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Welcome501(c)(3) Pro & ConFAQ - Frequently Asked QuestionsIRS ProcessingCyber AssistantIRS Form 1023, Part IIRS Form 1023, Part IIIRS Form 1023, Part IIIIRS Form 1023, Part IVIRS Form 1023, Part VIRS Form 1023, Part VIIRS Form 1023, Part VIIIRS Form 1023, Part VIIIIRS Form 1023, Part IXIRS Form 1023, Part XIRS Form 1023, Part XI
IRS Form 1023, Part X

Form 1023, Part X

 
Pages10 and 11 - Part X - Public Charity Status
Current tax law divides all 501(c)(3) organizations into two broad sub-
categories - public charities and private foundations.  When you file a
501(c)(3) application, you are actually asking the IRS to decide not only
whether your group qualifies as a 501(c)(3), but also whether it is publicly
supported.
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Page 10 - Part X - Question 1 - Are you a private foundation?
A private foundation is an organization that receives most of its support
from a limited number of sources, such as one family or one corporation.
It is generally less favorable to be a 501(c)(3) private foundation because
these organizations must pay a 1% or 2% tax on interest, dividends, capital
gains and other investment income, and are subject to a wide variety of
restrictions with respect to how they invest their assets and conduct their
operations.  Percentage limits placed on the amount donors can deduct on
their individual income tax returns are also lower.
I am not including detailed coverage of private foundations in this website
because I have seen too many small groups get themselves in trouble with the
"wide variety of restrictions" mentioned above.  If you are forming this type
of group, I recommend you sit down with a professional who can alert you to
the potential pitfalls as well as help you prepare your 501(c)(3) application.
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Page 10 - Part X - Questions 2 through 4 - Private Operating Foundation
Private Operating Foundations are outside the scope of this website.  If you are
forming this type of group, you should  seek professional help in preparing your
501(c)(3) application.
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Page 10 - Part X - Question 5 - Public Charity
Some organizations are public charities solely because of the activities they carry on
(boxes 5a through 5f on pages 10 and 11 of Form 1023):
- Churches (if you check this box, you must complete Schedule A of Form 1023)
[click here for information about Sandy Deja's book about Schedule A]
- Schools
- Hospitals
- Supporting organizations
- Testing for public safety organizations
Other organizations are public charities because they receive at least one third
of their support from the general public.  Organizations whose public support
is mostly in the form of gifts or contributions would check box g on page 11
of Form 1023; organizations whose public support  is mostly in the form of
payments for goods or services, such as admission to cultural events, fees for
therapy, or payments at fundraising events, would check box h.  Many groups
check box I, which asks the IRS to decide for you.
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Attention: Advance Rulings Have Been Eliminated!
The IRS has eliminated the Advance Ruling process described in Question 6 of Part X
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Page 10 - Part X - Question 6 - Advance Ruling
As explained in  Notice 1382 (which you should have received with Form 1023)
SKIP question 6a. and the Consent that follows it.  Only provide the information
requested in Part X - Questions 6b and 7 if your group has been in existence for
5 or more tax years.
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Page 10 - Part X -  Questions 7 - Unusual grants
Read the definition of unusual grants given in the Form 1023 instructions or IRS
Publication 557 before deciding that any amounts your organization has received
are unusual grants.
Have more questions about Form 1023?
Visit www.501c3Book.com for information about Sandy Deja's book,
Prepare Your Own 501(c)(3) Application
(Ebooks available for immediate download.)

This page last updated April, 2011.