Charities are always in need, especially during tough times. Though nonprofit financial experts estimate a volunteer's time is worth $19.51 an hour, charities can't survive on helping hands alone [source: Kadlec]. Thanks to a series of tax breaks intended to help nonprofits receive funding and spend it wisely, charities and other nonprofits can stretch each dollar -- but not without strict oversight.
The Internal Revenue Service (IRS) calls these groups 501(c)(3)s, the designation for organizations qualified for federal tax exemption. These include public charities, private foundations and private operating foundations. 501(c)(3)s serve a breadth of purposes, including religious organizations, scientific organizations, public safety testing, education, national or international athletic competition, and animal rights. Public charities are the most common type of 501(c)(3).
Federal oversight of a 501(c)(3) starts at the outset. The first step in starting a nonprofit is to hold a meeting at which the governing board's roles are determined and assigned. From this meeting, the IRS needs to see formal articles of incorporation, which must include details about the structure of the governing board and administration, a formally stated charitable purpose of the organization, and planned activities. From then on, the group is limited to that purpose and activities [source: McRay].
An organization formally gains 501(c)(3) status by filing IRS Form 1023 and demonstrating adherence to federal and state criteria. Most organizations must file IRS Form 990 every year to maintain their status [source: Foundation Group]. They have to file for exemption within 27 months of recognition and, once established, the approved exemption application, the last three information filings and all supporting documents must be available for public inspection [source: Internal Revenue Service].
Considering the IRS is the designated government agency that regulates nonprofits, you might have guessed that most of the benefits associated with charity operation are tax-related. Read on to learn about specific tax breaks and other benefits that help charities operate.