A charitable organization is a trust or association established for charitable purposes only. Charities promote goodwill and lessen government burdens. The Internal Revenue Service (IRS) classifies organizations for tax purposes. An entity claiming charitable status must show IRS documentation to donors. Educational institutions, religious organizations, and other public interest entities can qualify as charities if IRS rules are met. Key requirements are operating only for approved purposes and not profiting individuals. Cemetery and burial companies, legal entities, fraternal lodges, and veterans groups can also qualify. A qualified charitable organization must be a nonprofit that advances some public benefit in areas such as:
- Education
- Poverty relief
- Research
- Environment
- Diversity
- Religion
- Health
Minimum distribution rules for individual retirement accounts can incentivize donations to charity.
The legal concept of “charitable” differs from casual usage. There are four main charitable purposes in law:
- Trusts advancing education
- Religion
- Poverty relief
- Other causes benefitting the community
Companies sometimes establish charities for tax planning.
An entity claiming charitable status must show IRS documentation to donors and operate only for approved purposes without profiting individuals.
Qualified charitable organizations include:
- Cemetery and burial companies
- Legal entities
- Fraternal lodges
- Veterans groups
- Trusts advancing education, religion, poverty relief, and community causes
These entities can qualify as charities if IRS rules are met. This allows them tax exemption and the ability to receive deductible contributions.