Charitable Organization, one should make sure that the organization must meet one of the criteria written in IRS 509 (a) (1 to 4) of the code stating that:

  1. These organizations are charitable institutions, churches, hospitals, and qualified medical research institutions with various affiliations. These churches may need to file an additional exemption application so that donors can file a tax exemption on donation. A church is legally tax exempted under IRS 501 c3 code;
  2. Fundraise and collect contributions from legal sources such as the general public, government agencies, corporations, private foundations, and other public charities;
  3. Receive income from activities with an organization’s exempt purposes in Arizona, or
  4. Actively operates in a supportive relationship to one or more existing charities, schools, and orphanages.

The common types of qualified charitable organizations identified by IRS 501 (c)(3) support educational, religious, and relief activities. Below is a more extensive description of the organization that can apply for a qualified charitable organization.

1. Organizations that conduct activities promoting:

  • Relief of the poor, the underprivileged, and those distressed
  • Advancement of religion
  • Advancement of science and education
  • Construction and maintenance of public buildings, monuments, or works
  • Lessening the burden of government
  • Lessening neighborhood tensions
  • Eliminating prejudice and discrimination
  • Defending human rights and civil rights secured by law
  • Combating community deterioration and juvenile delinquency

2. Educational organizations include:

  • Primary and secondary schools, college, professional or trade school
  • Organizations that conduct public forums and discussions, lectures, panels, and similar programs
  • Organizations present courses by means of correspondence or through TV or radio.
  • Museums, zoos, planetariums, symphony orchestras, or similar organizations
  • Non-profit day-care centers and preschools
  • Youth sports organizations

3. Religious organizations include churches, synagogues, temples, mosques, and similar organizations. It must meet the minimum criteria of sincere religious belief and sincerity for religious organizations. Religious practices and rituals should not be illegal to the defined public policy.

qualified charitable organization

Are Such Organizations Legal Under The US Laws?

USA’s Internal Revenue Service (IRS) code has a portion concerning a qualified charitable organization at 501(c)(3), same as the registry for Children’s Care Arizona. It determines the classification between a public charity or a private foundation and its eligibility. The non-profit organization must have a charitable purpose under the categories.

Private individuals and foundations that give to qualified charitable organizations in Arizona can have grants or tax credits from their adjusted gross income (AGI) that may be limited to 30% for cash donations and 30% for appreciated securities.

If any institution wishes to apply as a qualified charitable organization in Arizona, the initial step is to draft the Articles of Incorporation or a Certificate of Incorporation. It must be filed within the state where the entity is located. Like any business entity, it makes the corporation legally bound by state and federal laws.

Each state has different required paperwork and rules for filing Articles of Incorporation. The Secretary of the State handles such applications. The state officials will then review the application of Articles of Incorporation on the appropriate rules and appropriate payment of fees. The status will be notified to the organization.

The application for securing a tax-exempt status should be filed within twenty-seven months from the month-end in which it was organized. The organization shall use Form 1023 applying for the Recognition of Exemption under IRS code Section 501 (c)(3). The following information must be in the Articles of Incorporation for the filing of tax-exempt:

  1. Name of entity
  2. Statement of the exempt purpose
  3. Dissolution clause
  4. Date when the document was adopted
  5. Two signatures (For unincorporated association)

 

Bottom Line

Sharing your cash, goods, plus your charity and Arizona tax credits to charitable organizations is a noble act. These donations help support low-income families, orphans, calamity victims, or scientific research in Arizona.

While other people might be persuasive to give your donations to any charity, it is still best to give it to a qualified charitable organization, where you are sure that what you have provided will go to your intended recipients – to a school, a relief event, or a religious drive to help those in need.

Get personal tax incentives and benefits received for giving to charity. Children’s Care Arizona is one of the long-standing qualified charitable organizations in Phoenix, Arizona. We are committed to helping low-income families get through with their child care and supervision expenses.