Page 105 - Washington Nonprofit Handbook 2018 Edition

section 509(a)(3). The supporting organization rules are beyond the scope of this
Handbook.

CHAPTER 28. Charitable Purposes

Federal tax law provides that for an organization to qualify for tax exemption
as a 501(c)(3), it must be organized and operated exclusively for charitable,
religious, scientific, educational, and certain other purposes. In order to maintain
its tax-exempt status, a 501(c)(3) organization must comply with this standard
throughout its entire period of existence. If its purpose changes – either in how its
purposes are stated in its articles of incorporation and bylaws, or in the activities
the organization actually conducts – its qualification for exemption may also
change.

The tax law recognizes a wide variety of purposes and activities as being
“charitable.” While section 501(c)(3) enumerates other qualified purposes, such as
religious and educational purposes, the law interprets these as subsets of the
general category of charitable purposes, not as separate categories. Charitable
purposes include relief of the poor, the advancement of religion, the advancement
of education or science, the erection or maintenance of public buildings or
monuments, lessening the burdens of government (in limited circumstances),
promoting social welfare, lessening neighborhood tensions, eliminating prejudice
and discrimination, defending human and civil rights secured by law, combating
community deterioration and juvenile delinquency, and protecting the natural
environment. Educational purposes, as a subset of charitable purposes, include
both instruction of the public and the individual. Educational activities include
scholastic publications as well as visual and performing arts.

In order for an organization’s activities to qualify as charitable, they must
benefit the general public or a segment of the general public that is broad enough
to be considered a charitable class. A charitable class must be large or indefinite.
For example, an educational organization formed to educate the children of one
family will not qualify as charitable. In addition, activities that violate public policy,
such as the provision of education on a racially discriminatory basis, will not qualify
as charitable.

“Exclusively” for Charitable Purposes Means “Substantially.” While the
tax law specifies that a 501(c)(3) organization must be organized and operated
“exclusively” for charitable purposes, the Treasury Regulations provide that an
501(c)(3) organization may also engage in activities that do not specifically further a

WASHINGTON NONPROFIT HANDBOOK -94- 2018